What is an NFT? What do NFTs mean for artists, buyers and collectors?
NFTs are a brand new asset class made possible by recent innovations in cryptography and blockchain technology. As an entirely new digital…
This article attempts to answer the question that we often get from artists: "What is an NFT?". In this article we'll provide a short answer to that question, and if your curiosity isn't satisfied, we also provide you a longer answer that goes in to a more detail about what an NFT technically is, and what are its implication for the artists.
The short answer:
The term NFT is short for "non-fungible token". That means a token that's similar to a digitally unique certificate that acts like a proof of ownership and provenance over an artwork. The NFT is stored in something called a "blockchain" which is why it can't be copy-and-pasted like a regular image file can. This makes it rare (just like a physical artwork) and that's how a digital item can have value. Since it is recorded on the blockchain, people can do further things with it like move it between wallets or sell it in the future.
Read on for a more detailed answer.
NFTs are a new kind of asset made possible by innovations in cryptography. As a new digital format through which art can be bought and sold, this new medium has many implications for art and art collecting. This article explains, in language aimed at artists and art fans, why NFTs are important and what benefits this new way of owning art brings.
What exactly are NFTs?
NFT is an acronym for the term “Non-fungible token”. “Fungible” (which derives from the Latin verb fungi, meaning “to perform"), is a financial and legal term that is roughly equivalent to the word “swappable”.
The term “Non-fungible” is used for items that can't be exchanged for equal value. One example of non-fungible items in real life could be baseball cards, which became very popular in the US in the last century, some of which sell for millions of dollars, whereas others are considered worthless. While the more valuable baseball cards and the worthless ones are both "baseball cards", that doesn't mean that they can be swapped for equal value.
“Token” is simply another word used to denote a different kind of “coin” or asset. Putting the words together, a non-fungible token, is something you own that is unique, and thus doesn't have a clearly defined value.
How is this related to art? Since NFTs are unique and don't have a clearly defined value, they lend themselves very well to representing ownership of things that are not interchangeable, like artworks. An artwork can be associated with an NFT (technically, this happens by including a reference to the artwork in the data of the NFT) and then owning that token acts like a certificate of ownership of that digital artwork.
What are the benefits of NFTs over physical artworks?
Someone's first impression of NFTs could be that they are inferior, or derivative copies of the original artwork, but this is only ever someone’s subjective notion of what has value. Some art will only ever be created and sold digitally. In addition, NFTs have many qualities which could be considered as advantages over their real-world counterparts, and in some ways could be considered as more authoritative than the original physical artwork.
Durability
Real artworks can physically deteriorate, be vandalised, lost, or destroyed. In the physical world, items decay over time. Coins historically were typically made of precious metals to avoid this problem. If we are to use something as a store of value, we typically don’t want it to be in a perishable format. Owning an NFT of an artwork allows that artwork to live on indefinitely into the future.
A Public Transaction History
NFTs' transaction histories are publicly recorded in the blockchain in which they are based. This provide a timeless record of its ownership that has the same quality of permanence of that digital information has.
NFT Forgery is Impossible
Due to the public transaction history, it is always possible to tell if a given NFT is truly the original, by tracing it back to when it was minted. The art world is famous for fraudulent artworks and sometimes a careful process must be used to ensure that artworks are truly the original. The perfect, publicly accessible record of ownership of NFTs means that it is simple to verify that an NFT being re-sold is the original.
Transportable
Owners of physical artworks are beleaguered with problems related to the physicality of the artwork. For example, if an art owner would like to move house, possibly abroad, an immediate question they must face is how to transport their artworks? Should they be shipped or sent by plane? Which courier company do you use? Will they get damaged in the post and will you need insurance? With an NFT on the other hand, you simply leave it in your wallet, and it is accessible to you from all over the world.
NFTs are Easier to Sell
The fact that NFTs don't have to be transported has the additional benefit of making your artworks available to a much broader audience and much easier to sell. Since the NFT can be sold over the internet, the audience for an artwork is truly international. Again, NFTs allow the transactions to take at speeds constrained only by the infrastructure of the internet, and there are fewer worries about how to physically exchange the item without any damage being caused during the process.
The Drawbacks of NFTs
Despite all their advantages, NFTs can also be considered to have disadvantages when compared with their real-world counterparts:
Limitations of the digital format
Many artists like to examine artworks they own in great detail, as this can give interesting clues to the methods used to produce the artwork. Digital images are 2D representations of a real, physical artwork, and as such some detail may be lost, for example the 3D texture of the paint can never be fully represented by a 2D image.
Placement of Artwork in your Home
An artist once commented that "An NFT can't be hung on a wall!", which is absolutely true. There are inevitably some things that can be done with physical artworks that can't be done with NFTs. But it could be countered that it is a limited way of thinking to believe that people only want to enjoy artwork on walls. Many people may want to look at their artwork on their phones, show it to their friends on their computers and show it off on the internet. For those who do want their NFTs to be displayed at home, many people do this on large screens and digital photo frames.
How NFTs are Bought and Sold and what NFT Owners can do once they Own One
To keep this article focussed, we have expanded on How to Buy and Sell NFTs and what you can do with one once you own one in another blog post. We think this would be helpful for those who are new to NFTs to understand how NFTs are used in practice.
What's next?
One way of learning more about NFTs is to get set up with The Pixel Gallery and start selling your own. If you found this article to be helpful, consider, Signing Up for The Pixel Gallery and contributing some of your own artwork.
If you have more questions about how The Pixel Gallery works, they might be answered in our "Become a TPG Artist" page.
Summary
Thanks for reading this article about the new world of NFTs, we hope it was understandable and was able to inform you about this new format. In this article we have covered what NFTs are conceptually, we have compared and contrasted the properties of NFTs with physical artworks. We hope that the article has been able to convince you that amongst all of the internet hype and media attention, there are some aspects of real-world value to this new technology.
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Thanks for reading, have a great week.
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