Context: Christie’s held an auction to sell the work by digital artist Beeple- first ever sale by a major auction house of a piece of digital art that does not exist in physical form. The work is in the form of a new kind of digital asset: a Non Fungible Token (NFT). This means that it is authenticated by blockchain, which certifies its originality and ownership.
- The work, called Everydays: The First 5000 Daysis a collage of 5,000 individual images, which were made one-per-day over more than thirteen years.
- It sold for $69,346,250, which Metakovan paid in the form of cryptocurrency Ether. Metakovan, whose real name was not disclosed, is the founder of Metapurse, the world’s largest NFT fund.
Analysis
Ether
- Ether (ETH) is the main token of the Ethereum blockchain and the world’s second-largest cryptocurrency by market capitalization. Just like the largest cryptocurrency, bitcoin, ether can be used to send payments directly to another person without the need for an intermediary.
- Ether is the cryptocurrency built on top of the open source Ethereum blockchain, which runs smart contracts.
- The cryptocurrency acts as a fuel that allows smart contracts to run unlike bitcoin, which is meant to be a unit of currency on a peer-to-peer payment network.
- Ether’s supply is not capped like that of bitcoin and its supply schedule, often described as minimum necessary to secure the network, is determined by members of Ethereum’s community.
- Ethereum is a cryptocurrency platform that uses smart contracts – rules that execute automatically exactly as written.
- Ethereum advocates that their platform will give users more control over their online data. With traditional apps and services, the platform owners have control over, what their users do online. For example, Gmail has a copy of all of its users’ emails, and Twitter habitually bans accounts that don’t follow its rules. Ethereum is a platform for building applications similar to the apps we use today, but without centralized control.
What are Cryptocurrencies?
- Cryptocurrencies are “a stateless digital currency” in which encryption techniques are used for trading and these ‘currencies’ operate independently of a Central bank like the RBI, “rendering it immune from government interference”.
Non-fungible tokens (NFT)
- A way to represent anything unique as an Ethereum-based asset and they’re secured by the Ethereum blockchain.
- NFTs are tokens that we can use to represent ownership of unique items. They let us tokenise things like art, collectibles, even real estate.
- Powered by smart contracts on the Ethereum blockchain, NFT can only have one official owner at a time– no one can modify the record of ownership or copy/paste a new NFT into existence.
- NFT stands for non-fungible token. Non-fungible is an economic term that you could use to describe things like your furniture, a song file, or your computer. These things are not interchangeable for other items because they have unique properties. Fungible items, on the other hand, can be exchanged because their value defines them rather than their unique properties. For example, ETH or dollars are fungible because 1 ETH / $1 USD is exchangeable for another 1 ETH / $1 USD.