NFTs: what are they?

Written by Abby Chadwick. Illustration courtesy of Abby Chadwick

I don’t know about you, but I’ve been hearing about NFTs all over the internet. However, the more I hear about them, the more confused I become. After some extensive and somewhat confusing research, I think I finally understand them, and hopefully I can shed some light on the topic for you as well.

To begin, I think it would be best to establish what “NFT” actually stands for: non-fungible token. According to TheVerge.com, “non-fungible” essentially means each NFT has qualities that make it unique and irreplaceable with another NFT.

For example, dollar bills are fungible, meaning they have the same value when you trade one for another. Something like rare baseball cards, however, are non-fungible because trading one baseball card for another does not insure that you will end up with something of the same quality or value. The actual “token” part of the definition can stand to mean numerous things.

According to Ethereum.org, NFTs can be any form of digital media: images, videos, music, tweets, GIFs, even collectibles in video games. However, they can also represent something tangible (i.e., tickets to a concert or deeds to a car.)

When people buy and sell NFTs, they are essentially buying ownership over that specific “digital trading card.” A digital artist known as Beeple created a collage of his digital artwork and sold it for…get this…$69.3 million. Now, in the time it took you to read that sentence, I could have easily just downloaded a PDF of that $69.3 million dollar piece and saved it to my own computer. The thing is, no matter how many times that image is downloaded, screenshot and copy/pasted, there is still only one true owner of that NFT.

Because most NFTs are part of the Ethereum blockchain (a digital database that runs the cryptocurrency and ownership information associated with blockchains), information such as the uniqueness of a piece as well as who owns it is all published publicly.

Now, the big question is why on earth would someone spend that kind of money on the ownership of something they could have just downloaded for free? Well, the answer is similar to what you would hear if you asked an art collector why they bought an original Picasso when they could have just bought a print of it for a fraction of the price.

For some, it’s about the investment (buying these NFTs with hopes that their price will increase some time in the future.) For others, it’s simply about bragging rights (although you would definitely have to find the right audience to brag about the $46,300 thousand you spent on a PNG file of a pet rock (yes, someone did in fact do that.) After reading the very long twitter thread of the pet rock owner explaining why they decided to drop over $46 thousand on this rock, I essentially concluded that because NFTs are fairly new to the art collecting game, people are assuming that pieces created early on in NFT history (like said rock) will be worth substantial amounts in the future. I guess only time will tell.

Overall, I understand why artists and collectors are jumping on the expanding world of NFTs. It’s a great way for artists to make money, and it’s also a way for collectors to capitalize on the future of digital art. That being said, I do think it will be a long time until you see me spending millions on a PDF image of a cartoon cat, but ya never know!