Designer Krista Kim on the world's first NFT house

Digital artist Krista Kim joins "Squawk Alley" to discuss the world's first ever NFT house, as well as the surprise tax facing those who buy NFT with cryptocurrency. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi

Contemporary artist Krista Kim recently sold an NFT-minted digital house for 288 ether, valued at over $500,000 based on the cryptocurrency’s trading price Wednesday.

The creation — called Mars House — is part of Kim’s grand vision for the role augmented reality will play in the world, she explained in an interview on CNBC’s “Squawk Alley.”

“Right now, a lot of the [NFT] art that’s currently available on platforms, it’s a very limited parameter of how you can present the art,” Kim said Wednesday. “It’s presented, basically, as a digital file, a beautiful drawing or video on your screen, but my intention was to look beyond that.”

The new owner of Mars House, she said, will be able to upload the file into various metaverses -- 3D immersive worlds -- and experience the digital real estate there. She said Mars House represents the “next generation of NFT art.”

“For me, I actually foresee that we will be living in an augmented reality lifestyle within a very short period,” Kim said, predicting it could happen in “a couple years.”

The metaverse is an informal term used to describe a collaborative and immersive virtual world, and companies like Roblox and Fortnite maker Epic Games are working on the concept.

Augmented and virtual reality are key to providing a more immersive experience for these worlds. AR is technology that superimposes computer-generated images over real-world views, while VR goes further into a complete virtual space. Both have historically been associated with some sort of wearable headset or glasses.

Facebook’s Oculus is a well-known brand making virtual reality headsets, and the social media giant’s CEO, Mark Zuckerberg, has predicted big advances around AR and VR in the coming decade. Facebook plans to release smart glasses later this year.

Microsoft has its HoloLens offering, and, Kim noted, Apple has long been rumored to be working on an AR product.

Kim sees a central role for NFTs as the so-called AR lifestyle progresses.

“We’re all going to be decorating our environments and our personal space, our fashion,” she said. “Just like tattoos. People express themselves with tattoos. It’s an art form. Well, people are also going to express themselves with digital ... assets and decorative pieces and collectibles, fashion, accessories.”

NFTs are blockchain-based assets that are unique by design, and their popularity has boomed in recent months. Among their most critical characteristics, proponents say, is allowing for documented ownership of digital items.

Ownership of a particular NFT is recorded on distributed digital ledgers known as a blockchain, which also are used to power cryptocurrencies such as bitcoin. A range of assets are already being sold as NFTs, including basketball highlights, old tweets and a rock album. Recently, RTFKT Studios sold a collection of NFT-minted digital sneakers for the metaverse.

Historic auction houses known for selling multi-million dollar paintings have entered the crypto collectible fray, too. Last week, an NFT collage from the artist Beeple sold at a Christie’s auction for $69 million. On Tuesday, Sotheby’s announced a partnership with digital artist Pak.

Critics have dismissed the NFT boom as a flash in the pan destined to fade over time, and some note their soaring popularity — and what people are willing to pay for them — has coincided with a major rally in the value of many cryptocurrencies.

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