For ages we have been looking at art as a physical collectible: The Mona Lisa is a painting, the Statue of Liberty is a huge copper statue, and the Balloon Dog (by Jeff Koons) is a stainless-steel sculpture. But in the recent months, a new kind of collectibles has arisen: the NFT. NFTs or non-fungible tokens are unique digital tokens that people can collect, like artworks. What makes NFTs special is the fact that they are intangible. They are one-of-a-kind assets in the digital world, that can be bought and sold, just like physical pieces of art. In this article we will go more in depth into NFTs and answer some of the most common questions about NFTs.
What exactly are NFTs?
NFTs are unique digital tokens that people can collect. They are called non-fungible, since they are unique, and cannot be interchanged with something else. Think for example about money. If you have a 100-euro banknote, you can swap this banknote for ten 10-euro banknotes, or two 50-euro banknotes. With NFTs this is not possible. You can think of NFTs as digital tokens that serve as a proof of ownership for virtual or physical assets. However, 99 out of 100 times, NFTs involve virtual assets and not physical ones.
How do NFTs work?
NFTs can be sold on dedicated platforms, where the platforms charge a commission for each successful sale. Most NFTs are sold at online auctions, like the way auction houses (e.g. Christie’s and Sotheby’s) sell their lots. In March 2021, Mike Winkelmann, a digital artist known as Beeple, sold an NFT of his work ‘Everydays – The First 5000 Days’ for $69 million at Christie’s. This sale positions him as one of the most valuable living artists. Additionally, creators of NFTs can add smart contracts to their works, which for example, give the creator a percentage of the profits, if the work is resold in the future.
You might be wondering: what is stopping people from copying the digital artworks? Surprisingly, the answer to this question is: nothing. The artworks from Beeple have been copied for tens of thousands of times. The buyer of the NFT owns a digital proof that he or she is the sole owner of the ‘original’ artwork. This means that even though the artwork has been shared countless times, the owner of the NFT owns the original artwork.
In the future, we will see a bigger emergence of NFTs, we might even see that physical art’s proof of ownership will become tokenized. Some people might think that this is a bubble, however, with the increasing interest in cryptocurrencies and smart contracts, I believe that the blockchain technology on which all this is based, NFTs will have a significant share in the art market of tomorrow.
This article is written by Berke Aslan