When you hear the term nft, you might be thinking of virtual goods, like digital stickers or games. NFTs, however, have expanded well beyond that to include physical objects and even artistic works. They’re often traded on marketplaces that let people collect and trade rare items. New NFTs are “minted” through a process that’s slightly different in each marketplace, but it involves associating a unique set of data — the NFT — with a real-world object.
This is known as “tokenization.” Once minted, an NFT can be sold or traded just like any other item on the platform where it lives, such as YouTube or the Apple App Store. This democratizes collecting in the same way that it has helped online music become more popular than physical CDs, and could eventually allow for fractional ownership of physical assets, such as real estate or artwork, in ways that were never possible before.
The NFT phenomenon is a result of the blockchain, a public ledger that records and verifies digital transactions. The underlying technology behind cryptocurrencies, such as Bitcoin and the dollar, has enabled this type of trading because each token is tied to an individual owner through its blockchain address. NFTs are non-fungible, which means that unlike a dollar or a Bitcoin, one NFT can’t be swapped for another.
While NFTs initially took off in the art world, they quickly spread to a wide range of digital creations, including music songs, sports highlights, video game avatars, fashion items, trading cards, domain names and memes, and more. Some, such as Twitter founder Jack Dorsey’s first tweet or Tim Berners-Lee’s original source code for the world wide web, have even become valuable enough to be auctioned off as NFTs.
For creators, NFTs can provide a new avenue for selling work that might not have much of a market otherwise. NFTs can also build community, as owners can interact with each other in online spaces that are associated with their tokens. For example, the streetwear brand The Hundreds created an NFT around its mascot Adam Bomb and used it to reward fans with special discounts and early access to new products.
Despite these advantages, some critics argue that NFTs are a bad idea. For one thing, they raise questions about property rights. For instance, YouTube hosts video content on its servers and makes decisions about how the content is used, such as whether it violates its community guidelines or is eligible to run ads. When someone purchases an NFT, the copyright and intellectual property rights are transferred to them, which raises philosophical issues about how we value things. In addition, NFTs can be difficult to track and manage, leading some to call them “toxic investments.” nft