What are Non-Fungible Tokens?
A lot of recent discourse in the tech-entertainment-art-investment intersection has focused on non-fungible tokens, otherwise known as their shorthand NFTs. They are unique digital tokens, a one-of-kind digital collectable. They are the original. This is what makes their digital application both important to itself but, also, strange to the outside world. For instance, an NFT could be sold which is a gif or short clip of a monumental sporting moment, like Trent Alexander Arnold’s short corner for Liverpool’s third goal against Barcelona in the 2019/2020 Champions League Semi-Final. There is a definitive ownership of that gif or short clip, with the caveat that anyone can view that gif or short clip in just the same way and quality the owner can. It’s very abstract. And yet: NFTs are being sold for thousands and millions of dollars.
Blockchain
What underpins NFTs is blockchain technology. This is a digital ledger, essentially, where information is stored within “blocks” on a “chain”. The blocks are validated by a decentralized peer-to-peer computer network who solve complex equations, with the individual whose terminal solves the equation earning payment in cryptocurrencies. The blocks and the chain are very difficult, almost impossible to hack, alter, or falsify, due to the previous block’s data being integral to the next block’s data. So, if a hacker changes one, they have to change each subsequent one which would take immense simultaneous coordination and power.
This technology, as alluded, is what cryptocurrency uses – bitcoin, Ethereum, dogecoin, etc. This is primarily where blockchain is finding its use. Bitcoin’s price continues to skyrocket as investors – lay and professional – buy-in, shops from car dealerships to online betting sites accept them as payments, and media outlets continue to give them press.
Blockchain provides the ultimate certificate of authenticity and ownership for NFTs.
Digital Art
A digital collage by a graphic designer and artist Beeple was sold for $69.3m, the third-highest fee for art by a living creator. There is a worry that these digital art NFTs are less being bought for their artistic gains, as a statement of support for the medium, NFTs, and blockchain technology but more as speculative trading to exploit a gold rush. For instance, the owner of Beeple’s work owned other pieces of the artist’s work as NFTs which he’d divided into smaller tokens and was selling for high amounts of profit as he was bidding on the collage for $69.3m. In short, the owner was, in a way, upping the prices of his own items, of which he was selling tokens of, as he was buying this latest piece. Technically, this isn’t illegal. However, sceptics are concerned about the general ethics and reliability of NFTs, as a result.
Creator Economy
The overall hope for NFTs was that they would enable creators to make money, continually for their content, as the original creator of work never relinquishes themselves of their NFT but, rather, will see revenue as a result of each subsequent sale. The idea is that the whole process is “democratised,” outside of corporations and large businesses, and that creators don’t have to divide up what they make. They get all the revenue. However, NFTs in their current incarnation may not make good on this promise, if they are unreliable and abused.
