NFT. Yet another millennial abbreviation to explain to your parents? Not quite. The reality is slightly more complicated and understanding it can feel like a big fat CBA. But it’s worth getting your head around. NFT’s market value reportedly grew by 299 per cent in 2020, when it was valued at $250 million. Kings of Leon have released an album in NFT form, Emily Ratajkowski is creating one to reclaim her own likeness. This week it announced that the winning bidder for an NFT of a drawing by Jean-Michel Basquiat will be given the option to destroy the original with Banksy-esque verve. Still confused? Buckle up for a deep dive into the elusive world of crypto collectibles.
It stands for non-fungible token. In economic speak, ‘fungible’ means an asset that can be interchanged for something of the same value, like one Bitcoin, or a tenner. Non-fungible indicates something that cannot be interchanged with something else, like Botticelli’s Birth of Venus, say. A non-fungible token is a unique, verifiable asset that exists only in the digital realm and can be purchased and sold like other property, despite having no tangible form of its own. It can essentially be thought of as a one-of-a-kind representation of a physical or virtual thing, offering a form of ownership that does not necessarily amount to possession. In layman’s terms, just think of it as a one-of-a-kind token that represents a physical or digital thing, offering a virtual certificate of ownership.
NFTs most often transform digital files, like images, into unique assets using blockchain technology. (Blockchain is another can of worms, but it can be thought of as a digital record of transactions, sort of like a big nerdy iCloud that’s used for keeping track of cryptocurrencies like Bitcoin.) ‘Tokenised’ content is stored on the blockchain and can be bought and sold with the identifying information and original owner safely embedded within it. The recent NFT explosion has shown that a mind-boggling array of things can be tokenised and traded – not just pictures but sounds, fractions of video, tweets, clips from sports matches, even real estate.
Like anything weird and collectible, NFTs are often sold at auction, and are causing bidding frenzies across the globe. In March, Kings of Leon became the first ever band to release an album in the form of an NFT. The $50 album, a kind of digital limited edition, gave buyers a token on the blockchain from which to download the record, exclusive artwork and limited-edition vinyl. Things got stranger later that month, when Twitter CEO Jack Dorsey sold his first tweet (which read ‘just setting up my twttr’) as an NFT for almost $3 million. The auction winner is thought to own a piece of internet history.
But that’s nothing compared to the art world, which has taken to NFTs in a very big way, with digital-only artworks achieving record-breaking sums at auction. Earlier this year, an NFT of a work by digital artist Beeple sold for $69 million at Christie’s. The winning bidder received a digital file of the collage Everydays: The First 5000 Days and some rights to present the image. While nothing is stopping the work being duplicated online, the key is that the bidder owns the ‘original’ work, an asset that they may be able to sell for millions (more) further down the line.
That’s arguably the most interesting thing about NFTs, they tap into the fundamental, messy concept of ownership and profit. In a move that’s both empowering and confusingly meta, Emily Ratajkowski is ‘minting’ an NFT of an image of herself posing in front of a Richard Prince painting of her own Instagram post (which she criticised in a New York Magazine article last year). Ratajkowski’s NFT piece, which will be titled Buying Myself Back: A Model for Redistribution, is described as an effort to reclaim the use of her own likeness, a result also sought by Kate Moss when she minted three videos of herself as NFTs in April.
Whether it’s an image or an album, proponents of NFTs point out that they can address the problem of profit going into the right pocket. The rise of the internet has seen digital files reproduced and shared online, often without royalties being paid to creators and artists, but with NFTs, ownership is recorded on the blockchain, which, in theory, prevents illegal reproduction and piracy. On the other side, sceptics are quick to point out cryptocurrency’s wild volatility, and questions have already been raised over the artistic value of works sold at hype-driven auctions. Another sticking point is the negative environmental effect of the vast energy required to generate and trade NFTs.
Whatever you make of them, the appetite for these unusual tokens shows no signs of abating – only time will tell whether they’re a crypto fad or an economic revolution that’s here for the long haul.
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