Non-fungible tokens or NFTs track ownership of unique digital items via blockchain technology. They can be purchased, sold or redeemed. But what does it actually mean – and what does it mean to you? Find out why NFTs are a hot topic for creative industries and beyond.
WHAT ARE NFTS? GREAT QUESTION, AND YOU’RE NOT THE ONLY ONE ASKING. NON-FUNGIBLE TOKENS HAVE A UNIQUE IDENTIFYING NUMBER THAT CAN BE USED AS EVIDENCE OF OWNERSHIP FOR INFINITE DIGITAL GOODS. THINK OWNERSHIP OF INTERNET GOODS TRACKED VIA THE BLOCKCHAIN.
If you find this explanation inadequate, that’s likely because we should have led with this: an NFT in the form of a digital artwork sold for $91 million dollars in 2021. That’s right – a JPEG file was bought by nearly 30,000 bidders for a combined value that breaks all art sales records.
NFT and blockchain innovation in general are only emerging in day-to-day conversations, despite the fact that NFT has been in place since 2014. NFT transactions climbed 21,000% to over $17 billion in 2022 and 2023, set to exceed these records.
According to Dr Eric Lim from the School of Information Systems and Technology Management at UNSW Business School, the topic of NFTs is being popularised as the technology matures and becomes increasingly user-friendly.
“The media has been sensationalising events like Jack Dorsey selling his first tweet for millions of dollars,” Dr Lim said.
HOW DID WE END UP LIKE THIS?
Do you know about Web 3.0? Also referred to as metaverse, this next iteration of the web built on the two preceding ones. It will rely on token-based economics, built on the back of platforms like Bitcoin (the first application to run on the blockchain) and Ethereum (the first application to support NFTs).
The 1990’s Web 1.0 provided us with basic information and electronic commerce. Web 2.0 in the middle of the 2000s allowed us to consume and create content. Web 3.0 will be a location where data is held by individuals who can purchase or sell as they wish.
This means that content creators can sell their digital work while still retaining copyright, as with physical work. A person may be the owner of the work, or a lot of people may own an interest in the work. It could be works of art, newspaper articles, the land in the metaverse, or even sneakers.
In such a digital world, there are no physical constraints. It’s virtual. You can scale without limit. This is why NFTs are integral to this economy, because NFTs as a technology, or as a tokenized representation of an asset that resides on this blockchain, can enforce this concept of scarcity,” Dr Lim said.
THE MODERN MARKETPLACE OF NFTS
Buying NFTs can be a way of supporting artists and creators, building a niche collection, claiming ownership of cultural artifacts, or even speculation much like the stock market. Regardless of your preference as a purchaser, configuring the technology to buy and sell NFT is simple.
The advantages of NFTs go beyond financial leeway. Online creative industries will now be re-monetised, as this technology will be able to provide real proof of copyright and ownership.
As an individual creative artist, if you don’t have the support of a legitimate publishing house, it can be practically impossible to protect your work online. This means that companies often exploit creative people and work in an unethical manner.
By using NFTS, individual artists can afford to risk their proprietary rights to their works. They can actually prove where the artwork came from,” said Dr. Lim.
“With the NFT, you can go into blockchain and verify for yourself, ” when was that NFT created?” You can go through the entire process.”
This capacity to link blockchain evidence to one’s work lends itself to the corporate sector, too. The incorruptible nature of technology means that authenticity is immediate, transparent and beyond question.
There will no longer be online platforms that can falsely advertise or sell independent design work. Luxury brands will be able to ward off fraudulent product impersonations by creating NFTs to prove the authenticity of their products.
“If I were a manufacturer of luxury handbags and wanted to protect the authenticity of my bags, I would issue NFT every time I sold them. It will be transferred to the purchaser’s digital wallet and represent the authenticity of the bag,” Dr Lim said.