The NBA is using them to sell highlight videos. Artists are using them to sell digital works. Musicians are using them to retain royalties. Twitter’s CEO is even using them to sell tweets.
NFTs, or non-fungible tokens, are suddenly everywhere in digital media. Once an obscure part of the broader blockchain technology world, they have boomed in recent months thanks to the sudden embrace of almost all corners of the art, entertainment and media worlds.
The excitement is fueled in large part by an idea that can be difficult to fully appreciate: ownership of a digital asset … or at least the feeling of ownership.
“That’s the difference of how people need to be thinking about this technology,” said DJ and producer 3LAU, whose real name is Justin Blau. “There’s something about ownership that makes people really excited.”
And people are buying. Christie’s auction house on Thursday sold its first piece of NFT-linked digital art, which commanded a winning bid of $69 million. A digital collectible card of soccer superstar Cristiano Ronaldo recently sold for more than $289,000. Former T-Mobile CEO John Legere paid $888,888.88 for a piece of NFT art released by DJ Steve Aoki.
It all raises the question: What the heck is an NFT?
What is an NFT?
It’s easiest to answer the question metaphorically. Think of an NFT as a certificate of authenticity. But instead of a sheet of paper, it’s a unique string of characters. For example, the NFT for this piece of digital artwork created by actress Lindsay Lohan is 0x60f80121c31a0d46b5279700f9df786054aa5ee5.
That string is connected to a blockchain, the same concept that powers cryptocurrencies like Bitcoin. The main difference is that bitcoins are fungible, which means they are essentially the same. NFTs are non-fungible — each one is unique.
Blockchains work by using groups of computers to create a shared digital ledger that no one computer can change. Instead, they must agree by performing complex calculations — a system that yields a secure and unchangeable document.
That makes blockchains perfect for creating systems in which unique digital identifiers can be easily and securely exchanged — hence the creation of NFTs.
Who decides who owns an NFT, and where do you own it?
Anybody can create an NFT — but that doesn’t mean anyone will buy it.
NBA’s Top Shot is a helpful example here. Top Shot is a digital platform with its own trading cards that uses NFTs to track ownership.
The NBA partnered with Canada-based Dapper Labs to create Top Shot, selling digital packs of cards that have been in high demand. Buying a pack means you then own the NFTs connected to those cards. That ownership is tracked on a blockchain created by Dapper Labs. You can then showcase your cards online.
They’ve been wildly successful, with packs sold out and cards going for tens of thousands of dollars.
Could you make your own NFTs connected to NBA players and highlights? Sure, although it’s unlikely anybody would pay for them, and you could end up sued by the NBA.
Some artists have already discovered NFTs connected to their art that they didn’t authorize.
Couldn’t I just copy the image of that card?
Absolutely. But much like a poster of the “Mona Lisa,” nobody is going to pay much for a copy.
But the question of copies does get to why some people are calling NFTs a fad. The internet means scarcity of pieces of media like images is almost nonexistent. Ownership of an NFT doesn’t confer much inherent value (the exception being when copyright use is included, which is rarely the case).
Top Shot is also only one application of NFTs. A more unusual example is the first tweet ever sent on Twitter. Jack Dorsey, the company’s CEO, sent the tweet back in March 2006 and recently put it up for auction with an NFT. Bidding, which closes Sunday, has already hit $2.5 million. Dorsey said he plans to donate the proceeds to charity.
What would you do with that?
Nothing? Anything? As Bloomberg’s Leonid Bershidsky put it, NFTs in most cases are “a geeky implementation of bragging rights.”
Blau said he looks at it more like an emotional attachment in the digital realm.
“When you think about the ability to own anything at all, whether it’s real art or a sports car, there’s a certain emotional value people get out of that ownership that isn’t associated with the cost of producing that item,” Blau said. “What NFTs do in the digital world is create emotional value surrounding ownership of a digital asset.”
You can buy and sell NFTs, which has become something of a hobby for people looking to capitalize on the recent hype. People are also building ways to display NFT art in your home.
Do the artists get a say here?
They can. One of the biggest selling points of NFTs in the art and music worlds is the opportunity to create a way to make sure artists aren’t cut out of deals related to their own art.
There’s also a way for artists to make extra money. Singer Shawn Mendes is using NFTs to sell digital versions of his guitar, necklace, vest and earrings to fans who can then use them on their digital avatars.
Plus, unlike with other pieces of art, royalties can be built in so that any time an NFT is traded or sold, the original artist or creator gets a cut.
Mendes’ manager, Andrew Gertler, the founder of the management company AG Artists, said the sale of tokenized goods is proving helpful to the music industry overall during this turbulent time.
“This opens up a whole new world not just for the musicians that have suffered from revenue loss in the pandemic but also their collaborators,” he said. “I know concert tour visual artists [and others] who were out of work and turned to NFTs to make a living. It’s really incredible to see a new income stream for so many creators.”
Jason Abbruzzese contributed.