You’ve probably heard the term “non-fungible token” or “NFT” and no, it’s not some type of new trendy mushroom dish.
So what exactly are NFTs? They’re digital “tokens” that cannot be altered, deleted, copied, or modified in any way. (You can learn even more about the evolution of non-fungible tokens on the podcast videos here.)
NFTs are available on the Ethereum Blockchain (ETH). (This information about their owners, media types, and creators makes them different from ETH coins.) What’s more, these tokens cannot be traded with any other currency because they are not fungible. Cryptocurrencies such as bitcoin and fiat currencies such as the U.S. dollar, in which each coin or ten-dollar bill is identical in value, are considered fungible.
Non-fungibility — or something that is unique and its worth is not based on standard values — is what drives rare and unique trading cards, collector’s items, and, more recently, fine art. In fact, the concept of scarcity has always been a cornerstone of the art market. While some prints and photos can be printed in multiple editions, collectible fine art is rare and considered highly desirable.
This fundamental compatibility between NFTs and art markets has transformed both art collection and cryptocurrency. It also created a new community of investors and artists that includes everyone from celebrities to crazy-rich but relatively unknown individuals.
The NFTs’ digital existence and the Ethereum blockchain system that they are created on have prompted the crypto community to examine the limits of ownership and digital collectibles.
Many people are seizing the chance to create their own digital assets (such as from landmark moments in internet culture) and transform the blockchain into a virtual museum. These moments can be minted as NFTs, which contextualize them in a digital format that reflects their culture.
Despite their popularity, NFTs have come under fire.
However, NFTs are not perfect — not even close. The high price of digital assets has sparked a lot of discussion and debate. Many of the conversations revolve around how to buy non-physical media or art. Images, videos and even social media posts can be saved as.JPGs or accessed free of charge on social media platforms.
So why on earth would you pay millions of dollars to purchase a digital artwork that you can drag and drop onto your computer for free? The simple answer is that no matter how easy it may be to save or view a copy of the NFT an individual owns, they will always remain the sole owner. Consider that although millions can own prints of a famous Rembrandt painting, they do not own the original artwork.
But, you argue, the Rembrandt painting is real, it’s tangible. NFTs are just digital. And you’re right: NFTs are built on the belief that ownership is what’s ultimately the most important thing, not necessarily the form the item takes.
It is important to remember that works of art like a Picasso painting are often stored safely away and kept out of sight of the public. They are often loaned by their owners to institutions to be displayed. Some owners even commission a replica to display on their walls while the originals are kept protected in a vault somewhere.
Backlash has also been directed at NFTs over the negative impact they have on the environment. This is a criticism they share in common with Ethereum and cryptocurrency.
Regardless of what position you take, it’s likely that NFTs are here to stay, at least for the foreseeable future.