In general terms, “NFT” is an acronym for “Non-Fungible Token.” That definition almost tells you less than the acronym itself, so let me expound a bit:
The best way I can think of to explain the difference between fungible and non-fungible tokens is by comparison with money and precious metals. If you buy a brick of gold, the brick is worth money but is not money itself. The money is a fungible token (that can be used to buy almost anything else) and the gold brick is a non-fungible token (which can’t be used to buy anything, though somebody might be willing to make you a trade.)
In real-world terms, you can’t hand a gold brick to a cashier at a supermarket to buy your groceries. The brick and the groceries are all non-fungible tokens, and can only be purchased with fungible tokens like cash or credit.
With that concept in mind, I can explain what this means for the world of art. Specifically, digital art (like I make here).
There is an issue unique to digital art, the question of provenance. (Originality, ownership and transaction history.) Copying anything digital is as easy as pushing a button, so a digital artwork tends to lack originality. Tokenizing a digital artwork into a NFT (pronounced “nifty”) solves this issue. In a layman’s terms nutshell, tokenization of the image (known as “minting”) hard-wires code into the image which effectively says, “This is the original. Copies of this picture might exist, but none of the copies are this one.”
The example I see most often to explain what this means and how it works is the Mona Lisa. Hundreds of thousands, more likely millions, of copies of the Mona Lisa exist. You can buy a postcard Mona Lisa, look it up on Google Images, buy a poster or a canvas print, hell, grab some paint and a slab of wood and make your own. But the one thing all of these copies have in common is that none of them are the original Mona Lisa in the Louvre. It is the originality that makes the Mona Lisa more valuable than its copies.
That’s what a digital art NFT has. Originality. I don’t pretend to understand all the technical details, but another thing that a NFT has is a record of ownership and a transaction history, all permanently recorded. It has provenance, in other words, which is something that “regular” digital art does not.
NFTs are also resellable, which makes digital art an investment, a status previously only possible for physical art. Think of buying one of Vincent Van Gogh’s Sunflower paintings before he became famous. Chances are you couldn’t do more than dream of buying one today. When you buy a NFT, you might speculate that the value will increase, the way that the monetary value of a Van Gogh increased.
You don’t have to consider it an investment, of course, but it’s good to know that you can.
In short, the NFT represents an exciting new chapter in art history, and I’m proud to be a part of it.
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