What are NFTs and why are some worth millions?
A digital-only artwork has sold at Christie’s auction house for an eye-watering $69m (£50m) – but the winning bidder will not receive a sculpture, painting or even a print.
Instead, they get a unique digital token known as an NFT.
Where Bitcoin was hailed as the digital answer to currency, NFTs are now being touted as the digital answer to collectables.
But there are plenty of sceptics who think it is all a bubble that is going to burst.
What is an NFT?
NFT stands for non-fungible token.
In economics, a fungible asset is something with units that can be readily interchanged – like money.
With money, you can swap a £10 note for two £5 notes and it will have the same value.
However, if something is non-fungible, this is impossible – it means it has unique properties so it cannot be interchanged with something else.
It could be a house, or a painting such as the Mona Lisa, which is one of a kind. You can take a photo of the painting or buy a print but there will only ever be the one original painting.
NFTs are “one-of-a-kind” assets in the digital world that can be bought and sold like any other piece of property, but they have no tangible form of their own.
The digital tokens can be thought of as certificates of ownership for virtual or physical assets.
How do NFTs work?
Traditional works of art such as paintings are valuable because they are one of a kind.
But digital files can be easily and endlessly duplicated.
With NFTs, artwork can be “tokenised” to create a digital certificate of ownership that can be bought and sold.