One of a kind
WORLD Radio - One of a kind
What are NFTs and how could they expand beyond the world of digital art?
PAUL BUTLER, HOST: It’s Thursday the 7th of October, 2021.
Glad to have you along for today’s edition of The World and Everything in It. Good morning, I’m Paul Butler.
MARY REICHARD, HOST: And I’m Mary Reichard. First up: special editions.
This past spring, a piece of art sold for $69 million.
That piece of art is a digital collage. It lives somewhere behind a computer screen and that’s where it’ll stay.
BUTLER: WORLD’s Anna Johansen Brown explains what and why this particular piece of art is making news.
ANNA JOHANSEN BROWN: Joseph Todaro has been creating digital content for years. But he’d never made digital art before. Not until this spring, anyway. That’s when he started seeing people post on Twitter advertising their digital artwork for sale.
TODARO: I was really intrigued by that, because I thought, okay, it's digital, it's an image that anyone can go download, right? So what does it mean, to own it?
Todaro decided to try his hand at creating a piece of digital art: A series of three-dimensional metallic shapes.
TODARO: And then all of a sudden, it sort of expands into this much crazier shape than the shape it started out as and it sort of just transforms back and forth. So it's this infinite loop of like this breathing piece of metal.
Todaro posted those pieces online and they sold within days. Total sales came out to around $2,700. They’re not physical pieces of art. They’re six-second video loops displayed on a screen. They kind of look like something you'd find on a laptop screen saver. So why was Todaro able to sell them for thousands of dollars?
Because of a thing called a non-fungible token or NFT.
An NFT is a little piece of data stored on the blockchain, the same place you can track bitcoin and other cryptocurrencies.
Owen Cyclops is an illustrator and artist who started tying his work to NFTs recently. He compares the blockchain to an omnipresent public ledger.
CYCLOPS: And all these equations and bits of information are getting locked in there and cemented and they can't be changed. That matters for digital money. Because the problem before was if I sent you, you know, a file, that's digital money, couldn't you just copy and paste it and make a million digital dollars or something? Right? So it never worked, until we had this public record that is cemented over time called the blockchain.
That’s why cryptocurrencies like Bitcoin work.
CYCLOPS: If I send you one bitcoin, you can't just copy and paste it into another one, because it's locked into this larger chain of information.
NFTs take that one step farther, with the concept of fungibility.
Fungible just means exchangeable. Dollar bills are like this: Any one bill is as good as another.
Something that is non-fungible, then, means unique...one of a kind. You can’t swap it out with something else. You can’t copy it. It’s recorded in the blockchain for everyone to see.
Michael Sutton manages a cryptocurrency hedge fund. He compares an NFT to a certificate of authenticity, like what you’d get if you bought a signed baseball at the World Series.
SUTTON: So what artists are doing is they're taking a picture, which Yes, you can download yourself anytime. So it's digital. And they're matching it with this certificate, this NFT token and saying, yes, this unique serialized token, of which there's only one, I'm attesting belongs to my piece of artwork. And that can be then proven and shown digitally online to anyone else.
That’s how you can “own” a digital image. Other people can copy it, but they can’t copy the NFT. So only you have the original. Like owning the Mona Lisa instead of owning a printed poster of it.
SUTTON: The original work is what has the, the draw the power to it. And that's what NFT gives you. NFT gives you that authenticity.
NFTs first hit the stage back in 2017. But it wasn’t until this spring that they really took off. People were still in pandemic mode, doing more and more online. NFT sales exploded: On May 3rd, over $100 million changed hands in NFT transactions.
And then things started to drop. Sales plummeted by 90 percent in June before ticking up a bit over the rest of the summer. But overall, people just aren’t buying as many NFTs.
One reason? Joseph Todaro says the pool of interested buyers is small, partly because you have to be a bit of a nerd to get into it. All NFT transactions happen via cryptocurrency. You can’t buy one with dollars.
TODARO: You have to set up a crypto wallet where you can store a crypto currency, right, to buy these non fungible tokens. So what you have is a regular person saying wait a minute, I need cryptocurrency I don't have cryptocurrency, how do I get cryptocurrency?
Another hurdle: The fees. Every time you create something on the blockchain, like an NFT, it’s being processed by somebody’s computer. And that takes electricity.
TODARO: And someone has to pay for the electricity. So there's a fee associated with every single transaction that takes place on the blockchain.
So those pieces of artwork Todaro sold?
TODARO: On that first sale that ended up being equivalent to I believe, around $260, only 60 of that $260 was, you know, in my pocket, right? $200 went toward fees.
But NFTs aren’t just tied to art. They can be linked to physical things, like a bottle of wine or a Gucci handbag. Or they can be linked to a business document, a property deed, a license.
Owen Cyclops says the applications are endless.
CYCLOPS: You print out a ticket for a concert from your computer, but couldn't your friend just photocopy that ticket? They could, right? And then one of you gets there, one ticket’s fake, one ticket’s real. But if that ticket was tied to a notch in this big public ledger, that's an NFT. That would solve that problem.
Merav Ozair is a data scientist and blockchain expert at Rutgers University.
OZAIR: The business use case are boundless because the power of NFTs is there is in the authentication. And every transaction that you have in the economy starts with authentication. You authenticate the asset, you authenticate the person, you authenticate the process every step of the way, you have to authenticate.
So even though the popularity of NFTs in digital art is a little unpredictable right now, Ozair says the technology isn’t going anywhere.
OZAIR: Yeah, we’ll have maybe still the art and other applications. But eventually, the business use cases, the economic use case will evolve and come to the front.
She predicts it will be like the internet: At first, a crazy idea that only a handful of uber nerds used. Now, such a part of life most of us couldn’t survive without it.
Reporting for WORLD, I’m Anna Johansen Brown.
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