NFTs have been all over the news lately – with artists like Beeple selling their works for multi-millions. But what is an NFT, why the craze all of a sudden and where might it lead?
Let’s start from the beginning. Also, this post is written by the NFT expert (aka Olivia’s husband) Michael Murray.
So, what is an NFT?
An NFT is a “non-fungible token” or a unique digital asset. It is a method of creating a provably unique digital item, with a provable and traceable owner, through blockchain technology. In theory, this can take the form of anything from digital artwork to a Tesla.
Think of an NFT like a painting. You buy the original painting, the original Monet, when you buy the NFT. Whereas yes, there can be other copies out there, as you would find with the Monet as well. Unlike a Monet though, the NFT is, of course, digital-only.
Currently, a Dapp (decentralized app) platform named Ethereum has seen the bulk of NFT issuance on it’s blockchain, but there are several competing platforms. When someone “mints” an NFT, they are creating a verifiable identification on that blockchain that is publicly viewable. They also allow for the incorporation and execution of “smart contracts.”
At the moment, these “smart contracts” might seem a lot like the “metadata” you may find in any computer file or image – the background information that tells you more about the parameters of the file itself. The added advantage of smart contracts are they allow for the automatic execution of things like royalties. For example with an NFT, you can set the contract so that the original creator receives a predetermined portion of any future sale. NFTs do not necessarily confer copyrights or trademarks.
The art world was taken by storm in the summer and fall of 2020 as several major art auction houses began hosting NFT sales. In March 2021, the artist Beeble sold a single NFT for $69 million.
The other major driver for their visibility over the past year has been the explosion of collectibles and memorabilia. The NBA’s Top Shot store, which sells “packs” of collectible basketball highlight clips, has seen over $500 million in sales since its launch in October 2020.
These large monetary figures have led to expanded growth in the sector, with Topps following the NBA with the looming launch of baseball cards.
The applications of blockchain technology are still being discovered – no one would have predicted the growth of NFTs even two years ago. As the market develops, more and more applications may be found for this method of holding and transferring digital ownership. Could media companies begin to release all of their content over the blockchain in order to better track and monetize their output? It’s possible.