You may have read about Twitter’s founder Jack Dorsey’s first-ever tweet that he sold for several million US dollars. A tweet. A tweet that read ‘just setting up my twttr’ valued over $2.9 million. What made this tweet special was that it was tokenised—turned into a unique, irreplaceable, digital object— an NFT or a non-fungible token. If you are as bamboozled as we are, you have come to the right place. Read on, greenhorn!
What are NFTs?
NFTs are unique digital tokens that assure exclusive ownership and minimise duplication. They are digital representations of assets. Analogous to digital passports, each token contains a unique, non-transferable identity that distinguishes it from other tokens. They are also extensible. Thus, one NFT can be combined with another to spawn a third, unique NFT.
So, are they cryptocurrencies?
While both NFTs and cryptocurrencies use blockchain, they have little in common beyond it. What makes them different? Cryptocurrencies can be exchanged and replaced. For example, you can exchange a bitcoin for another bitcoin. However, the Jack Dorsey tweet, an NFT, cannot be exchanged for another. It is a singular digital object with only one original version.
NFT art? NFT gaming?
NFTs can be pretty much anything as long as it is digital, from tweets to drawings, video and sound clips, tools and virtual objects used in video games, and even random scribbles. Upon ‘tokenising’ anything that exists in a digital format, one can sell it as an NFT. The buyer will then have exclusive rights to it. Though copies of NFTs are possible, only one original can exist. In the real world, it would be like owning an original Picasso painting as opposed to one of its many copies.
The origin story
Still relatively new to the internet, NFTs first originated in 2015. During that time, NFTs were almost unknown, and within a decade of their inception, billions of dollars have been spent on them. The first-ever NFT on the Ethereum blockchain was Terra Nullius. In its formative state at the time, this project only allowed users to record a customised message on a blockchain. NFTs have come a long way since then, though they may be unfamiliar to internet noobs.
Several nifty NFTs can be found on the blockchain. Curio Cards is a permanent digital gallery of digital artwork. CryptoKitties is an online game that presents players with one-of-a-kind, adorable, virtual kitties which can be bred, fed, bought, and sold. CryptoPunks, some of the most expensive NFTs, are a collection of unique pixel avatars. A community of digital penguin-lovers has also recently cropped up called Pudgy Penguins, where the namesakes are NFT collectibles. Attempts are also being made to connect NFTs to real-world, physical objects. For example, Nike has patented a method to verify the authenticity of sneakers by allotting them unique identities using NFT. Props to Nike for the name: CryptoKicks.
Given the current omnipresence of NFTs, the entertainment industry, too, has jumped on the bandwagon. Filmmakers, content creators, and directors are beginning to use NFTs to interact with their audience, crowdfund projects, and sell their movies, shows, and videos, in part or wholly. Tokenising filmmaking will also allow fans and followers to partake more actively by helping with the creation from the get-go. According to digital artist Kevin McCoy, who created an NFT back in 2014, this is just the natural progression of things. In an interview, he declared that he imagines complex models of ownership with pretty much everything tokenised, just like it was digitised.
NFT technology, with its unnatural complexity and incredibility, represents Gen Z. According to the New York Times and Time magazine, many teenagers across the globe are cashing in on the NFT boom. FEWOCiOUS, an 18-year-old digital artist, has sold NFTs worth $17 million. The beauty of NFTs is that it does away with all middlemen, limiting the transactions to just buyers and sellers. NFTs are also revolutionising how people perceive art. Some teenagers believe NFTs decentralise the art world and redefine discourses around what qualifies as good art. Arbiters of taste, if you will. Additionally, depending on the resale value, the artists can opt to get a cut every time their NFT is resold.
Is the NFT market worth it?
Well, this is where the shifty part comes in. NFTs can be considered as stocks or other assets. Speculative in nature, the worth of the investment depends on whether its value appreciates or depreciates. Other risks also exist. While blockchain works as a ledger, making it harder to commit fraud, cryptocurrencies have been stolen before. As it uses the same platform, perhaps NFTs are not exactly ‘theft-proof’ either. Moreover, it is an ever-changing technology that is bound to evolve and alter. Many have even predicted it to be a bubble that could burst without warning.
Largely a market for the Richie Richs of the world, making claims of decentralisation suspect, NFTs are not quite all rainbows and butterflies. NFTs are potentially detrimental to rainbows and butterflies alike. The NFT boom is bound to accelerate climate change further due to its dependence on blockchain technology. While fancy supercomputers are mega-cool, they also inevitably raise greenhouse gases and emissions. This has generated a lot of chatter about the ills of the overuse of NFTs. Admirably, many artists have also gone out of their way to cancel digital art launches to do their bit to mitigate their carbon footprint.
So, what next?
Like most new technologies that get mainstreamed, the jury is out on whether NFTs are here to stay. Outlandish and bizarre as the realm of NFTs is, perhaps it is just an indicator of what the future holds. And so, whether you are a naysaying millennial or a vociferously supportive GenZ-er, it might be best to wait and watch.