- NFTs, or non-fungible tokens, offer “ownership” of digital artwork.
- Major artists, like Grimes, are already selling their works as NFTs.
- NFT tokens are primarily locked to the blockchain of the cryptocurrency Ethereum.
You’ve probably seen people in your social media feeds talking this week about something called an NFT, or non-fungible token. Though NFT buzz has quietly been building in cryptocurrency circles for months, the concept is now decidedly mainstream after the singer Grimes—partner of Elon Musk, mother to X Æ A-12—auctioned “exclusive” digital art for a combined total of $6 million in NFTs.
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If this sounds like a bit like gibberish to you, that’s okay. We’re here to help you understand what NFTs are, how they work, and whether or not you should care about them.
What Are NFTs?
To grasp what a non-fungible token is, let’s start with a contrasting explanation of a fungible token: a bitcoin. Yes, bitcoin is a nontraditional digital cryptocurrency, cryptographically “mined” and verified by millions of computer users around the world. (Discover how the mining process works.) But someone asking a price in bitcoin could accept that amount from anyone.
One bitcoin is the same as another, and all have the same value at the same time. This is what it means to be fungible: you can swap a bitcoin, a U.S. dollar, and so forth for any other of the same currency. You can be sure that any item with that particular quality has the same value.
A non-fungible token, on the other hand, is unique and can’t be substituted one-to-one with another item. A lot of things are non-fungible in a philosophical sense, like two people’s different memories of the same event. New cars are essentially fungible, but older cars almost never are—try replacing a beloved aging car with another “just like it.”
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NFTs are kept in the same blockchain logs as a cryptocurrency called Ethereum, according to The Verge. Blockchain refers to the collective record (called a ledger) that stores cryptocurrency transactions, like a communal Excel spreadsheet. The same infrastructure documents both things, showing the close link between non-fungible tokens as a concept and cryptocurrency.
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How Do NFTs Work?
In the art world, the emerging medium of NFTs uses cryptographically verified information to “lock” and secure a particular asset or even package of assets, like a piece of digital visual art accompanied by a music file.
It’s like wrapping a fancy PowerPoint in mathematical padlocks and auctioning it at Christie’s. Grimes’s pieces, for example, combine visual and musical art; some sell just one of a kind, while others sell thousands of “prints.” Then there’s someone like “Beeple” Winkelmann, who has made millions from art speculators as the keystone of a growing scene, per the New York Times:
“According to the NFT Report 2020, published by L’Atelier BNP Paribas and Nonfungible.com, the value of the NFT market tripled in 2020, putting its current value over $250 million.”
Why Is Everyone Interested in NFTs Right Now?
As with cryptocurrencies, many investors simply want to take on NFTs for speculative market value. But, of course, the point is they could never spend them if they wanted to. All NFTs will need to be sold individually at auction like traditional artworks, but the original transactions will stay on the record forever.
And unlike the traditional art market, there’s no “original” physical item to ever hang on the wall—though museums may end up acquiring NFTs to display them like other kinds of multimedia art. Different licenses may determine whether or not particular works can be displayed at all.
If it sounds like NFTs recreate some of the same pros and cons as other kinds of more modern art, that’s exactly right. NFTs are like limited runs of prints, but with a crypto, stock market-y sheen.
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Are NFTs Just a Fad?
Maybe. But the market that NFTs are serving is both real and motivated, at least to some extent, by good intentions. Yes, there are speculators driving the high-end art market, but Linkin Park’s Mike Shinoda sold a new single mostly to fans and gave the profits to charity. “Regular people really are collecting this stuff. And it’s not just a couple of billionaires getting involved,” Shinoda told Input. Fundraisers could offer exclusive content.
Other artists want to offer NFTs the same way they might offer Cameo appearances, OnlyFans content, or even special Patreon rewards. It’s a way to trade a feeling of access for a price that fans can feel is helping to support the artists they love. Grimes may blow the market open to the public, but lesser-known artists may become the virtual bread and butter of non-fungible tokens.
One other major advantage of the right kind of NFT is that artists can easily, securely see where and for how much their art is selling. That means they can earn a portion of each sale in perpetuity, so if their art accumulates a lot of value as speculators believe it will, the artists will continue to benefit from that prosperity.
How Do I Get Started With NFTs?
If you’re interested in NFTs simply as investments, cryptocurrency investment news sites often have sections dedicated to covering NFT news. (Pro tip: Take this news with a grain of salt and always vet your own investment choices.)
The New York Times mentions MakersPlace, SuperRare, and Rarible as sites that specialize in digital NFT artwork. Landmark crypto artist Beeple’s art, meanwhile, is for sale at regular old Christie’s, the iconic auction house where Beeple has had the first major NFT auctions. Grimes sold NFTs through Nifty Gateway, and Mike Shinoda’s work is available on digital platform Zora.
If there are artists you love whose digital art could interest you down the road, you’ll see that news on their social media pages or even in mainstream news articles. Keep an eye out and you could find yourself on the frontier of the next big tech trend.
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