The theme this week on the One Minute Retirement Tip podcast is Non-Fungible Tokens (or NFTs)...explained. 

Today, I’m talking about the difference between collectibles and NFTs. On the surface, it seems like NFTs and collectibles are basically the same thing. And I think that’s a good way of thinking about NFTs, but with one clear difference. 

When you buy a physical collectible, like a one-of-a-kind piece of art, that collectible is a physical item. You would never buy that piece of art if you couldn’t take possession of it and hang it in your home or office or wherever. 

What’s different about NFTs is that you buy the piece of art, like in the case of Mike Winkelman’s art that recently sold for $69 million as a NFT. Someone paid $69 million dollars for a piece of art that they don’t even physically own. They just own the proof of ownership that exists with their non-fungible token.

If it sounds downright absurd to you, that’s because it is. If you go on YouTube, you can watch a video of Mike Winkelmann himself explaining the absurdity of his art fetching that kind of price tag. 

Similar to collectibles though, the sky high prices for some NFTs can be better understood by looking at the collectibles market. Value is in large part driven by scarcity and uniqueness of the collectible, and the same is true for NFTs. 

There are some practical applications for this. Digital files like artwork, memes, and audio or video files can be easily and endlessly duplicated. If you downloaded songs illegally and directly to your computer in the 1990s via Napster, you know how easily digital files can be copied. 

With NFTs, artwork can be "tokenised" to create a digital certificate of ownership that can be bought and sold, solving a lot of the problems that currently exist for creators of digital art. Seems like a good solution if you’re an artist trying to sell your work, which is probably not most of you listening. So tomorrow we’re going to turn to the investment implications of NFTs and discuss whether NFTs as an investment makes sense. 

That’s it for today, Thanks for listening! My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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