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Written by Myles Shin

Pokemon cards, tiny Japanese erasers shaped like objects such as hamburgers. For many of us, accumulating a large collection of collectibles was a big part of our childhood. With the new era of technology increasingly bleeding into every dimension of our lives, it has created a new digital collectible frenzy for Non-fungible tokens, otherwise known as NFTs. “Non-fungible” means that these NFTs are not easily exchanged, as is the case with money. For example, if a person were to try to split a $10 bill into smaller bills, he could break it down into two $5 bills; it will always be worth the same. However, these NFTs are one-of-a-kind and will not always hold the same value. NFTs are digital tokens created through the Ethereum blockchain, which is different from cryptocurrency, but is stored in the same way as cryptocurrency. All NFT transactions and data are stored on ledgers that are available to the public, making it nearly impossible to “steal” or counterfeit NFTs (or cryptocurrency for that matter). 

What’s stopping people from turning anything into an NFT? Creating an NFT requires a hefty fee since it requires a lot of computing power to remotely “mine”data using computers. The fee ranges from hundreds of dollars all the way to hundreds of thousands, depending on the price of the asset being sold.

NFT trading operates similarly to artwork auctions. The rich will pay millions of dollars for artwork because it is rare; they get to have the only copy of that painting. A lot of its value comes from the exclusivity of the artwork. NFTs are similar in this aspect since whoever purchases the NFT is the only one with ownership of the token of that specific digital good. So, if it was a digital piece of artwork, then the person who bought the NFT would have a record and a hash code that verifies that he/she owns the virtual record of that asset . The NFT is a certification of some sorts to verify that the individual owns the digital asset. However, the creator of the digital artwork owns the intellectual property to that item and can reproduce the artwork as many times as he/she wants. However, the artist cannot replicate the NFT since he/she has already sold that to someone.

One NFT company that has grown in popularity recently among basketball fans is Top Shot, a company that sells highlight clips from NBA games. Each highlight has a ranging number of NFTs; the ones with fewer NFTs are obviously more rare, thus warranting a higher price tag. Some of the NFTs can sell for upwards of $71,000 dollars, like this clip of LeBron James dunking. This move received backlash, though, since anyone can watch and screen record this clip on YouTube for free. Most people who are buying into Top Shot are only in it to make profit; they understand that the NFT holds no physical value. They buy the clips in hopes that another person will come along and buy it from them and then that person buys it in hopes that someone else will buy it for a higher price; this creates a never-ending cycle of selling and reselling an item that has no true monetary value.

So as NFTs continue to climb in value, it is unclear as to how much consumers are willing to pay for digital tokens. NFTs already have and will continue to expand to new digital assets; the first official tweet is being sold for over $2.5 million. Don’t be too surprised if one day there are NFTs for songs or even self-driving cars.