NFTs: What Are They?

Jack Dorsey, co-founder and CEO of Twitter, recently sold his first tweet as an NFT for nearly $3,000,000. The Weeknd sold digital art, along with a new song, as an NFT for upwards of $400,000. Tom Brady just announced that he will be launching a new NFT company. You’re probably wondering by now, what even is an NFT, and why did they become so popular all of a sudden?

NFT stands for “non-fungible token,” but that probably doesn’t help much. Essentially, “fungible” means that something is replaceable. For example, if I have one dollar, I can trade it for another dollar and I would still have one dollar—nothing changes. Since NFTs are non-fungible, each one is unique, and trading one NFT for another will completely change its content and its value. But what actually is an NFT? In short, it’s a token, i.e. a string of characters, that is stored on a blockchain, similar to how cryptocurrencies are stored. So an NFT could be something like “34244u12p4y213o” or really any combination of characters. The value of an NFT doesn’t come in the NFT itself, though. Here’s where it gets confusing: NFTs are most commonly used to sell digital art, but as you can imagine, digital art can be easily copied and pasted as many times as you want. You can see the art before you even buy it, so if it’s just the art that you’re interested in, you can screenshot it and go. But an NFT indicates actual ownership of the piece. It’s a similar concept to buying the Mona Lisa vs. buying a replica. Anyone can have the art downloaded on their phone, but the NFT indicates true possession. Most people aren’t interested in this in the first place, and they view NFTs as a form of “enhanced bragging rights.” But for art collectors, it allows them to actually own digital art, and it also allows them to support artists by buying their NFTs.

As if NFTs couldn’t get any more confusing, they are actually having a massive negative impact on climate change. Because NFTs are stored on blockchains, they must be “mined,” just like Bitcoins and other cryptocurrencies. This process, which involves computers solving complex puzzles, takes huge amounts of energy and causes carbon emissions. This is very dangerous, because anybody can create an NFT by simply clicking a few buttons on their computer without actually realizing the negative effect that it can have on the Earth.

NFTs may just be a fad, but with the amount of time and effort that has been going into them recently, it certainly seems like they will be around for a while. Although the concept seems foreign at first, it seems to simply be the digital version of buying and selling art as more and more events and actions are being moved online. While NFTs seem to have a lot of potential in the art world, they must be handled with great caution given the potentially catastrophic effects that they can cause.