When the virtual gavel dropped on March 11, the online audience could not believe their eyes.
A digital work of art had just sold for $69 million.
It could be delivered as easily as sending an email. No moving men were needed to install a huge sculpture or hired curators to delicately frame a painting.
Art has officially moved into the digital age.
The creator of the $69 million Everydays: The First 5000 Days is South Carolina-based digital artist “Beeple,” whose real name is Mike Winkelmann.
Beeple amassed a large following by using 3D rendering software to make colorful and evocative digital images, which he then authenticates with a unique piece of code.
For his masterwork, Beeple composed a new piece of digital art every day for 5,000 days and made them into a collage.
Before you roll your eyes back in your head and blame the Federal Reserve for this rampant speculation, please take note that this is not just a piece of digital art. It represents something profound in the way we transfer, track and hold digital items.
That’s why this auction was historic, and all investors should take note.
Unique Digital Assets
Beeple’s art is a “nonfungible token,” or NFT for short.
A token is a digital item that’s categorized and tracked on a blockchain, which allows us to see its ownership without needing a centralized intermediary.
This token can be transferred and traded between users, and the blockchain keeps track of that record.
This is what enables bitcoin to create a new form of money. It is also a new way of representing ownership in digital goods.
Most crypto tokens are fungible, meaning they can be exchanged like for like.
There’s no difference between the bitcoin you and I own; they’re interchangeable. The same could be said for dollars, gold bars or shares of Tesla.
On the other hand, a nonfungible token is a unique digital asset. It can be coded in a way to provide for limited editions.
Sure, you can copy anything digital, just as you can take a photo of the Mona Lisa, frame it and put it on your living room wall. But it won’t be the original.
It can also be programmed in a way that the original creator gets a cut of every resale or use. For instance, Beeple’s NFTs will pay him 10% each time the works are resold.
A New Digital Economy
NFTs allow us to track the authenticity of a digital good. They allow for digital scarcity.
There’s a record of every NFT on a blockchain, and we can see who owns it, as well as what the current owner does with it.
The NBA is already commercializing NFTs by allowing fans to purchase digital video highlights that are authenticated on the blockchain.
In just the first week, basketball fans have spent over $65 million on videos of slam dunks and game-winning 3-pointers.
NFTs will pave the way for a new digital economy. They will enable creators to harness more of the value they create.
Take the music industry. A rock band creates a new song, but to be paid for this work, they have to stream it through platforms such as Spotify or Apple Music.
Spotify pays the artist between $0.003 and $0.005 per stream. So, the band makes about $1 every 400 songs streamed.
It takes over 1 million streams for the artist to make $5,000 on a song. That’s why most of an artist’s earnings currently come from endorsements and tours, not the sale of their music.
NFTs will recreate this current setup and allow artists to keep more of the value they create.
Rather than having an intermediary such as Spotify in the middle of the transaction, an NFT can be coded to pay the artist every time their songs are played or transferred to another user.
Get in on This Huge Trend Before It Takes Off
These are just a few use cases among many for NFTs. It’s also why they’re reinventing the digital world.
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Editor, Automatic Fortunes