August 28, 2023

Lara Villard

11th Grade

Lakeland High School

NFTs, or non-fungible tokens, have garnered attention in the past few years. However, though NFTs have made a name for themselves, for most people that’s exactly what they have remained: just a name. The concept of NFTs remains foggy for the majority of the population, despite their worldwide reach. Therefore, in order to clear the clouds, here’s the general breakdown:

To begin, what does a “non-fungible token” mean? The word “fungible” is defined as anything that is interchangeable or replaceable. Therefore, something that is non-fungible is non-interchangeable. These non-fungible tokens exist on what is called a blockchain. A blockchain is a database where anything of value can be tracked or traced, like a digital ledger. Each NFT contains a string of code that makes it unique and identifiable on the blockchain. Hence, tokens which externally look the same are discernable by their strings of code. This proves the authenticity of an NFT and is why it can be worth so much money. Even up to $91.8 million, to be exact. 

However, NFTs did not begin by selling for millions. Blockchain, the system on which all cryptocurrency is built, was developed in 2008 after the U.S. financial crisis. This development enabled transactions to be recorded, making its system nearly impossible to be hacked or cheated. More importantly, on a blockchain, existing data cannot be altered. Data can only be added, and stored in chunks known as blocks. The data is distributed and monitored, making it extremely low-risk. In 2009, Bitcoin was created using a blockchain, and it became the first international form of currency to be established.

NFTs did not immediately come about with the invention of cryptocurrency, but rather emerged as a denomination of Bitcoin, in what is known as colored coins. These colored coins could represent a variation of different assets. While the colored coins hold the same value as any other sum of bitcoin, unlike general bitcoin, these colored coins hold metadata that contain ownership rights among other benefits. Though still far from the NFTs of today, colored coins arguably kickstarted the NFT revolution. However, in its previous version, Bitcoin itself could not support the issuance of assets on the blockchain. That’s why Robert Dermody, Adam Krellenstein, and Evan Wagner created Counterparty in 2014, which is built on top of the Bitcoin blockchain and allows for the exchange of assets while using Bitcoin as a currency. Video game currency, trading cards, and unique memes began to be sold using this platform, showing the potential of buying and selling assets on a blockchain. Eventually, with the rise of another cryptocurrency, Ethereum, the majority of NFTs began to be sold on this platform. 

From the unique Cryptopunk characters to CryptoKitties, and then to art such as Beeple’s “Everydays: The First 5000 Days” and Julian Assange and Pak’s “Clock,” NFTs have become worldwide a central topic of discussion. Many believe that NFTs can help the art world when it comes to proving the authenticity of a piece of work. Proof that a certain person created an artwork can bring value to a piece that, without the authentic seal, it could otherwise never have achieved. And authenticity lasts forever. The blockchain also provides a platform for artists to generate more wealth, as they are no longer subject to sale cuts from galleries. Not only that, but it connects artists to patrons and gives more opportunities to those who can’t afford to put place artwork into a top gallery.

In addition to the art world, in the future, NFTs might expand to many more industries, including gaming, real estate, and even into the metaverse, which is essentially a virtual world. Soon, anything might be sold on the blockchain: digital clothes, digital land; even digital art, which can be incorporated within the metaverse as collector’s items that others visiting your digital home can admire. There are so many possibilities available when it comes to NFTs, so while the world of NFTs is expected to grow in size, what the future holds cannot be known. Many of the biggest innovations in the world led to unexpected and unanticipated consequences. Only time will tell where NFTs will lead.