The Herald

Issue of the day As NFT boom cools, what are they?

- VICKY ALLAN

FOLLOWING a crash in the the crypto currency market, investors are now worrying about what is about to happen in the much-hyped market in nonfungibl­e tokens, or NFTS. While no one is saying a full collapse is happening, the market is cooling – and many are asking what that will mean – while the rest of us are still asking what even NFTS are in the first place.

You’re talking about things like those yawning chimp cartoons, right?

Correct. The Bored Ape Yacht Club NFTS are among the most famous – and have persuaded people to invest millions on simple digital images. For instance, Eminem shelled out around £334,000 for Eminape, an image of the ape wearing a military-urban peaked cap, or to be more precise, for the unique data recorded in a digital blockchain attached which permanentl­y records its sales history. In January this year, the Bored Ape Yacht Club series surpassed one billion in sales.

Hang on, what does nonfungibl­e mean?

The key thing to understand is why NFTS are not a cryptocurr­ency, even though they are generally encoded with the same underlying software. Fungible is a term used in economics for things that can be exchanged for other things of exactly the same kind. NFTS are non-fungible because they are digital assets that are unique, in the same way that real world assets, like houses or works of art are. They are not “fungible” or tradeable as if like for like, in the way that, say a Bitcoin or a £10 note is.

Why was the NFT even developed? One of the issues with the internet was that digital images have been flying around in abundance, which hasn’t been great for artists who have wanted to retain value in their work. NFTS were seen as a way in which artists could create limited editions and allow people to buy ownership. They are like certificat­es of authentici­ty attached to the works.

But it’s not all Bored Apes is it? No. Last year, an NFT artwork by the American artist Beeple set a record for the sale of a digital artwork when it was auctioned off by Christies for $69 million. Coca-cola has even got in on the act, auctioning, in aid of Special Olympics Internatio­nal, an NFT lootbox that includes a jacket that can be worn on a 3D virtual reality platform. However, the explosive growth of the NFT market that occurred in 2021 now seems to be levelling off.

So, is this any more than a marketing bubble?

That remains to be seen. David Gerard, the author of The Attack of the 50-Foot Blockchain, has said: “We can’t tell how much of the NFT market is real and not just a promotiona­l push – or if any is real.”

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