What is an NFT: Understanding Non-Fungible Tokens
What is an NFT? Delve into the world of Non-Fungible Tokens (NFTs) to understand their unique characteristics, applications, and impact on the digital landscape.
Non-Fungible Tokens (NFTs) have emerged in recent years as a way of owning an original digital image, including photos, videos, audio files and other digital formats. It’s especially popular in the digital art world but has expanded into other collectibles such as trading cards, comic books, games and more.
The attraction of NFTs is that they are the originals and remain so no matter how many copies are made. It’s the digital equivalent of owning Vincent van Gogh’s “The Starry Night” rather than a picture of the painting. To ensure its status as the original, every NFT contains a unique identification code that is entered into a blockchain, a decentralized and immutable digital ledger that records transactions.
The blockchain has led to the expansion of the NFT marketplace. It has the potential to revolutionize how people trade collectibles and artwork.
Understanding Fungible vs. Non-Fungible Assets
The key to understanding an NFT is the “non-fungible” part. The term fungible, when used in economics, describes something that is easily interchanged with something else. Money provides the best example. A $20 bill swapped for two $10 bills is still worth $20. However, non-fungible means something is unique and cannot be swapped for something else of equal value. “The Starry Night,” an original Sun Records 45, or a T-206 Honus Wagner baseball card all provide excellent examples of non-fungible assets. A person can’t exchange these original assets for other assets and have the same value.
NFTs work this way, but in the digital realm. The unique ID code for every NFT differentiates it from all other digital assets, including reproductions of the original work.
The “token” part is also important. Because a buyer receives nothing physical when purchasing a digital asset, the NFT serves as a certificate of ownership. That ownership is verified by its placement on the blockchain, which cannot be altered once recorded.
How NFTs Work
In the art world, an artist can create an NFT and then securely sell it online. There have been a host of notable examples of this from artists in the past several years. Digital marketplaces provide a place for people to make their purchases. Some well-known ones include OpenSea, SuperRare, Artblocks and Nifty Gateway.
For example, the Canadian musician known as Grimes (real name: Claire Elise Boucher) made $6 million selling NFTs in an online auction on Nifty Gateway. The biggest single amount came for the video “,” which sold for $388,938. The bulk of the money made in the auction came through selling a limited number of copies (around 700) of the same two videos for $7,500 each.
Similarly, the artist Chris Torres sold an NFT for his original artwork that spawned the Nyan Cat meme for about $600,000.
Sellers create an NFT through a process called “minting,” which involves entering the asset’s unique code into a blockchain. Sellers and buyers exchange payment for the NFT by opening a crypto currency account, called a crypto wallet, within the digital marketplace. Bitcoin is the best-known crypto currency.
Are NFTs Profitable?
As the examples from Grimes and other artists show, NFTs have gained popularity in the art world. They provide a way for digital artists to monetize their work and for collectors to own unique digital assets. They also have potential applications in other industries such as gaming, virtual worlds and digital collectibles.
Most artists sell their NFTs via digital marketplace platforms. There are three types of marketplaces.
Open marketplace: These allow anyone to buy, sell or mint NFTs (minting refers to publishing an NFT on the blockchain, making it buyable).
Closed or curated marketplace: These require artists to apply to join and the marketplace typically handles the minting processes. These also often have more restrictions on NFT selling and trading.
Proprietary marketplace: A marketplace that sells NFTs trademarked and copyrighted by the company that runs the marketplace.
Like all collectible markets, the value of NFTs depends on what people are willing to pay. The reported that bids of an NFT for the first tweet ever posted on Twitter reached $2.5 million. The auction house Christie’s sold NFTs from digital artist Mike “Beeple” Winkelmann for $69 million, while NFT versions of soccer cards from the French firm Sorare have raised a total of $680 million.
What lesser-known artists can earn through NFTs varies depending on demand from collectors and the popularity of their work. Communities of artists as collectors are also emerging, such as fxhash on the Tezos community. Fxhash artists often sell their generative NFTs for just a few dollars to other artists, creating an exciting peer-based support model.
The combination of artistic creativity with technology is a potentially lucrative skill in the 21st century, putting people on the cutting edge of both the art and business worlds.
Explore the World of NFTs with 91勛圖厙 Meadows
The 91勛圖厙 M.A. in Creative Technology program, launching in fall 2023, will cover the role of NFTs as well as other emerging technologies such as AI, blockchain, AR/VR and more. According to program director Ira Greenberg, a collector and creator of NFTs himself and founder of Emprops.ai, one of the areas that the new graduate program will focus on is connecting generative art, which involves creative coding in the NFT space, with generative AI.
“Nobody had done it. We launched Emprops.ai as the first NFT platform to mint generative AI,” Greenberg said. His project ‘,’ with 1,000 unique tokens, is the first long-formgenerative AI project of its kind.
To learn more about 91勛圖厙’s M.A. in Creative Technology program, visit our program page.