In March 2021, a 1961 oil painting by VS Gaitonde sold for over $5 million – making it the most expensive Indian art ever sold. In the same month, auction house Christie’s sold a digital work of art for the first time for $69 million. It not only set a record but also made a blockchain application called NFT instantly popular.
NFTs, or non-fungible tokens, are unique digital items stored on a blockchain, the same network that runs cryptocurrencies. Anything digital – images, videos, music, even the online version of this article – can be converted into an NFT and monetised. NFTs are not the digital art but instead certificates of authenticity, and most use the blockchain of ethereum, the second-biggest cryptocurrency. Just like crypto, trading of NFTs too has no legal backing yet. The lack of regulation also means that it is prone to price manipulation.
Increased use of the internet and a surge in interest in crypto has driven NFTs’ popularity. “Many consumers who had put money in crypto were introduced to NFTs as a new medium of investment. NFTs also gained popularity when celebrities like Twitter co-founder Jack Dorsey, Paris Hilton, and Snoop Dogg sold NFTs,” said Sumit Ghosh, CEO & co-founder of Chingari, the NFT marketplace that was launched by Salman Khan in October 2021.
Apart from art and memorabilia collectors, some have taken to NFTs due to speculation as the value of a token is derived from what buyers are willing to pay for it. “The appreciation of crypto market capitalisation along with mainstream users adopting crypto drove NFT popularity,” said Santosh Yellajosula, member of Blockchain and Crypto Assets Council (BACC) and chief ecosystem officer at Xfinite. He added that the NFT market may see a correction in the short term.
The rising interest in digital art due to the pandemic-induced lockdowns also helped NFTs reach a mainstream audience – those that were not crypto backers.
NFTs also enable digital content creators and owners of IP (intellectual property) to monetise their work or assets without a ‘middleman’ and earn a royalty every time the NFT is resold. “NFTs gave the ability to make digital assets scarce and verifiable. NFTs fractionalise digital content and make it tradeable – making IP liquid,” said the CEO of an Indian sports NFT company.
The world’s most expensive NFT sold by Christie’s – a collage of 5,000 pictures by US artist Beeple – can be downloaded and ‘viewed’ by anyone but only one person actually ‘owns’ it. That ownership data is stored as an NFT on a decentralised blockchain network.
In 2021, NFT sales reached $25 billion compared to just $95 million in the previous year, according to Reuters. Industry players say, in an increasingly online world, ‘bragging rights’ – in the form of NFTs – too have gone digital.
In November, Amitabh Bachchan auctioned a recorded rendition of the poem ‘Madhushala’. Other celebrities like Salman Khan and Sonu Nigam too have launched NFT.