NFTs have blown up over the past year, and are now very much part of mainstream conversation.
Celebrities from Premier League footballers to Paris Hilton have jumped on the bandwagon, while social media is flooded with people using cartoon apes as profile pictures.
But what does it all mean, and how do NFTs actually work? Here’s everything you need to know.
What are NFTs?
NFT stands for non-fungible token, which immediately begs the question: why aren’t they fungible, and what does fungible mean anyway?
In economics, a fungible asset is one whose individual units are essentially interchangeable. For example, money.
One pound, or one Bitcoin, for example, is a fungible asset. It doesn’t matter which specific pound coin or which specific Bitcoin you own, they still have the same value and serve the same purpose.
NFTs, by contrast, are unique. They are often pieces of digital art, but can also be videos, tickets to an event, access to play-to-earn games or other digital assets.
When someone buys an NFT, what they are actually purchasing is a token proving ownership of such an asset. It’s a bit like buying an original painting, with one key difference.
Digital tokens proving ownership of an asset which doesn’t exist outside of the digital sphere and which can therefore be replicated into identical digital copies have no intrinsic asset value. Even if you purchase an NFT, nothing is stopping someone else from simply right-clicking, saving it and using it as their own profile picture, for example – and no one will be able to tell the difference.
An NFTs value is entirely dependent on people being prepared to pay that sum the next time it is sold.
This makes them a far more risky investment than purchasing, for example, an original painting by Vincent Van Gogh, which has a far more solidified value.
Like cryptocurrency, NFTs are exchanged through the blockchain, and can be bought and sold using Ethereum, the world’s second-largest digital currency after Bitcoin.
What’s with all the apes?
The Bored Ape Yacht Club is one of the most popular and best-known NFT projects to date.
Paris Hilton, Jimmy Fallon, Steph Curry and Eminem are among the celebrities who have purchased one.
There are 10,000 in existence, all of which have their own unique features and styles. Some are rarer than others, such as apes with golden fur or laser eyes, and are therefore seen as more valuable.
The minimum cost to buy one is $224,000. Eminem paid $461,868.42 for his. This gives owning one an air of exclusivity.
Real-life events have been organised for owners, including a yacht party that featured appearances from Chris Rock, Aziz Ansari and The Strokes.
Essentially, a Bored Ape NFT is a status symbol – except it’s one anyone else on the internet can use too, and there’s nothing the owner can do about it.
When have NFTs been in the news?
NFTs have been popping up in the news with increased regularity.
John Lennon’s eldest son Julian has announced he will sell off some Beatles memorabilia as NFTs.
Each NFT will be offered as an audio-visual collectible, with narration by Julian and imagery of the item. However, he will keep the physical items himself.
Other bands including Nirvana and Kings of Leon – who released an album as an NFT last year – have also adopted the trend.
YouTube chief executive Susan Wojcicki has announced the video platform may embrace NFTs as a way to help creators make money.
Earlier this month a French woman who survived the 2015 attack on the Bataclan concert hall discovered that her surgeon was attempting to sell an X-ray of her injuries as an NFT.
Emmanuel Masmejean is facing legal action after not seeking permission from the patient to attempt to sell the X-ray, which showed her forearm with a Kalashnikov bullet lodged near the bone.
