Billions are involved, but what are non-fungible tokens for…

Are they valuable digital works of art or is it just hot air? Billions are involved in the world of non-fungible tokens (NFTs). How exactly does it work? Who trades with him? And isn’t that an exaggeration?

What is an NFT, in plain language?
NFT stands for non-fungible token, which is a non-exchangeable currency. It is proof of ownership of a digital file. And that can be anything: a sword in a computer game, a digital painting, but also, for example, a text. In fact, any digital file can be converted into an NFT. As soon as there is a certificate of ownership, you can acquire (financial) value.

Why would anyone pay money for a ‘digital image’?
The simple answer is: supply and demand. By doing something unique and exclusive, you create scarcity. “If you have enough people who want something, the price goes up,” says Belgian NFT user @skaanbarry, who says he makes tons a year from NFT trading. “By treating it as a collector’s item, it naturally becomes sought after. And when demand exceeds supply, it’s worth more.”

Also read: This is the new crypto craze (and millions are made here)

Something like this can never get big, can it?
You would think so, but it is quite the opposite. For example, the NFT in the first tweet, from Twitter founder Jack Dorsey, sold for $2.9 million. Especially last year, astronomical amounts have been paid. The artist Beeple auctioned a series of photographs for 68 million dollars and last month it was… the fusion, a digital artwork by anonymous artist Pak, sold for $92 million. A 12-second video of a LeBron James dunk previously raised $208,000. And believe it or not, images of monkeys (Bored Ape Yacht Club), kittens (CryptoKitties, where it started in 2017), and robots (Mekaverse) sometimes sell by the ton.

Jack Dorsey founder at a cryptocurrency conference in Florida on June 4, 2021.

Photo: ANP/AFP

Does the owner of an NFT also own the copyright?
New. Although the file has been assigned to the person who acquired the NFT, it can still be used by others online. For example, the NFT of the famous internet meme ‘Charlie bit me’ (a boy bites his slightly older brother’s finger) sold for $760,000, but can still be seen on all sorts of channels. So you can’t actually sell something with that token, because it has a certain (financial) value.

How can I buy or sell an NFT myself?
If you want to trade digitally, you must have a digital identity. Then you need an account with a wallet, for example on the Open Sea platform, where NFTs are auctioned. In fact, this is a kind of market where you can search for files that you would like to own or trade. Most transfers are made through the Ethereum cryptocurrency, so it is recommended to invest in it first.

Also read: Is Bitcoin a bubble that can burst at any moment or a ship that you should not miss? Answers to frequently asked questions

What does cryptocurrency have to do with this again?
NFT transactions work on the same technology as Ethereum. Payments are made via blockchain, a digital cash book known for its anonymity and security. In a way, NFT is similar to cryptocurrency: you attribute value to something purely digital. However, they differ from each other on crucial points, because an NFT is always unique. A bitcoin is tradable, no matter which bitcoin you have, they are all the same, while an NFT represents a unique digital object.

How popular are NFTs in the Netherlands and Belgium?
The amounts in the Netherlands are not yet that astronomical, although many artists try to sell their work through NFTs. In Limburg we will have to wait for the auction of a work by the artist Pablo Lücker to start. Dutch football clubs jumped on the NFT bandwagon and last fall the Jumbo-Visma cycling team auctioned off the NFTs from some of their Belgian star Wout van Aert’s wins. His stage win in Paris at the 2021 Tour de France was sold for around €16,000 to @skaanbarry† Your wallet indicates that the NFT is already worth $32,000. @skaanbarry: “But that’s just the price I put on it myself.”

There are billions of dollars involved, but what exactly are non-fungible tokens?  'In the end it's just a digital image'

Pablo Lücker with the Lamborghini painted by him, which will be sold through an international auction. The buyer will receive an NFT artwork in addition to the sports car.

Photo: ANP/ANP

Also read: Pablo Lücker from Roermond turns expensive Lamborghini into a unique painted work of art

Doesn’t all this sound like the umpteenth hype that could collapse at any moment?
Yes and no. It is what the madman gives for him and that is no different in ordinary life. Has home value really doubled in the last five years or is it just because people talk about it? The NFT market is growing at a ridiculous rate. In 2021, $25 billion worth of NFTs were traded, compared to just $94.9 million the year before. However, financial experts note that the increase in prices of objects seems to have stopped. The risks are just as great as with cryptocurrencies and investing: money can evaporate before your eyes. @skaanbarry says it will have achieved a net profit of €750,000 in 2021, but warns: “This can certainly collapse in a short time. This is why NFTs make up no more than 5 percent of my entire cryptocurrency portfolio. I certainly don’t want to take any chances on that.”

What kind of people trade NFTs?
The world of NFT traders is difficult to understand as many users are anonymous, just like @skaanbarry:: “That is mainly for my own safety. It involves large amounts of money and I wouldn’t want to be hacked or, worse, mugged.” From that anonymity, it is a prestige to boast of possessions. “Show boaters how rich you are, a bit like rappers do with their watches.” That expensive avatar on social media is therefore a sign of wealth. A large part of the users is also very active in cryptocurrency trading. Stereotypes mean it’s mostly ‘man stuff’, but bitcoin platform BTC-Direct reports that more and more women are joining, including in NFTs. It is true that women, more than men, invest mainly in the long term. One popular platform is World of Women, on which Hollywood stars Eva Longoria and Reese Witherspoon are very active.

Is it about art and property or is it just money?
No doubt there are artists who argue for ideological reasons that it is beautiful and logical that digital objects can also have value. But the practice is mostly simpler: most users are there for the money. So too @skaanbarry. “I do this purely to make money. He wanted to be a millionaire before he was 35. That has already been done. And if it continues like this, I can retire in two years, when I’m 35.”

Also read: This collage turns the art market upside down: 58 million euros for digital art, that’s crazy, right?

Isn’t it still weird that a digital file you don’t own rights to is worth that much?
Yes. as well @skaanbarry he is amazed at the staggering sums circulating. „You have to look at it a bit like the crazy prices people pay for physical Pokémon cards. I myself find it absurd. I once sold something from the Mekaverse for 50 Ethereum, equivalent to $200,000. I would never spend something like that. You have to be realistic: at the end of the day it’s just a 2D image.”

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