Beeple’s NFT digital art,Everydays-The First 5000, was auctioned for £50m or $69m at Christie in Mar 2021. You can copy a digital file as many times as you want. But the buyer of the NFT owns a token that proves they own the original work. What is NFT? How does it work? How is it different from Cryptocurrency? What other things were sold with NFT? Where can NFT be used?
The digital art, called Everydays-The First 5000, was a collage of the thousands of individual daily images which Beeple real name Mike Winkelmann, an American graphic designer, started in early 2007 and has done every day since.
Beeple artwork Everyday which was sold with NFT
Table of Contents
What is NFT?
You can copy a digital file as many times as you want. But the buyer of the NFT owns a “token” that proves they own the “original” work.
NFT, stands for anon-fungible token.
What is Non Fungible?
Fungible (adjective): Replaceable by another identical item; mutually interchangeable.
Rs 100 note in your wallet is no different from any other Rs 100 note or two Rs 50 notes. It is interchangeable 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.
NFTs are more like Fabergé eggs; they all follow the same basic concept (a jeweled egg), but each one is an original creation with a different shape, size, or pattern. As such, the eggs are not like-for-like interchangeable. This feature is the essence of an NFT.
Example of NFT
On 19 February, an animated Gif of Nyan Cat – a 2011 meme of a flying pop-tart cat – sold for more than $500,000.
A few weeks later, musician Grimes sold some of her digital art for more than $6m.
Twitter’s founder Jack Dorsey has promoted an NFT of the first-ever tweet, with bids hitting $2.5m.
Christie’s sale of an NFT by digital artist Beeple for $69m (£50m) set a new record for digital art.
CryptoKitties is a virtual first blockchain game, created in October 2017, which allows players to adopt, raise and trade virtual cats. CryptoKitty is one-of-a-kind and 100% owned by a person. It cannot be replicated, taken away, or destroyed.
Video on NFT
Wall street Journal, in this 6 minute explains how NFT work, and why skeptics question whether they’re built to last
How are NFTs related to Cryptocurrency?
Technically, NFT or non-fungible token is a unit of data stored on a digital ledger, called a blockchain, that certifies a digital asset to be unique and therefore not interchangeable. The records cannot be forged because the ledger is maintained by thousands of computers around the world. NFTs can be used to represent items such as photos, videos, audio, and other types of digital files. NFTs are a class of cryptocurrency assets in which each item, or token, is entirely unique.
Most NFTs currently exist on a single blockchain, Ethereum. As with crypto-currency, a record of who owns what is stored on a shared ledger known as the blockchain.
What is blockchain? How is it related to Bitcoins?
A blockchain is a unique database, behind the technology that powers cryptocurrencies like Bitcoin, Ethereum, etc.
In a blockchain, data is stored in blocks or groups which are then chained together. The latest transaction block will contain details of the previous transaction block. Data is in coded form ie cryptography so Information once stored cannot be changed or tampered with even though everyone has access to the records.
Blockchain keeps track of all transactions, just as a ledger does and the copy of the ledger is not stored in a centralized network, like in banks transmitted and stored with everyone. So It is a type of distributed ledger technology (DLT).
Our article What is Blockchain? How it differs from Cryptocurrency? explains it in detail.
What is Bitcoin?
The blockchain concept was launched by a pseudonymous person or group called Satoshi Nakamoto who released a white paper in October 2008 on Bitcoin named ‘Bitcoin: A Peer-to-Peer Electronic Cash System‘. It highlighted how blockchain could be the software infrastructure that allowed Bitcoin transactions. It was published a month after the 2008 global financial crisis, triggered by banks considered “too big to fail”, filing for bankruptcy.
Nakamoto’s paper proposed a payment system that had three main features. All could be implemented without a central financial institution.
- There is no need for a third-party financial institution like banks to provide an element of trust between buyer and seller who usually don’t know each other, even though it is online and they have never met.
- To overcome the problem hat one could duplicate the digital money like a word file and spend it at two or more places. Nakamoto suggested a mechanism that would secure past transactions and also identify and stop double-spending. The information is coded using cryptography and is chained in blocks called blockchains. Hence Currencies like Bitcoins are called as Cryptocurrency
- There is a system for new money to be generated. And those who generate blocks for the transaction, miners, get a part of the transacted amount as fee
The image below shows how does the Bitcoin economy works
How does bitcoin economy work
Top 10 Cryptocurrencies
There are hundreds of cryptocurrencies around the world but the core group of 20 coins constitutes around 99% of the market by volume, according to crypto website CoinDesk.
Bitcoin and other cryptocurrencies, as speculative investments, have generated numerous billionaires as well as those that lost their investments by untimely selling their coins or by forgetting the password to their digital wallets.
New cryptocurrencies come and go, but Bitcoin never goes out of fashion. In January 2013, 1 Bitcoin was worth around $20 and in early 2021, the value of 1 Bitcoin crossed $50,000.
Ether (ETH), the cryptocurrency of the Ethereum network, is the second most popular digital currency after bitcoin.
| Cryptocurrency | Price as of March 29, 2021 | Market Cap |
|---|---|---|
| Bitcoin | $57,566.38 | $1.075 trillion |
| Ethereum | $1,811.82 | $209.464 billion |
| Binance Coin | $273.38 | $42.304 billion |
| Tether | $0.99 | $40.632 billion |
| Cardano | $1.19 | $38.188 billion |
| Polkadot | $33.74 | $31.349 billion |
| Ripple | $0.56 | $24.598 billion |
| Litecoin | $192.88 | $13.038 billion |
| Chainlink | $28.06 | $11.689 billion |
| Stellar | $0.41 | $9.23 billion |
What is Ethereum
Launched in 2015, Ethereum is an open-source, blockchain-based, decentralized software platform used for its own cryptocurrency, ether. It enables SmartContracts and Distributed Applications (ĐApps) to be built and run without any downtime, fraud, control, or interference from a third party.
Ether (ETH), the cryptocurrency of the Ethereum network, is the second most popular digital currency after bitcoin. Bitcoin and Ethereum is like Amazon and Flipkart.
Ether and bitcoin are similar in many ways:
- each is a digital currency traded via online exchanges and stored in various types of cryptocurrency wallets.
- Both of these tokens are decentralized, meaning that they are not issued or regulated by a central bank or other authority.
- Both make use of the distributed ledger technology known as blockchain
While bitcoin was created as an alternative to national currencies and thus aspires to be a medium of exchange and a store of value, Ethereum was intended as a platform to facilitate immutable, programmatic contracts, and applications via its own currency.
Transactions on the Ethereum network may contain executable code, while data affixed to Bitcoin network transactions are generally only for keeping notes.
Other differences include block time (an ether transaction is confirmed in seconds compared to minutes for bitcoin) and the algorithms that they run on (Ethereum uses ethash while Bitcoin uses SHA-256).
Difference between Bitcoin and Ethereum
Uses of blockchain
So blockchain is the technology used in cryptocurrencies. But blockchain applications go far beyond cryptocurrency and bitcoin such as
- secure sharing of medical data
- Real estate processing platform
- Advertising insights
- Cross-border payments
- Real-time IoT operating systems
- Personal identity security
- Anti-money laundering tracking system
- Supply chain and logistics monitoring
- Voting mechanism
- Original content creation
- Cryptocurrency exchange
- NFT marketplaces
- Music royalties tracking
How NFT can be used?
In the future, it can be used to store all kinds of data, from the birth certificate and health data to land records and much, much more.
It could be used for smart digital agreements to exchange money, shares, property, or virtually any asset. These digital contracts could one day do away with the need for a third-party arbitrator, such as a court, and instead, use a computer program on blockchain to confirm that the conditions have been met.
Related Articles:
- What is Blockchain? How it differs from Cryptocurrency?
- Understanding Bitcoin: What is Bitcoin,How it works,How to buy Bitcoins
- Is Crypto currency banned in India?
Bitcoin was hailed as the digital answer to currency, NFTs are now being touted as the digital answer to collectables
