WASHINGTON — You have been seeing headlines about the Twitter founder Jack Dorsey selling his first tweet for millions, but what exactly is this NFT business?
It’s the latest digital financial craze that people across the world have spent millions of REAL dollars on.
Question:
What are NFTs?
Answer:
It stands for "Non-Fungible Token," a digital collectors’ item.
Sources:
Moish Peltz, a digital intellectual property attorney from the law firm Falcon, Rappaport and Bergman, LLC and Dan Ackerman, senior editor and digital technology expert from CNET.
What We Found:
Let’s start basic. A fungible token is an item or currency like a dollar. It has an equal value somewhere in the world for it. A simple example is a paper dollar could equal four quarters.
By contrast, a Non-Fungible Token means the item is unique.
“Even if you have something that is functionally the same, it's not exactly the same, so it doesn't count,” Ackerman said of NFTs.
That sounds easy enough, but what exactly are these unique tokens?
"Thinking of them as collectibles of the internet is the right way of thinking of NFTs," Moish Peltz said.
A basic example is a digital creator could make a music file, video file or picture file. Once it is uploaded we can all copy it. It’s not special and has no value.
But if that creator takes that file and converts it into a NFT, the program adds digital information to the file. Almost like a certificate of authenticity.
Then as an NFT, that file gets listed on the internet’s financial ledger: blockchain.
“You're saying, ‘I'm buying this, I know, it's really just a digital copy of something, I can just get anywhere,’” Ackerman explained. “‘But I feel like this particular version -- because it has this digital certificate of authenticity with it -- will be worth more later, and I'll be able to resell it.’”
A similar comparison is like when a baseball player autographs a baseball card. It has more value.
When a digital creator turns a file into an NFT, it gets the digital information stamp and gets put online for everyone to see. The buyer would be getting this “official copy.”
It sounds ludicrous, but there is huge money behind these digital collectibles. They are sold in online auction websites or direct buyer to seller.
Twitter CEO jack Dorsey sold his first tweet as an NFT for $2.9 million.
To wrap it up, an NFT is a version of a piece of digital art that has a certificate that makes it unique and shows up on the internet’s ledger.
All its value comes from who made it and how much people think they could be worth.