I read that the American rock band Kings of Leon is getting in on NFTs (non-fungible tokens). They are not the first. I looked into this term which I was not familiar with and found that the artist Grimes sold a bunch of NFTs for nearly $6 million and an NFT of LeBron James making a historic dunk for the Lakers garnered more than $200,000. The auction house Christie’s got bids in the millions for the artist Beeple.
NFT stands for “non-fungible token,” meaning a token that you can’t exchange for another thing of equal value. Fungibility is the ability of a good or asset to be interchanged with other individual goods or assets of the same type. Fungible assets simplify the exchange and trade processes, as fungibility implies equal value between the assets.One comparison I found said to consider that you can exchange a $20 bill for two $10 bills. They are fungible. Bitcoins are fungible. But an NFT is one of a kind.
NFTs (sometimes pronounced niff-tees) are used to create verifiable digital scarcity. They also give digital ownership. They are currently being used with things that require unique digital items like crypto art, digital collectibles, and online gaming.
This goes back to blockchain which has become an established way to provide proof of authenticity. Blockchain gets most of its attention because of its use with cryptocurrencies, like Bitcoin. Ownership is recorded on a blockchain which is a digital ledger.
NFTs use Ethereum, a decentralized, open-source blockchain featuring smart contract functionality. Ether is the native cryptocurrency of the platform. It is the second-largest cryptocurrency by market capitalization, after Bitcoin.
We heard recently that Elon Musk bought a lot of Bitcoin and will accept it as payment for his Tesla vehicles, and other vendors accept cryptocurrencies as payment. But NFTs are unlike cryptocurrencies because you can’t exchange one NFT for another in the same way that you would with dollars. Its appeal is that each is unique and acts as a collector’s item that can’t be duplicated. They are rare by design, like limited editions and prints.
And now, with music, proponents say that NFTs could help artists struggling with digital piracy, low streaming royalty rates and a lack of touring revenue from the last year of Covid-19 pandemic restrictions.