Talking tech: what are NFTs?
Technology is constantly evolving, often faster than we can keep up with. Our talking tech series is here to help you stay on top of the latest technology and the digital trends you need to know, and how you can use them in a B2B context.
First, we’re taking a look at NFTs – or non-fungible tokens. What are they? Why are they suddenly everywhere from the art world to the Kings of Leon’s latest album? And what could they mean for you and your business? Read on to find out everything you need to know about NFTs.
What is an NFT?
An NFT, or non-fungible token, is a digital token that authenticates a one-of-a kind asset online. Effectively it’s a certificate of ownership for any form of online asset that can be bought and sold – from artwork to webpages.
How does it work?
NFTs run on blockchain, a bit like cryptocurrency.
I’m still trying to get my head around blockchain…
A blockchain is a digital record of transactions. Individual records, or blocks, are linked together in a chain. Each transaction added to the chain has to be validated by multiple computers across the internet in a peer-to-peer network. This decentralized network ensures one single machine cannot add invalid blocks to the chain.
This safeguards the chain so it is never broken and each block is permanently recorded. So, in the case of NFTs, your NFT token, or block, will always be attributed to you as the owner, and ownership can’t be forged.
Why the weird name?
In commerce, something ‘fungible’ is an asset you can easily swap for something else of the same value, like a £10 note made into loose change.
Which means, you’ve guessed it, a non-fungible asset can’t be interchanged. It’s unique. Like an original piece of art. Which brings us to…
Why am I hearing about it right now?
NFTs have exploded in the world of digital art in the last few months, with large price tags being attached to works sold using them. You may have heard some of the bigger and more baffling news stories, such as Twitter founder Jack Dorsey selling his first tweet for £2.1 million, the band Kings of Leon being the first to release an album on an NFT or the sale of the iconic GIF Nyan Cat – an 8-bit cat with a pop tart for a body riding a rainbow (you’ve definitely seen it before – it’s our main image) – which went for over US$700,000.
And then there’s the case of digital artist Beeple.
In March, auction house Christie’s held its first ever auction of a purely digital work of art, a JPG file of Beeple’s collage “Everydays – The First 5000 Days” sold via an NFT. It sold for US$69 million. The sale was completed in Ether cryptocurrency.
Does that mean the way we buy or sell digital media will change?
In the art and music world, NFTs offer a potential way to improve copyright of digital art. Many artists are hoping that the new process could prevent endless duplication of their work or grabbing digital assets or downloads across the web. NFTs can also contain smart contracts that may give the artist or creator a cut of any future sale of the token.
However, while some of the interest is coming from people who enjoy supporting the work of independent creators, Artsy CEO Mike Steib told CNN Business, “The recent headline price records for NFTs seem to have been largely driven by newly minted crypto millionaires and billionaires looking to diversify their bitcoin holdings and more interest to the crypto ecosystem”.
So, should I get one, or is this just a bubble that will pop soon?
That’s the million-dollar question, quite literally for some. Overall, the assessment is that NFTs are a risky investment. Nadya Ivanova, a close observer of NFTs at L’Atelier, an independent subsidiary of investment bank BNP Paribas told Forbes, “There’s a high amount of risk…the important thing to understand about the NFT market is it’s very new. And we’re still going through different cycles that are establishing what is the real value of something”.
Even NFT multimillionaire Beeple himself, real name Mike Winkelmann, is under no illusions: “I think it’s a bubble. If it’s not a bubble now, I do believe it probably will be a bubble at some point because there’s just so many people rushing into this space,” he said.
So, while NFTs are in the spotlight right now, we can expect to see them balance out and become less exciting as they become more commonplace in our day-to-day lives. That said, there is a chance that this could revolutionise the way we buy and share digital art and music, making ownership more specific. It could also give artists more freedom and cut out the middleman when selling their art.
How can my business use it?
Well, anything digital can be sold as an NFT – the New York Times recently sold one of their online articles that way. However, while it isn’t complicated to create an NFT and there are several marketplaces for them to be sold, businesses may want to hold back on making any big changes to product sales and see what happens in the coming years.
That said, there is a possibility for businesses to use blockchain technology to track products or services. Startup Verisum (who went through the startup incubator from one of our clients, Kaspersky), has built an NFC chip, backed by a digital ledger built on a secure blockchain platform which lets manufacturers track the entire lifecycle of their product – from factory ship to resell and recycle – authenticating the origin of their $3,000 Gucci handbag, say.
Anything else I should know about NFTs?
Yes, they have a pretty bad carbon footprint. In most cases, NFTs run on the Ethereum blockchain network, the world’s second-largest cryptocurrency. The computer power needed to run and authenticate its blockchain is vast, with an annual carbon footprint of more than 12 million metric tons. That’s equivalent to the emissions of Panama for a full year.