NFTs are trending and confusing. Are they digital? Yes. Are they currency? No. So what are NFTs and why should makers consider selling or buying them?
First, some definitions. NFT stands for non-fungible tokens. To understand what they are, you’ll need a bit of economics. A fungible asset is something that can be readily traded and maintain its value. The ubiquitous fungible is money. You can swap, say, $20 for two $10 bills without coming up short. But a non-fungible asset can’t be traded like that. There’s only one, unique item. Here’s another ubiquitous non-fungible: a house. Even if you sell it, it’s basically one of a kind. (Thanks to the BBC for this explanation.)
NFTs are digital assets that can be bought or sold. As the BBC says, “The digital tokens can be thought of as certificates of ownership for virtual or physical assets.”
Here’s how photographer Jesse Dittmar explained it on Breakfast with Sergio: “An NFT is an asset on the blockchain. If you don’t know what the blockchain is, it’s a public ledger that a ton of computers keep all at the same time,” he said. “An NFT is a unique serial number tied to a digital object.”
Transforming a digital object into an NFT is called “minting.” Owners place their NFTs in digital wallets. “If the code lives in your wallet, then you own it and no one else does,” Dittmar said.
The NFT proves ownership of either physical or digital property. And they’re hot. For example, the image that spawned the meme dubbed “side-eyeing Chloe” has been sold as an NFT.
How does this help makers?
With NFTs, makers can collect royalties on the original object. The benefit of residual income is one reason designer and digital artist Jaime Derringer is all in when it comes to NFTs.
“The best part of an NFT, which is different from physical items, is that once you upload or mint something to the blockchain, it’s still attached to you as the original person who uploaded it. And you can add royalty percentages to that sale,” she said.
“If you think about artists who got super famous, and now their artwork is selling for $60 or $100 million dollars, (the artists aren’t) getting any money for that,” she said. But with NFTs and blockchain, Derringer said she could get a lifetime income stream off one sale.
Derringer has been involved with NFTs since April 2021. Less than a year later, she’s sold 350 pieces and she’s also buying and selling collectibles – NFTs from other artists and makers. It’s a holdover from her childhood days, she said.
“I grew up collecting baseball cards, Garbage Pail Kids, and stickers, so it’s super fun to (trade collectibles.) It’s not so much a financially driven thing.”
Although NFTs are digital, all sorts of makers can take advantage of them.
“Let’s say you’re a sculptor, you could take a photograph of your sculpture, upload it mint it and sell just the photo of your sculpture,” Derringer said.
There are marketplaces for NFTs, just as there are maker marketplaces like Etsy. Derringer’s work is available on OpenSea. Others are listed below.
Artist Jaime Derringer is selling this piece from her Soft Math series as an NFT on OpenSea.
Although she’s enthusiastic, Derringer has a warning. Guard your digital wallet, just like you’d guard your physical one. Digital wallets are accessed with a key phrase. If that phrase is lost or forgotten, there’s no way to access the contents because the technology is so de-centralized.
“I made the mistake of creating a couple of wallets. I wrote down the wrong key phrase, or I did something that locked me out of one of my wallets. And there was no saving it,” she said. “You need to double, triple, quadruple check your key phrase and store it somewhere very safe. I would not recommend storing it on your computer.”
Afi Scruggs is our starff writer. She is a freelancer based in Cleveland, Ohio.