Non-fungible-tokens, or NFTs, have boomed in popularity recently with some major sales in the millions, but what are they and what is the connection to cryptocurrency?
The major thing to know is that NFTs are digital assets stored on blockchain - the same technology underpinning cryptocurrency purchases, mining and trading.
But, that is about where the similarities end.
Physical money and cryptocurrencies are “fungible”, so they can be traded or exchanged for one another.
In this sense, they are equal in value. For example, one Bitcoin is always equal to another Bitcoin. Just like a $5 note is equal in value to another $5 note.
But NFTs don’t work like this. Just because one thing is an NFT does not mean it has the same inherent value as another NFT. They’re not equal, so they're “non-fungible”.
NFTs are tokens that represent ownership of unique items and allow people to tokenise things like art, collectibles, or real estate.
How does blockchain work?
Blockchain is the technology underpinning both cryptocurrencies and NFTs. It can seem complicated but the concept behind it is simple: To allow digital information to be recorded and distributed, but not edited.
“One key difference between a typical database and a blockchain is the way the data is structured,” Investopedia said.
“A blockchain collects information together in groups, also known as blocks, that hold sets of information.”
Each block has certain storage capacities and, when filled, are chained onto the previously filled block, forming a chain of data known as the “blockchain”, Investopedia said.
All new information that follows that freshly added block is compiled into a newly formed block that will then also be added to the chain once filled.
Highest selling NFTs
Beeple’s “EVERYDAYS: THE FIRST 5000 DAYS”: $69 million
CryptoPunk #3100: $7.58 million
CryptoPunk #7804: $7.57 million
Beeple’s “Crossroads”: $6.6 million
Doge: $4 million
Jack Dorsey (and Twitter’s) first-ever tweet: $2.9 million
The Best I Could Do: $1.65 million
CryptoPunk #6965: $1.6 million
Axie Infinity Virtual Game “Genesis” Estate: $1.5 million
Auction Winner Picks The Name: $1.3 million