What is an NFT?

March 22, 2022

NFT is the new internet catchphrase that has taken the digital world by storm. The term NFT is so famous that even Christie’s and Sotheby’s are holding auctions for these digital arts and have gained record breaking amount of sales in auction. But what are NFTs really? I’ll be more than welcome to give you a primer on this but if you really want to understand it more, I suggest you do your own research as well on this topic as I don’t think any single article will suffice.

What are NFTs?

NFTs or Non-Fungible Tokens are a digital asset that may or may not correspond to a real-life asset. Think of it as kind of a paper that proves to others that you own a particular thing. These may be a piece of art, music, a screenshot, an animated GIF of a cat that poops a very colorful rainbow.

NFTs are your bragging rights

Say you own a physical art and you want to have it minted for it to be an NFT, you can then sell the consequent NFT created and still have the physical art for yourself. What the other person would have is the certificate of authenticity and ownership that cannot be faked as it is recorded in the blockchain you sold it in.

NFT history

Before the concept of NFTs was introduced, it first started as a “Colored Coin” and was initially issued on the Bitcoin blockchain in 2012 to 2013. Much like an NFT, a Colored Coin are used to prove ownership of an asset like cars, equities and bonds and even real estate. Then in 2014, Counterparty was founded. It is a peer-to-peer financial platform and is distributed on the Bitcoin blockchain. Back in May 3, 2014, a digital art named Quantum made by Kevin McCoy was the first minted or created NFT.

Blockchain and NFT

I have mentioned the word blockchain in this article for quite a few times now but I haven’t really told you how it relates to NFT. I have explained that the record of transactions relating to a particular NFT and the NFT itself is stored in a blockchain. How the blockchain does this is through a peer-to-peer network of computer that computes equations to complete the transaction. Every computer has a record of the transaction and in turn every computer authenticates the transaction that is happening, making it near impossible to tamper with.

Is NFT a cryptocurrency?

Well, not quite. Cryptocurrency is a digital currency that exists in blockchain. It got its name because it uses data encryption to verify transactions. They do exist under the same set of rules though, as they are both inside a blockchain. However, cryptocurrency is a currency. Much like physical money, it has a ready equivalent. 1 Ethereum is always gonna be 1 Ethereum. NFTs in contrast, are not interchangeable as one NFT may have more value than the other even if they look similar.

NFT changed how art can be consumed

Before NFT technology, an artist need to commission the service of a commercial art gallery for them to be able to sell their artworks to a wider audience. But even with the help of an art gallery, a sale is not certain. On top of this, the overhead costs needed to keep the show can also make it prohibitive for artists without a sponsor. The way the NFT artists circumvent this is by selling their artworks on the online auction sites specifically made for NFT. A few moments after an online auction and their money is transferred to their online wallets. No more added costs of hiring curators, paying the gallery that will host your exhibition, the lighting, etc.

The First 5000 days

One such artist that found success in selling their NFT art is Trevor Jones. Jones was not an artist at the beginning of this adult life, choosing to be a waiter at a local Hard Rock Cafe and eventually becoming a manager. A mental health crisis made him rethink the trajectory of his life and somehow got an idea to learn to create professionally. Many of his fans started to give his art a second look during 2012, when he got an idea to incorporate QR codes in his art. Creating a new niche for himself, he began incorporating technology more into his art and his following picked up. Many other artists like him rode the NFT wave and got successful in return. Recently, Mike Winkelmann also known professionally as Beeple sold their NFT art in Christie’s for 69 million dollars. The piece that was sold is called Everydays: The First 5000 days. The particular piece set the record for an artwork that exists only digitally.

Even with the recent Beeple sale at Christie’s, many people are still skeptical of NFTs as a legitimate form of artwork. Art purists and other skeptics bring light to the fact that these artworks only exist digitally. As someone who creates digital art for a living, I can see where the skepticism is coming from. Paying an absurd amount for an art that you will only be using on your social media accounts seems crazy. However, can’t the same be said about physical artworks? We hang them on our living rooms for our consumption, maybe invite over a few friends for them to have a look at what art we have recently purchased. Is that not the same thought process going through a person’s mind when they buy a digital art? With all these questions in mind, only one thing I know is for certain. The existence of NFTs and the trajectory of its popularity will change the way we view and consume art in the near future. Maybe, it already has.