NFTs, explained: what they are and why theyre suddenly worth millions

Furthermore, there are infinite possibilities for post-purchase collectability of tickets through exclusive experiences and digital art. The digital tokens can be thought of as certificates of ownership for virtual or physical assets. One of the first big NFTs was a crypto collectible called CryptoKitties.

In March 2021, the blockchain company Injective Protocol bought a $95,000 original screen print entitled Morons from English graffiti artist Banksy, and filmed somebody burning it with a cigarette lighter. The person who destroyed the artwork, who called themselves "Burnt Banksy", described the act as a way to transfer a physical work of art to the NFT space. No, but technically anything digital could be sold as an NFT (including articles from Quartz and The New York Times, provided you have anywhere from $1,800 to $560,000). William Shatner has sold Shatner-themed trading cards (one of which was apparently an X-ray of his teeth). NFTs can also contain smart contracts that may give the artist, for example, a cut of any future sale of the token.

The creation of blockchain assets, NFTs included, uses a large amount of computing power – and so a huge amount of energy. Some are worried about the very real impact the craze could have on the environment. NFTs are having a moment among artists, gamers and brands across all kinds of sectors. In fact, it seems every day brings a new player to the NFT marketplace.

Since NFTs use the same blockchain technology as some energy-hungry cryptocurrencies, they also end up using a lot of electricity. There are people working on mitigating this issue, but so far, most NFTs are still tied to cryptocurrencies that generate a lot of greenhouse gas emissions. There have been a few cases where artists have decided to not sell NFTs or to cancel future drops after hearing about the effects they could have on climate change. Thankfully, one of my colleagues has really dug into it, so you can read this piece to get a fuller picture.

Ethereum token standards ERC-721 and ERC-1155 are the main blueprints created by Ethereum that allow developers to create and deploy their own non-fungible tokens on top of its blockchain. While NFTs themselves are exchangeable (in the sense that you can buy and sell NFTs from/ to other people) the unique traits of each NFT mean it has its own distinct value. For instance, you couldn’t trade a shiny Charizard Pokemon card for a “Shoeless” Joe Jackson, 1909 American Caramel baseball card like-for-like. This is what’s meant by “non-fungible” when people talk about NFTs. Now, let’s talk about fungibility – the part that gives non-fungible tokens their name.

On the other hand, something such as artwork is generally nonfungible. The “Mona Lisa” is not of equal value to “The Persistence of Memory,” as both artworks are unique, deriving value as such. Blogging, for instance, can be aneffectiveway to promote your work. Collaborating with other artists or creators can NFTs also help widen your market reach, as it introduces you to your collaborator’s audience. While bitcoin carries with it intangible value, an NFT represents a real-world asset. The price of each bitcoin is dependent on market fluctuation, while an NFT’s cost is determined by the value the asset represents.

NFTs are secured on cryptocurrency blockchains, trading using Ethereum, Solana, Wax and other tokens. This means they are tied to the ebb and flow of cryptocurrency values, which is a positive and a negative. Finally, an NFT named “Clock” currently stands as the third-most expensive NFT ever bought – with 10,000 individuals forming an “AssangeDAO” to purchase the piece for $52.7 million. This piece is essentially a stopwatch that shows the total time WikiLeaks founder Julian Assange has been imprisoned. It was launched by Assange in partnership with digital artist Pak to raise funds for Assange’s ongoing, high-profile court case.

On the secondary marketplace, you can compare your purchase to previous sales. For most beginners, DeVore says it’s a good idea to start with a reputable online marketplace. Some well-known examples for art include OpenSea and Nifty Gateway. NBA Top Shot, which makes licensed NFTs based on basketball games and players, has its own marketplace, for instance. Treyton DeVore, an investment advisor based in Kansas City, Missouri, who advises clients on digital assets, says you can consider NFTs an especially unpredictable part of your crypto portfolio. NFT technology has also proved a fit for digital versions of other collectibles, such as trading cards.

Big name musicians who’ve created NFTs include Grimes, Kings of Leon, Steve Aoki and 2 Chainz. Non-fungible tokens make it easy to buy and sell digital media online. All you need to do is make an account with a marketplace like OpenSea that lets its users create NFTs. You don’t need to know how to make an ERC-721 token or have any experience with blockchain for that matter.