Non-fungible tokens (NFTs) — cryptocurrency craze hits the mainstream art world (and memes!)

Y’all have probably heard about NFTs, as they have already made a substantial amount of money for some digital artists.

An NFT of the Overly Attached Girlfriend meme, minted by the creator herself, has sold for 200 ETH (currently over $400,000 / R5.8m).

This joins NFTs of Nyancat which sold for 300 ETH, and Bad Luck Brian which sold for 20 ETH.

So… in addition to becoming a new way for artists to monetise their work, NFTs have also become a new kind of digital merch that creators can sell, it seems.

WTF even is an NFT?

“Fungibility” is just some fancy legal and economics jargon that boils down to interchangability.

I’ve found it helpful to think of it in terms of physical-world stuff.

If we both have a pocket full of 50c coins, and you give me one of yours and I give you one of mine, we have traded two completely different coins (or tokens), but no value was lost or gained.

50c coins are completely interchangeable — or “fungible” if you want to be fancy.

Something doesn’t have to be currency to be fungible. Gold, steel, and many other minerals are completely fungible regardless of shape or size provided you are trading the same grade of raw material. You can trade 50 grams of raw aluminium for any other 50 grams of raw aluminium of the same quality.

Natural diamonds do not work like this. There are many factors that go into figuring out the value of a diamond so you can’t just trade one diamond for another, or interchange equal weights of diamonds, because their carats and facets and whatnot come into play.

Natural diamonds are a physical example of a non-fungible token.

But digital art is infinitely copy-able, why are people paying so much money for NFTs?

Copyright / intellectual property has nothing to do with the value of these high-profile NFTs.

While there are NFT platforms that allow you to transfer the copyright of an artwork to the buyer, none of these high-profile NFTs included copyright of the digital artwork.

So what are you buying when you buy an NFT, then?

It can be a combination of things. It’s a certificate of authenticity, a record of provenance, a signature, and probably some other things I’ve not yet thought of.

It is apparently also possible for an artist to embed secret data in an NFT that only the owner can see, but that doesn’t really factor into the value of these high-profile NFTs.

For a physical-world comparison, imagine taking a ball or collectible card of a specific player to a sports game and then getting your favourite player to sign it. Or a CD or poster to a music show and getting the band or musician to sign it.

More than that, their signatures on these objects are dated and numbered. You have gotten the very first signature given out by this player / band / artist.

By taking a common ball, CD, or poster and giving it to a famous person to sign, number, and timestamp you have turned a completely fungible physical token (you can swap one unused ball for another unused ball — they are interchangeable) into a non-fungible token.

That’s what’s happening here.

2 Likes

Funnily enough there was also something about NFT and making your own in a freecodecamp email that I just got to opening as well.

The only thing I don’t understand is why would someone pay that much for a meme?

2 Likes