A non-fungible token is a non-interchangeable unit of data stored on a blockchain, a form of digital ledger. Types of NFT data units may be associated with digital files such as photos, videos, and audio. Because each token is uniquely identifiable, NFTs differ from blockchain cryptocurrencies, such as Bitcoin.
Digital art is a common use case for NFTs. High-profile auctions of NFTs linked to digital art have received considerable public attention, with the work "Merge" by artist Pak being the most expensive NFT with a price of $91.8 million dollars and Everydays: the First 5000 Days, by artist Mike Winkelmann (known professionally as Beeple), the second most expensive auction at US$69.3 million in 2021.
NFTs can be used to represent in-game assets, such as digital plots of land, which some commentators describe as being controlled "by the user" instead of the game developer by allowing assets to be traded on third-party marketplaces without permission from the game developer. The monetization of NFTs within the game raised a $12.5 million investment, with some kitties selling for over $100,000 each.
NFTs, as with other blockchain securities and traditional art sales, can potentially be utilized for money laundering. Auction platforms for NFT sales may potentially face regulatory pressure for compliance with existing anti-money laundering legislation. Gou Wenjun, the director of the Anti-Money Laundering Monitoring and Analysis Centre for the People's Bank of China, has expressed that NFTs could "easily become money-laundering tools." Gou elaborated that there is an increasing unlawful exploitation of various new cryptographic technologies, and that illicit actors often self-identify as innovators of the financial technology sector.
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