What are NFTs and why are some selling for millions?

This article was first published on Silicon Republiccryptocurrency – Silicon Republic
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A version of this article was originally published by The Conversation (CC BY-ND 4.0)

Last week, Christie’s sold a digital collage of images called ‘Everydays: The First 5000 Days’ for $69.3m dollars. This week, Elon Musk said he’d sell a tweet of his as an NFT, which contains a song about NFTs.

The bidding on Musk’s tweet topped $1m – he has since tweeted, “Actually, doesn’t feel quite right selling this. Will pass.” – and millions more are pouring into the market. Sites like NBA Top Shot (where you can buy, sell and trade digital NBA cards) have individual cards selling for more than $200,000.

It might sound ridiculous but the explosive market of crypto-collectibles and crypto-art is no joke. I investigate cryptocurrencies and have academic publications on bitcoin markets. To help you understand what an NFT is and why they’re becoming so popular, here’s an explainer to make sense of it all.

What is an NFT?

A non-fungible token (NFT) is a digital file with verified identity and ownership. This verification is done using blockchain technology. Blockchain technology, simply put, is an unhackable system based on the mathematics of cryptography. So, that’s why you hear a lot of ‘crypto’ when referring to NFTs – crypto-art, crypto-collectibles etc.

What is fungibility?

Fungibility is the ability of an asset to be interchanged with other individual assets of the same kind; it implies equal value between the assets. If you own a fungible asset you can readily interchange it for another of a similar kind. Fungible assets simplify the exchange and trade processes, and the best example would be (you guessed it) money....

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