Digital collectibles known as “NFTs” have exploded in popularity lately.A video clip created by digital artist Beeple was flipped for a record $6.6 million last week. So what are NFTs? CNBC runs through what you need to know.From art to sports trading cards, people are spending millions of dollars on digital collector’s items. These crypto collectibles, known as NFTs, have exploded in popularity lately. A video clip created by digital artist Beeple, whose real name is Mike Winkelmann, was flipped for a record $6.6 million last week. It had originally been bought for around $67,000.
What are NFTs?
NFTs, or non-fungible tokens, are a new type of digital asset. Ownership of these assets are recorded on a blockchain — a digital ledger similar to the networks that underpin bitcoin and other cryptocurrencies.But unlike most virtual currencies, you couldn’t exchange one NFT for another in the same way that you would with dollars or gold bars. Each NFT is unique and acts as a collector’s item that can’t be duplicated, making them rare by design.You can think of them like the crypto alternative to rare Pokémon or baseball cards.The rise of the internet meant that anyone could view images, videos and songs online for free. People are buying NFTs out of the belief that they’ll be able to prove ownership of a virtual item thanks to blockchain.
Why are they so popular?
The coronavirus pandemic played a big role in the NFT boom. Last year, the total value of NFT transactions quadrupled to $250 million, according to a study from NonFungible and BNP Paribas-affiliated research firm L’Atelier. That’s in no small part because of stay-at-home restrictions that resulted in people spending a lot more of their time on the internet and saving cash from a lack of commuting. It’s similar to the rise of retail traders betting on GameStop and other historically unloved stocks promoted on the Reddit board WallStreetBets.Meanwhile, it also arrives at a time when bitcoin, ether and other digital coins have surged in value, with bitcoin briefly topping $1 trillion in market value last month.