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NFT bubble: How long will it last?
While the NFT business has seen a boom during the pandemic, players should realize that no bubble business is sustainable.
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A doodle from the archive of the artist FEWOCiOUS, due to be sold as an NFT at Christie's auction house, is pictured in this handout obtained on June 14, 2021. (Reuters/Christie's Images Ltd. 2021/Handout)
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young man named Ghozali has been in the spotlight over the last few weeks for ushering innovation by selling his selfies as non-fungible tokens (NFT) on some online marketplaces, such as OpenSea.
The selfies were taken in 2017-2021 and sold for an accumulated NFT trading volume of up to 284 Ethereum, a cryptocurrency, an equivalent of around US$930,000 today.
What is NFT in layman’s terms?
Fungibility is the ability of an asset to be interchanged with other individual assets of the same type. For example, if X gives $50 to Y and Y gives X two $20 notes and a $10 note or any other combination of notes totaling $50 in return, these assets are fungible. On the other hand, if A lends his favorite poetry book to B and a few days later B tries to return the newest edition of the same book after losing the originally borrowed copy, A might not accept it. So the book, as an asset, is non-fungible with respect to ownership.
A non-fungible asset is therefore a unit that cannot be interchanged. This means that an old book cannot be substituted by a newer edition. The old book may elicit personal memories that make it unique. If an individual wants to ensure that this uniqueness and ownership is guaranteed, one way is to “certify” it. In the digital world, certification is done with tokens. Thus, NFTs offer certification that guarantees an asset’s uniqueness.
Objects traded digitally today can be in the form of visual, audio, text, or numerals. Internet technology allows us to download these digital assets at a single click. In many cases, no matter how many times they are downloaded, each copy of the asset will be exactly the same.
What if we want to certify ownership of an asset? NFTs allow us to do so by using blockchain technology, which provides a public certificate of authenticity and proof of ownership, but does not restrict sharing or copying of the asset’s underlying digital data.
