A non-fungible token (NFT) is a special type of cryptographic token which represents something unique. Photo: 123rf
First there was blockchain, then there were cryptocurrencies like bitcoin, now there are NFTs - and they are taking the digital world by storm.
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Non-fungible tokens have hit the headlines after a digital artwork by Beeple sold at Christie’s auction house for $100 million.
NFTs have been described as similar to a fingerprint because each one is unique. The tokens (NFTs) show true ownership of any kind of digital asset.
That digital asset can be a song, an artwork, tickets to a concert or a moment in sport. The mania around NFTs is so hyped that Twitter's Jack Dorsey sold his own first tweet for $2.5m; a gif of famous US entrepreneur Mark Cuban dancing was traded for tens of thousands of dollars; Taco Bell had NFTs for five different tacos on the market. One US film director is ridiculing the NFT craze by selling his fart.
"In the cryptomarket scene there are a lot of people with money to waste," says Jacob Michaels, co-owner of the Moana Park Estate winery, who has sold his premium label Messenger as the world's first wine NFTs.
"And it’s incredible, because some of these people could be teenagers in their mother's basement who have struck gold over the past few years with some of these crypto coins and they've become multi, multi millionaires just out of sheer dumb luck and just being interested in something that's growing so fast and they're looking at places to put their money into."
In just a few months, he says, NFTs have grown exponentially and the bubble will "pop, somewhere down the line - but we're not anywhere near the end right now".
Today, Michaels explains to The Detail's Sharon Brettkelly how NFTs work, why they're not just a fad and how young people should have a go at making money in the NFT craze before that bubble pops.
People use cryptocurrencies such as bitcoin or ethereum, stored in their digital wallets, to buy NFTs on digital marketplaces.
Michaels says people are willing to pay silly money for bad digital artworks, songs or even tacos because "it’s a brand new idea and it’s unique, people can own it themselves so they can say I own this exact file, nobody else in the world owns it and I think that scarcity by itself is what drives people to buy it".
"People are also taking a more investor minded approach to this. One person might have spent $10,000 to buy 10 NFTs, then what happens is maybe next month or maybe immediately he puts it back out on the marketplace for 10 times that price."
American Michaels first became interested in blockchain in Korea several years ago when he was selling property, then he discovered cryptocurrencies, which he initially thought ridiculous. But he became a "big believer" after he bought into the virtual currency, ether for $38. Now it is worth $1800.
"I could see that there's a lot of new technologies being built on these platforms in blockchain. I think it’s going to revolutionise all different kinds of industries the same way the internet has 20, 30 years ago."
He has sold 50 bottles of Messenger wine on the NFT market place for 0.15 ether, or more than $350 per bottle. That's the same price as it retails for.
"We're very happy."
Michaels reckons the wine NFT buyers will most likely immediately put the NFT's back on the marketplace.
"This is where the future is going. Transacting money via the blockchain is way cheaper oftentimes, way faster than trying to send money through a traditional means."