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Physical art, such as painting by Rembrandt or sculpture by Rodin, can be worth a lot of money, partly because the original can be distinguished from a replica. But what about creative works that are online and therefore can be copied, downloaded and shared by anyone? So-called ‘non-fungible tokens’ (NFTs) also give this kind of work economic value.
Digital files, such as images, videos, music files and digital art, can be converted into a non-fungible token. An NFT is a non-fungible, unique and digital proof of ownership. When you buy NFT of a digital file, you become the official owner of that file.
Digital photo is sold for a considerable amount as NFT
We explain it to you with the help of an example. In 2008, this photo of Zoë Roth, later known as disaster girl, all over the world at once. The image of the devilishly grinning girl standing in front of a burning house was massively edited and shared for all kinds of jokes.
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The now mature Roth sold the picture as an NFT for the equivalent of more than 400,000 euros. A music studio in Dubai now owns the original image. Roth still owns the copyright, so every time the image is resold, she receives ten percent of the sale. In addition, anyone can still copy, download and share the image. NFTs therefore make digital files that can be massively duplicated valuable. With NFT, the music studio can prove that it has the original in its hands.
A tweet from 2.5 million
In addition to images, all sorts of other digital files are also sold in this way. On March 21, 2006, Twitter founder Jack Dorsey wrote “just setting up my twttr.” This first ever tweet was sold for almost 2,500,000 euros.
Another example is the iconic internet video ‘Charlie bit my finger‘, where Harry is bitten on the finger by his younger brother Charlie. The video was sold for more than 622,000 euros.
Price set at auction
NFTs are sold through auctions on online marketplaces. The more people bid on the NFT, the more expensive the NFT becomes. The price of an NFT is also related to its cultural value. In addition, digital works can have a great collector’s value and therefore increase in price.
Blockchain and the climate
The sale of NFTs takes place via Blockchain technology, i.e. completely online and without interference from banks. You can therefore only buy most NFTs with ether, a cryptocurrency. Blockchain is a kind of public database that records, among other things, which transactions have been made and who owns which NFTs. The blockchain system consists of thousands of computers connected to each other. Because the computers are constantly computing, they use an enormous amount of energy, even more than an entire country. Blockchain technology’s impact on the climate is therefore enormous. Several major crypto companies signed the Crypto Climate Accord in April this year. This agreement aims to make the crypto world climate neutral by 2040.
What should you be aware of?
It is possible that NFTs are a hype and therefore turn out to be less valuable in the future than expected. In addition, the regulations surrounding NFTs are still in their infancy. If you want to buy an NFT, make sure you do so on a trusted auction site. Frequently used websites are OpenSea, Rarible, SuperRare and Foundation.
The video below also explains NFTs.
Source: NOS, NU.nl, Forbrugerforeningen, Bright
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