Art, music, cryptocurrency – what’s uniting these concepts today? NFTs, the acronym that received the title for ‘Word of The Year’ in 2021. Find out what NFTs are and how they’re changing the way we see art.
Words and Photography by Urth HQ
NFT, an acronym for Non-fungible tokens, doesn’t exactly sound inspiring, yet NFT art is making waves in the art world and beyond. As an exciting by-product of art and the technology behind cryptocurrencies, NFTs are making headlines daily. Their transformation of the digital and physical art market is both disruptive and fascinating to follow.
Most people first heard the term NFT back in March 2021 when the news about Beeple’s artwork, titled Everydays – The First 5000 days, broke the internet. He earned an astonishing $69 million for a JPEG file of a digital artwork at the first-ever digital art auction, hosted by Christie’s.
Since then, the digital art industry has continued to grow and evolve – NFT art is now worth millions of dollars. Artists and speculators are competing for top prices and breaking sales records in the process, while the royalties paid out to artists are changing society’s preconceptions of what digital art can be.
But what exactly has made NFTs so successful? And, why are major artists and leading institutions all getting involved? If you’re new to the world of NFTs and digital art, it’s time to learn what makes NFTs so valuable.
What exactly are NFTs, and how do they work?
Let’s dig into the definition of NFTs and how the acronym first came into existence.
What are NFTs?
NFT stands for Non-fungible Token. The term ‘fungible’ in NFT means an interchangeable item. In matters of finance, money is a fungible asset. Let’s say I borrowed a $20 bill from you. I can return it in two $10 bills without losing your money’s value.
Other fungible assets include shares, money, cryptocurrency, gold, and so on. Fungible assets have plenty of supply and can be divided into smaller bundles – they can be used in numerous ways, including payments or as a store of value.
Non-fungible assets are one-off items such as houses or paintings. Take classical artworks as an example – you can’t transfer a painting’s value from the original even if you made or photographed its copy or replica. The best examples of non-fungible assets include houses, paintings, or trading cards.
NFTs refer to unique data units stored on the blockchain’s digital ledger. NFTs are comparable to a certificate of authenticity, representing a unique digital asset that’s not interchangeable. Once created, no one can adjust, change or steal an NFT due to the cryptographic factor of the blockchain.
Just like cryptocurrencies such as Bitcoin and Ethereum, NFT art is created in digital format on a blockchain, mostly the Ethereum blockchain. They remain forever embedded in the same blockchain’s ecosystem. However, unlike cryptocurrencies, each NFT is unique – you can’t exchange it for anything similar, making it non-fungible.
Where does Blockchain come in?
So what’s a blockchain? It’s a type of database where data or information is stored electronically. However, the blockchain differs from your regular database as it links together a series of data ‘blocks’. The chain of blocks create a collection of data or a shared digital ledger where all information and activity within the chain is recorded.
This shared ledger is permanent and unalterable. It’s almost impossible to tamper with or falsify the data that has been entered, which is why the blockchain is commonly used to track assets and record transactions. Every individual blockchain ledger comprises thousands of servers globally, meaning everyone across the network can verify all entries.
Artists can store any form of digital art as NFTs to verify the originals. And anything goes – videos, music, artworks, photography, memes, and even tweets. As long as anything valuable can be stored digitally, you can create an NFT to keep its value.
How do NFTs Work?
NFT art was first launched on the Ethereum blockchain. Today, Bitcoin Cash and Flow are among the newer blockchains supporting them. The unique identity of original NFT files, whether that’s an MP3, JPG, or GIF, makes for identifiable ownership.
What makes NFT art pieces so pricey? Firstly, their unique nature. Secondly, the fact that you cannot find replicas of some of those artworks. And just like physical art, NFT artists can sell their digital pieces, whatever they may be, at a price determined mainly by the principles of supply and demand.
What Makes NFT Art So Valuable?
All art itself is valued for its uniqueness and artistic merit. It’s hardly an open secret that anyone can copy a digital file countless times. However, ‘tokenizing’ digital artwork through NFTs creates digital certificates that authenticate ownership, enabling their trade on the NFT marketplace.
The same blockchain system that helps store cryptocurrencies, like Bitcoin Ethereum, is the same system that maintains and verifies the ledger where NFTs are stored in real time. By guaranteeing that records cannot be falsified, NFT marketplaces can use smart contracts to ensure that only legitimate owners receive royalties into the future.
Any artist can mint tokens or tokenize their existing work to sell them as NFTs. And any artist can benefit from the popularity of NFTs as an investment option, receiving royalties every time a piece of their art is traded from one investor to another.
The Future of NFT Art
NFT art is a rapidly growing space, because it offers genuine benefits to artists and collectors. And with blockchain technology increasing in popularity, it seems likely that NFT art is here to stay. Given everything we know now, it’s worth investing some time to get a working understanding of NFTs so you can dip your toes into the digital art landscape.
Did you know Urth recently launched Urth Art? It’s a new digital territory linking NFTs to gallery-grade photography prints. And with every artwork sold, 10 trees will be planted. View the collection.