Imagine you own an exquisite artwork by a famous painter, which is worth crores of rupees. And now imagine that you come across a copy of this artwork – an exact replica – which can only be distinguished apart after a scientific process. But, will anyone who knows that the second piece is a duplicate, value it the same as the original? Not really. As there is just one artwork which is original, no matter how similar both the pieces are.
The concept of a non-fungible token or NFT is exactly this, albeit in digital form.
NFT a virtual collectable
An NFT is a digital collectable, with the non-fungible part in NFT referring to the uniqueness of the digital asset. The asset cannot be reproduced, and any imitation of the asset will not have the same unique properties, much like the Mona Lisa's numerous copies don't have the same quality of being produced by Leonardo Da Vinci himself.
So what kind of digital assets can be stored as an NFT? The answer to that question is anything you can put into a digital form like paintings, GIFs, music, videos, or even that photo you took of the brooding sky at 3 am because you couldn't sleep. If it can be digitalised, it can be an NFT.
Recently, Twitter founder Jack Dorsey, sold his first tweet on the platform as an NFT for $3 million. Other examples include Canadian singer Grimes selling her digital art for more than $6 million online and the GIF of Nyan Cat, a 2011 meme of a flying cat sold for $500,000.
Why would anyone buy a GIF of a flying cat for $500,000 you ask? The answer to that is not simple, and there could be two answers: 1. Just like art, its value lies in the eyes of the beholder, and 2. Someone could buy it thinking they would be able to sell it a higher price later.
How NFTs remain unique
NFTs work on blockchain technology. The blockchain certifies the digital asset as a unique token and then stores it in the distributed online ledger.
The certification of the asset implies that it is a unique asset and any other similar digital asset will be considered as an imitation of the original asset.
Should you invest in NFTs?
As with all things new, the answer to this question is not clear. If there is a genuine piece of art being sold in digital form and you want to own it for the long term, you could consider investing in it. The other reason is simply if you believe its value will rise because enough people believe its value will rise.
How to buy NFTs
If you are interested in investing in NFTs in India, here is a guide. Create an account on WazirX, the only Indian marketplace for NFTs at present.
Fund your WazirX account -- NFTs on WazirX are only purchasable with its native token WRX. The price of 1 WRX is Rs 87. At the moment, NFTs on WazirX have a fixed price, but they will introduce an auction system in the near future.
Choose the NFT you wish to buy and pay for it using the WRX token.
First Published: IST