Tokens on a chain
A role for banks in cryptocurrencies, crypto collectibles, and everything in between
Published by Mastercard Asia Pacific, July 2022
In 2009, the first successful decentralized cryptocurrency was launched. In 2021, a piece of digital artwork was auctioned for a value of US$69 million. Two landmark events 12 years apart.
The auction house’s acceptance of cryptocurrency for the purchase of the artwork was not just a token gesture. Ownership of a cryptocurrency is represented by fungible tokens. Ownership of non-commoditized items, such as artwork, is represented by non-fungible tokens (NFTs). In this US$69 million sale, the buyer and the seller essentially swapped tokens.
After the sale, the blockchain recorded the shift in ownership. More sales down the road, more blocks. And so the chain continues. Simple and traceable.
But look into the details, and this auction is not a US$69 million posterchild for decentralized finance (DeFi) purists. The auction was facilitated by a centuries-old traditional auction house. And the artist, apparently concerned about the cryptocurrency’s volatility, quickly converted the proceeds into US dollars.