Saurabh Aggarwal's blog

In 2021, NFTs (or non-fungible tokens) surged in popularity.

For Instance, the graphic artist “Beeple” sold one NFT for a whopping $69 million USD. Since then, artists and investors have wondered if non-fungible tokens represent a new potential market. But what does “non-fungible” mean?

If a good is “fungible”, it means it can be exchanged for another identical item. For instance, if I trade a $1 dollar bill for another $1 dollar bill. I am left with the same thing. Examples of fungible goods include dollar bills, stocks, and Bitcoin.

In contrast, non-fungible goods cannot be exchanged for the same thing – they are unique. Examples of non-fungible products include land and sports memorabilia.

Non-fungible tokens, however, exist on the blockchain – a shared digital ledger. Blockchain technology is what gives rise to cryptocurrencies like Bitcoin, but it also supports NFTs. Any piece of digital content – digital art, music, gifs – can be transformed into an NFT and assigned a unit of code that can act as verified proof of ownership.

Think of NFTs as a digital signature or autograph. This signature is what gives digital assets one-of-a-kind value on the internet. Anyone can copy and paste an NFT, but only one person can own the original, verified signature (artists generally retain the copyright of the image, however.)

This scarcity and authenticity are what give NFTs value, just as they do for physical art. Thus NFT’s “open up doors for valuable digital arts and create opportunities for artists that never before existed,” says Sotheby’s, the auction firm.

Artists and investors can now easily buy, sell and own digital goods at scale. Further, NFTs allow creators to establish a direct relationship with customers and create a loyal community online.

NFTs are typically sold on several main marketplaces including OpenSea, Nifty Gateway, and Mintable. To purchase an NFT in a marketplace, you’ll need to have cryptocurrency to spend (usually Ether, a Bitcoin rival). You’ll also need to setup a digital wallet to complete the transaction (but beware of fees).

Some experts warn the NFT market is a bubble that will pop. Other experts note NFTs may be warming the planet because it takes an immense amount of energy to run the computers that support blockchain technology. When an artist “creates: a new NFT, it is added to the blockchain through an energy-intensive computer networking process called “mining”. The creation of one NFT, on average has the same carbon footprint as driving a standard gas-powered car 500 miles, according to the New York Times.

Still, it’s clear NFTs mark a new frontier for artists. “NFTs will be considered one of the groundbreaking artistic breakthroughs of the century,” Sotheby’s says.