On the Internet, for hundreds of thousands they sell something that costs nothing: how is this possible

An animation of a cat flying in space, leaving behind a trail of rainbows. How much can it cost and is it even worth anything? As it turned out, yes. Last month, almost $600 was paid for this video - the famous Internet meme Nyan Cat. The publication spoke in more detail about this with the BBC.

Photo: Shutterstock

The sold video is still on Youtube. And everyone can watch it. The buyer paid $ 600 simply to be considered the owner of the popular meme.

Sounds weird?

Then you will be even more surprised by the fact that the network sells virtual land plots that exist only on the Internet. And yes, there are also buyers on this item willing to shell out thousands of dollars for ownership of a piece of digital real estate.

Fragments of basketball matches are also lots. Even though they can be easily found in the public domain, thousands of people pay a lot of money for short videos.

You can even list tweets for sale, as Twitter co-founder Jack Dorsey recently did. For the publication, which he left back in 2006, they are already ready to shell out $ 2,5 million.

This is all part of the NFT token market, which is currently experiencing a real boom.

In February alone, the total amount of transactions in this segment exceeded $ 340 million, which is more than in the entire previous year, when the trading volume reached $ 250 million.

What is NFT

NFT tokens are a kind of development of the idea of ​​cryptocurrency. Like traditional digital money - Bitcoin or Ethereum - they work on blockchain technology.

The key difference is only one: if one Bitcoin “coin,” for example, is no different from another Bitcoin “coin,” then each NFT can be unique (or have a limited number of copies). Hence the name NFT - non fundgible-token (non-fungible tokens).

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If you have a unique NFT token, then you can be sure: no one else has this.

This turns an NFT into a kind of certificate certifying the exclusive ownership of a particular digital asset - a photo, video, music, illustration or GIF with a cat. Almost everything that exists on the Internet can be “packaged” into NFTs.

In particular, the NFT code contains information about the author of the product, its current owner, the mechanism for automatically calculating royalties from future resales, and the like. It is impossible to forge such a token.

As strange as it all may seem, digital assets are slowly becoming equal to physical ones, and more and more people are willing to pay to be considered the sole owner of a certain digital product - even if we are talking about ordinary animation.

And if at first the NFT sphere was mainly a haven for enthusiasts who were engaged in collecting various digital assets, now serious players are increasingly paying attention to this market.

How it all began. Pepe the Frog and the Cryptocats

The first experiments with NFTs began in 2017 - with memes about Pepe the Frog, posted on the Rare Pepe Directory platform.

One of the cards on display there, a portrait of Homer Simpson stylized as Pepe, soon sold for $500, and about a year later it went under the hammer for $38.

Next came CryptoPunks - a series of pixel portraits of virtual characters (cryptopunks), released in a limited edition of 10 cards.

At first they were handed out for free, but gradually they turned into collectibles among enthusiasts who were willing to buy from each other the right to own a particular character.

At the beginning, prices were insignificant, but they rose steadily and reached the million mark in 2021.

In February, 800 ethers were paid for one of the cryptopunks (Ethereum is the second most popular cryptocurrency after Bitcoin), which at the then exchange rate was $2 million.

NFT is about the Internet, so sooner or later it will come to the topic of cats.

In 2017, the virtual game CryptoKitties appeared, which boiled down to the fact that players can collect, buy, sell and even mate virtual kittens of various types.

Each crypto cat is unique, has its own characteristics that it can pass on to its offspring. The goal of the participants is to collect kittens with the rarest features.

Sounds like a simple game for kids? Perhaps, but quite adults played it. Moreover, they were ready to shell out huge sums for the image of this or that cat.

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Already in March 2018, the CryptoKitties audience was 1,5 million people, and the prices for crypto kitties reached hundreds of thousands of dollars in cryptocurrency equivalent.

What happens now

The end of 2020 and the beginning of 2021 are the best times in the short history of the NFT market.

Large investment funds are invested in companies launching projects in this sector. For example, Christie's, the largest auction house, draws attention to Andressen Horowitz, in which digital art is “packaged” in NFT tokens.

An auction of a work by digital artist Beeple is currently ongoing on the Christie's website - the highest bid is now more than $9 million.

This work has no material embodiment - buyers pay for a virtual token that will show their ownership of the picture, which is not so difficult to find on the Internet.

In the fall, the National Basketball Association (NBA) came to the NFT sector to launch the Topshots project, where you can collect and sell virtual cards with video clips of basketball matches.

The user buys a package with such fragments without knowing which cards are inside. Some cards are more valuable because they are produced in limited editions, some are less valuable because they are produced in large quantities.

Then you can choose: collect a collection of certain cards or sell them to other collectors.

The mechanics are very similar to the popular in the 2000s album for collecting stickers with football players: you buy sets of such stickers and try to fill the entire album as quickly as possible.

In NBA Topshots, however, these "stickers" are virtual, and the amounts that people are willing to shell out for them reach hundreds of thousands of dollars. In February, for example, they paid $ 125 for a card from LeBron James, and now they are asking for even more.

Now anyone can create their own NFT and try to sell it - for this there are marketplace platforms like Rarible, OpenSea or Nifty Gateaway.

Of course, simply placing this or that digital asset is not enough - you also need to find a buyer. Those who succeed make good money from it, even if they themselves do not fully understand what an NFT is and why someone pays so much money for their work. Top creators have already earned millions from NFT mania.

In general, under the guise of NFTs they sell illustrations, animations, music, game elements for computer games and even land plots with the Decentraland virtual universe.

And recently a director from Brooklyn decided to joke, and at the same time to make money on the hobby of Internet users with non-fungible tokens. He put up for sale an audio clip of his bunches, which he recorded during a year in quarantine.

Now, a year after the start of this entertainment, Ramirez-Mallis admitted that he can identify the members of this group only by their farts. As a result, Ramirez-Mallis and his fellow farting compiled all the recordings into one 52-minute Master Collection audio file. The highest bid for this file token is currently $ 183.

In addition, individual bunch records are available for 0,05 Ethereum (cryptocurrency), or about $ 85 apiece. So far, the group has sold one Individual Record token to an anonymous buyer.

Money out of thin air or revolutionary technology

Many people find it difficult to understand why someone is willing to pay for an ordinary image of a cat or a fragment of an NBA match that can be watched on Youtube, because all this, it would seem, has no real value.

Therefore, critics often refer to the entire NFT sphere as a bubble that is about to burst.

Defenders of the NFT idea convince: value lies in exclusivity. And they compare digital collecting to physical collecting of old baseball cards, stamps, music records or other rare objects.

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For some, the same brands do not cost anything, but others are willing to pay huge sums for the very feeling that you are the owner of this valuable asset for a narrow circle of people.

And even the fact that digital assets do not have any physical manifestation and copies of them can be found on the web does not change anything, explains Marc Andressen of the investment fund Andressen Horowitz: "You pay for the feeling."

However, collecting is not the only field where NFTs can come in handy. NFT proponents believe that non-fungible tokens could revolutionize ownership—and not just on the internet. After all, NFTs contain many functions that are now distributed among various institutions or intermediaries. In particular, they serve as reliable confirmation of the authenticity of an asset and make fraud and forgery impossible.

Over time, NFT proponents believe, such digital tokens will be "packed" with diplomas, driver's licenses, property rights and any other licenses or documents, the key attribute of which should be authenticity.

However, even the most zealous NFT apologists are hesitant to predict exactly how many years such a technological revolution might take. They often agree that right now this sector is very speculative - many are simply buying NFT tokens in order to quickly resell them for a higher price.

But as long as there is hype around the NFT topic and a growing audience with new money is coming to this sector, the NFT market is growing.

But when the hype passes, it is quite possible that memes, images of cats and NBA cards, for which they are ready to pay millions of dollars today, will again cost nothing.

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