Bertie Jacobs

A new acronym has entered our lexicon: NFT. NFT stands for non-fungible token, which, in itself, does not say very much. What NFTs are, is money. Big money. And it is changing the world of digital commerce.

Firstly, non-fungible means that an item cannot be exchanged for another of its kind. An NFT is unique, like a painting. In fact, it is very much like a painting. Professor Waldo Krugell from the School of Economic and Management Sciences at the North-West University (NWU) explains.

“You can say it is digital art, but it is probably safer to say that it is a one-of-a-kind digital item. It is stored on a blockchain and you can have one in your digital wallet. It is a new kind of asset class. Before the advent of blockchain technology it was difficult to own a digital artwork, because anyone could download a copy. NFTs solve this problem by making the property right visible and enabling transactions to happen in new ways,” says Krugell.

So, it is, for instance, a digital painting that is safeguarded from replication. Rapper Snoop Dogg, Paris Hilton, Gwyneth Paltrow, Justin Bieber and many more celebrities have launched NFTs, and the world is following suit. It is a trend that is booming.

“This market is big. Every week millions of dollars of NFTs are sold through marketplaces like Foundation or OpenSeas, and often famous celebrities are involved. Last year in March an artwork called Everydays: The first 5000 days sold for $69 million on auction.”

According to Krugell, NFTs might sound a bit like cryptocurrency with blockchains, high prices, and impenetrable jargon, with the average person unable to understand why their prices can be so exuberantly high. “It is not a fair comparison.”

Krugell elucidates: “It is a novel digital asset, but it is different from cryptocurrency in that NFTs are not used as a method of payment. Aside from being a way of collecting art they have been used in interesting ways. NFTs can work like membership cards, or tickets that allow their owners to do things in the real world or the digital world. Companies have used them as a way to engage a community around their brands, giving owners access to exclusive merchandise or special discounts. They can also work as a digital key to online spaces. In this way NFTs create value beyond the original token.”

Although NFTs are a craze abroad, South Africans have not succumbed to their allure … yet.

“If you are wondering if we have this in South Africa, it is not big in South Africa yet, but we do have a South African NFT platform called Momint and there were auctions last year. I think that this is a space that is going to keep growing with more products like music and real estate that can be tokenised and sold online. South African investors will definitely catch up,” concludes Krugell.

Professor Waldo Krugell