NFT stands for Non-Fungible Token. Fungible means replaceable, so if an item, or an artwork, is ‘fungible’, it can be interchanged with another item of the same value. For example, one bitcoin for another bitcoin.
Non-fungible items have an innate value to them which makes them irreplaceable like-for-like. This makes them desirable for collectors.
NFTs are digital objects held in blockchains. A blockchain is a decentralised ledger of all transactions that is duplicated and distributed across multiple computer systems across a peer-to-peer network. This makes it difficult or impossible to change, hack, or cheat the system – it’s the perfect way to record who owns an NFT at any given point.
NFTs got their big break in the games industry. For years, many video games have had accessories and weapons (each with their own individual value) that users could find or earn and then trade. However, because the blockchain wasn’t involved in the process, these weren’t NFTs as we now know them. In 2017, the game CryptoKitties (which is blockchain coded) where users buy, and trade virtual cartoon cats, marked the real beginning of the NFT craze in the general public.
Visual content, from meme images of ‘Pepe’ to pixelated video-game icons, have been traded as NFTs for a couple of years, but it was only when digital artist Beeple had his work ‘Everydays: the First 5000 Days’ go under the hammer at Christie’s in 2021, that people realized that this was a trend to get on, and quick. ‘Everydays’ was the first standalone NFT to be auctioned at a large auction house, and sold for $69.3 million – a long way off the opening bid of just $100.
After Beeple’s huge success at Christie’s, more and more artists are trying their hand at minting NFTs. Art critic Jerry Saltz said to “think of NFTs as a brush”, a new tool with which artists can create. Kenny Schachter wrote “Cubism was considered a search for the fourth dimension – are NFTs a window onto the fifth?” NFTs are certainly the topic of the day.
The work now available via NFT platforms is far from the early NFTs which often looked like quick designs on MS Paint. Big artists like Damien Hirst, Jon Burgerman and Urs Fischer are all minting NFTs. In the future, having a selection of work available as NFTs might be as common as having a selection of prints available of original works.
NFTs offer certain benefits to artists, too. Because the data is stored in the blockchain, it means that every time an NFT artwork changes hands, it’s recorded, meaning artists always know who owns their work. Some platforms also pay original creators royalties each time the NFT changes hands, for example, artists receive 8% on EulerBeats, and they can choose their royalty rate on Rarible. For collectors, the benefit of collecting NFTs is that authenticity is guaranteed.
The Intellectual Property laws around NFTs are still being ironed-out, so it’s not always clear whether by purchasing an NFT you are guaranteed complete ownership including IP rights.
The NFT market has also been widely criticised for its negative impact on the environment. The blockchain doesn’t just exist in thin air, it operates on thousands of computers stored in warehouses. Ethereum mining can consume 26.7 terawatt-hours of electricity per year – almost the same amount as is consumed by the whole of Ireland.
Also, because NFTs are digital entities, rather than physical (although you do sometimes receive a physical original as well), the trend has left a lot of people wondering what the point of them is. Many NFTs aren’t particularly aesthetically pleasing, so many critics view the craze as much more to do with the crypto-world and trading, than as a lasting, valuable addition to the art industry.