What are NFTs?

Joy Herrera, Staff Writer

Non-fungible tokens or NFTs are the latest product born from the interest in cryptocurrency. Cryptocurrency is a new form of money that is centered around blockchain programs that form unique codes. These codes make up coins or tokens that come to have value due to speculation and investment, not unlike the stock market or even fiat currency. For instance, Bitcoin is currently being traded for a little under $54,000.00. However, what makes NFTs different is that they are tied to a digital image, song, or video.  

NFTs are selling for incredible prices because they promise permanent ownership of a digital piece of artwork. This does not necessarily mean that the owner of the NFT holds the copyright, but they do have the prestige of this unique and unable to be traded (non-fungible) status symbol. It is similar to the principle behind trading card collectors, the rare cards can go up to thousands of dollars because collectors value the exclusivity. Digital artwork is different from trading cards though, as the cryptocurrency has no physical objects tied to it, and the artwork itself can be replicated. The receipt and the perceived scarcity are the only things that tie value to the NFT. However, this has not stopped people from investing in this new form of art. 

One high-profile purchase was an NFT made by the digital artist Beeple, called “Everydays — The First 5000 Days,” which was sold by the auction house Christie’s for $69 million. It was purchased with another form of cryptocurrency called Ether. This purchase may seem extreme and outlandish, but it is growing more common every day as prominent auction houses embrace the growing market. However, there are environmental and also legal concerns about the longevity and viability of NFTs. 

“I can see a risk for established artists who expose themselves to this new market where the rules aren’t clear,” stated William Goetzmann, a professor of business at Yale University. “If the prices of NFTs stumble along at fairly low values, that would scare people away from collecting your other works.”

So far, no legal cases have been brought to court about the copyright of NFTs or possible theft of tokens. This means that seasoned art collectors and dealers are putting themselves into the unknown legally with a purchase of assets that can potentially crash in value or even be stolen with little protection. 

Furthermore, NFTs often operate off a system of cryptocurrency called Ethereum which relies on blockchain technology that requires enormous amounts of electricity to support the processing power of mining more tokens. Moves are being made to reduce the energy consumption of cryptocurrency, but until these changes take place NFTs have the potential to generate large amounts of greenhouse gas emissions. NFTs may be the latest art fad or the future of the art world, but only time will tell.


Graphic courtesy of WIDEWALLS.COM