There’s nothing like an explosion of blockchain news to leave you thinking, “Um… what’s going on here?” That’s the feeling I’ve experienced while reading about Grimes getting millions of dollars for NFTs or about Nyan Cat being sold as one. And by the time we all thought we sort of knew what the deal was, the founder of Twitter put an autographed tweet up for sale as an NFT. Now, months after we first published this explainer, we’re still seeing headlines about people paying house-money for clip art of rocks — and my mom still doesn’t really understand what an NFT is.
Right, sorry. “Non-fungible” more or less means that it’s unique and can’t be replaced with something else. For example, a bitcoin is fungible — trade one for another bitcoin, and you’ll have exactly the same thing. A one-of-a-kind trading card, however, is non-fungible. If you traded it for a different card, you’d have something completely different. You gave up a Squirtle, and got a 1909 T206 Honus Wagner, which StadiumTalk calls “the Mona Lisa of baseball cards.
At a very high level, most NFTs are part of the Ethereum blockchain. Ethereum is a cryptocurrency, like bitcoin or dogecoin, but its blockchain also supports these NFTs, which store extra information that makes them work differently from, say, an ETH coin. It is worth noting that other blockchains can implement their own versions of NFTs. (Some already have.)
NFTs can really be anything digital (such as drawings, music, your brain downloaded and turned into an AI), but a lot of the current excitement is around using the tech to sell digital art.
What can NFTs do?
Initially, the benefit of NFTs was enabling true ownership of digital assets that mirrors that of the “real world.” But NFTs can do far more. NFTs allow creators to continue to earn royalties when their art is resold, which isn’t possible with, for example, a physical painting. Celebrities like Snoop Dogg8, Grimes and Paris Hilton9 are releasing unique mementos, art, and experiences as NFTs, recognizing the value they offer.
NFTs promise to remove the middleman from digital publishing, allowing artists of all types to sell directly to their supporters and enabling fans to act as patrons. In this way, NFTs could be paving the return to an older style of art community, where individuals support the artists they enjoy.
With NFTs, it’s possible not just to invest money in a rising artist by buying their early work and then benefiting when the work rises in value, but to invest time spreading their name, and still benefit when their value increases. “Now, creators can not only engage but transact with their fans directly: the community can voice their opinions and have a better chance of being heard, the perks can be designed to reward members who add the most value, and the community can benefit through token ownership and redeemable real world rewards,” comments Nichanan Kesonpat, blockchain entrepreneur10.
Some analysts see NFTs as limited to digital art and/or limited-edition topics, but others see immense potential for new paradigms of work, economy, and social value. Andrew Steinwold, an NFT expert, writes “Crypto is going to radically alter finance, value, organization, governance, the internet, money, and more. But it’s non-fungible tokens (NFTs) that will radically alter human society and culture