As the mania surrounding NFTs continues to skyrocket, an artist known as Beeple recently eclipsed the record for digital art by auctioning an original JPEG for $69 million. But what does that mean?
NFTs, or nonfungible tokens, function as a sort of certificate for original, tokenized versions of digital art. These tokens are not strictly limited to digital art, but essentially every digital asset of any medium could become a marketable NFT.
Although NFTs were established in 2017, the market recently snowballed with the release of a collectible digital album produced by rock band Kings of Leon, a video of Lebron James in mid-slam dunk, and so on. Even the founder of Twitter, Jack Dorsey, is auctioning off his first tweet as an NFT.
Technically speaking, the tokens exist within the blockchain, or record, of the cryptocurrency known as Ethereum. Unlike bitcoins or physical currency, NFTs are nonfungible.
What that means is they cannot be exchanged because they are irreplaceable creations. For example, if someone trades a dollar for another dollar, the value of the dollar remains the same; however, an NFT is the sole identifier for a piece of digital art and, for that reason, it cannot be exchanged in the fashion of traditional currency.
According to an article from The Wall Street Journal, the tokens “act as virtual deeds conveying ownership of a digital asset. Each one gets uploaded to a digital ledger where it conveys information: the date it was created, when it was sold, for how much and to whom.”
Such information is then transformed into identifiers by complex algorithms, which is crucial in ensuring an NFT has not been nor will be manipulated for malicious purposes. In a sense, NFTs therefore serve to promote and preserve an artist’s integrity as well as the authenticity of owning a digital artwork.
Security measures, however, are not the crucial risk involved in participating in the NFT market. Some critics emphasize the common assumption that NFTs are valuable because digital artwork has become a popular demand.
“There are people who have been conditioned by cryptocurrencies to believe that just the fact that it can be owned makes it valuable. . . People just 100% believe that this thing has value, but in fact it doesn’t because there’s no way to get value out of it except for selling it to another investor,” computer science professor Jorge Stolfi told The Wall Street Journal.
Moreover, there is a concern that NFTs could devalue with the passage of time. Humans are fallible and technology is ever-changing; sometimes we forget passwords, files become outdated, and accounts crash.
Perhaps it is not much different from physical art’s susceptibility to time, the elements, and natural deterioration. So far, the world of digital art has produced NFTs of photos, memes, videos, GIFs and music albums. If an NFT of Nyan Cat— an animated cat with a Pop-Tart body flying through a rainbow trail in the sky—can sell for $580,000, the future market for digital art begins to seem infinite.
