Non-fungible tokens are transforming the way we look at art.
It’s become common to see millions of people collectively scratching their heads in the wake of any explosive blockchain news for the past couple of years. Thanks to social media, the fear of missing out or FOMO is at an all-time high. Everybody wants to jump on the money-multiplying bandwagon—the most recent of which is something known as an NFT. If you’re even faintly familiar with the happenings of the tech world, you must’ve come across this word, mentioned usually alongside an ungodly amount of money. And, like clockwork, I’m pretty sure it left you scratching your head again—just like the “crypto gods” intended. So, in this article, I’ll be breaking down what the heck NFTs are, how they work, and if they mark the beginning of a revolution in the art world.
The ABCs of NFTs
NFT stands for Non-Fungible Token.
“Non-fungible”—If you studied economics in school, you may have already come across this word. It’s a specific word, which is defined as “not replaceable by another identical item.” Above all, an NFT is something that cannot be replaced by anything else. For example, if two people each have a bitcoin, they can swap with each other as their bitcoins are identical and hold the same value. NFTs, on the other hand, are not interchangeable, making them more akin to works of art; each token is unique. Although bitcoins are also digital assets, NFTs are one-of-a-kind digital assets with each token reflecting a distinct value.
A more real-world example to explain them would be money. You can swap a $10 note for two $5 notes and the value would still be the same. This is impossible when you’re dealing with anything that is non-fungible, which has special properties that prevent it from being interchangeable with something else. Pure gold? Fungible. The Mona Lisa? Non-fungible. NFTs are basically the same, only digital. So instead of getting an actual oil painting to hang it on a wall, the buyer gets a digital file.
Rise to Fame
The technology used in NFTs has been around since the mid-2010s but hit the mainstream market only in late 2017 with Cryptopunks, a project by John Watkinson and Matt Hall. They created 10,000 unique characters on the Ethereum blockchain. With this limited drop, the project quickly took off. Then came Cryptokitties,—a website that allows people to buy and “breed” limited-edition digital cats with cryptocurrency—which furthered the popularity of NFTs. Adding fuel to the fire, CryptoKitties’ meteoric rise coincided with the 2017 crypto bull market. That’s when the crypto-crowd took proper notice of NFTs.
2018 was an explosion for NFTs. The non-fungible token ecosystem grew exponentially with the introduction of various infrastructures and marketplaces, and game developers embraced the tech in a major way, allowing players to earn in-game items such as digital shields, swords, and other collectibles. But what changed the game forever was Mike Winkelmann, a.k.a. Beeple, an artist, graphic designer, and animator, who was selling his artwork titled Everydays–The first 5000 days for an eye-watering $69.3 million on the 11th of March, 2021. This was the third-highest price ever fetched by a currently living artist, after Jeff Koons and David Hockney. Some other noteworthy collections were, of course, those of Jack Dorsey, the founder of Twitter, who sold the first tweet ever for just under $3 million, a 50-second video by singer-songwriter, Grimes, which was collected for almost $390,000, and a series of Rick and Morty artworks, which were sold for over a million dollars.
On the face of it, the entire concept seems absurd. All someone has to do is right-click and save an image? Sure, anyone could do that, except that all they will have is a copy of the image. You can make as many copies of a digital file as you want but that’s all it’ll ever be: a copy. Only the person who purchases the NFT has ownership of the work. Critics are quick to dismiss the rise of NFTs as a bubble and while they may not be completely wrong, I distinctly remember how quickly Bitcoin naysayers had changed their mind when they realized they could’ve been rich beyond their wildest dreams had they not dismissed the concept.
Whether you’re a buyer, collector, or artist, marketplaces are now aplenty. SuperRare, OpenSea, and MakersPlace are among the notable few with many popping up every single month. Many digital artists have jumped into the craze in the blink of an eye, tired of making content for platforms such as Facebook and Instagram only to receive almost nothing in return. Due to the free availability of digital art, it has been largely undervalued for the good part of the decade. Here’s where NFTs step in; they incorporate the key element of scarcity to help artists generate tremendous financial value for their work. If you’re a buyer, you get to financially support artists you like, along with the bragging rights of owning the art, with a blockchain entry to back it up. And, as is with the traditional art world, there are also some collectors who identify NFTs as speculative assets and will buy it, hoping that the value goes up.
Uncertainty looms in the future of NFTs. It could either continue growing exponentially with time or the bubble could burst very soon. The volatility of the crypto market just doesn’t allow us to predict these things. However, in a short period of time, NFTs have made significant inroads into the luxury, gaming, and traditionalist art industries and have plenty of room to grow beyond these embryonic applications. NFTs have rejuvenated and given a new meaning to digital art, and the astronomical prices at which these pieces are sold assures us that somehow, it will remain a real part of the future of art.