By now it’s highly likely you’ve heard of the cryptocurrency craze taking the world by storm, NFTs. Everyone from Elon Musk to Paris Hilton to Shawn Mendes has been selling these digital assets, some for up to $69 million.
But, let’s be honest, the concept isn’t the easiest to wrap your head around—even SNL had to explain how they work. After all, how do you actually “own” a gif anyway (and what’s the point)?
If you’re still unsure about what on earth an NFT—aka a nifty—actually is, we’ve got you covered.
What is an NFT?
NFT stands for a non-fungible token and transforms digital works of art (amongst other collectibles) into verifiable assets. The ownership is processed via blockchain technology, which is why people have been referring to NFTs as a crypto craze.
The digital asset can be literally anything—from drawings to gifs, to a techno song produced by Elon Musk. Essentially, an NFT is like a one-of-a-kind trading card, which brings us to our next point.
What does fungible mean?
If you’re not sure what the word fungible means, you’re not alone there. Fungibility basically refers to how interchangeable or exchangeable an asset is, in other words, how unique it is. For example, a bitcoin is fungible because any bitcoin is worth the same—they are identical. Something non-fungible, on the other hand, means it’s unique in its value and is a one-of-a-kind, like a Pokemon card.
What’s so nifty about NFTs?
When you think about NFTs in this framework, it makes sense that they’ve become so popular in the art world, an industry that is all about exclusive ownerships of one-offs. And, like an original painting, an NFT can appreciate in value and can also be sold.
What about copyright?
Some people think that an NFT gives you the copyright to the digital artwork you’re buying, but this isn’t actually the case. When you buy an NFT, the digital ledger acts as a certificate of the digital file that tracks who has ownership of it. If anyone copies the NFT, just like with copies of famous artworks, they won’t be the original, however, the artist still has the copyright and reproduction rights.
Are NFTs just a giant flex?
What has people scratching their heads about the inherent value of NFTs, is that, unlike physical art, where an original will be of a notably higher quality, a digital file that is copied is identical to its original. In other words, you can save a gif of a cat for free and it will still be the same gif of a cat that someone bought for a lot of money.
The frenzy over NFTs then seems to lie in the status of ownership of the art, not the quality of the original. Like your limited-edition pair of sneakers, the rarity and exclusivity increase the allure. In this sense, yes, they are kind of a massive flex.
What’s the point?
But besides getting the bragging rights to ownership of an NFT, with an official certificate to prove it, buying the digital asset allows collectors to financially support artists. It will also allow the owner usage rights if they want to post it on an online platform.
What’s next for NFTs?
Although NFTs are blowing up at the moment, like all trends, there’s no certainty that they will maintain momentum forever. The craze has been super popular with younger generations, but, as 2021 has shown us, there is no shortage of investing trends popping up. Whether a new tech trend is just around the corner to take its place, we’ll have to wait and see.