What they have been and what they are becoming

There’s been a tremendous amount of hype and misinformation about nonfungible tokens (NFTs) since they appeared on the scene in 2014, particularly since the total market for them passed $24 billion. You can’t open a news feed without an article about nonfungible tokens popping up. These inevitably contain the obligatory “An NFT is a” paragraph for newcomers… and for readers who’ve consumed a dozen similar articles but still don’t get it. If you’re among the latter, you’ve come to the right place. 

NFTs really can be important and useful, and they’re evolving to become more so. But NFT evangelists and skeptics alike tend to dumb things down, hype things up and sometimes just get things wrong. Here are a few claims you might have read about NFTs — both pro and con:

  • NFTs are a scam.
  • You can turn your art into an NFT to prevent it from being copied.
  • NFTs are just a fad.
  • Each NFT is a proof of authenticity for a “one-of-a-kind” item.
  • NFTs are bad for the environment.

First, no — NFTs aren’t a scam. Scammers use email, but we don’t say email is a scam. Second, no — NFTs aren’t a fad, though whether any particular line of digital collectibles turns out to be a lasting set of cultural artifacts or a short-lived fever-dream of techno-social groupthink remains to be seen. Third, while some current blockchains have issues with energy consumption — for the moment — anyone caring about this likely doesn’t know what they’re talking about. And finally, beware of anyone that says you can turn your art into an NFT or that NFTs can prevent your art from being copied, or that they prove a work of art is an authentic “one of a kind.” This language was invented by people who know how to manipulate mass perception, and none of it is true.

Now, techniques such as zero-knowledge cryptography, combined with new smart contracts like the ones based on EIP-4910, are adding scalability, privacy and functionality for developers to build useful services.

Using NFTs in this way lays the foundation for artists to make a living more reliably and consistently by signing up their fans as promoters and distributors, granting them skin in the game…a franchise, if you will. Instead of having to convince people that others will want to buy an NFT for more money later, people can buy the NFT as a right to make authorized reprints and distribute them, which themselves represent a right to reprint and distribute. From ten first-generation digital prints, an artist and their collectors, influencers and promoters can receive passive income on royalties from over 11,000 digital prints and the revenues they collect. Owning such an NFT grants real, enforceable ownership to holders.

New NFT standards are also making it possible to do all this entirely on the blockchain without relying on third-party marketplace exchanges or centralized services. Imagine being able to copy a simple embed code from your NFT into your own gallery website — the way you might with a YouTube video, but without relying on YouTube to serve up the video — and sell it right there (be it a work of art, a concert pass, or a ticket to the big game) without any other platform involved.

In the end, the hyperbole being used to describe NFTs is understandable, and there will be plenty of the same as they evolve. It’s part of the story you’re buying. And these days, whether it’s a new Tesla, a painting of a can of soup, or even a digital banana NFT-taped to the wall of a blockchain, you’re buying a story. So maybe the hype peddlers get one thing right while getting everything else wrong. What a society comes to believe in can be the source of great value. After all, if we managed to convince you that an NFT is just a digital sales receipt recorded on a public internet bulletin board — and not a useful tool for improving the financial lives of creators while growing more inclusive and engaged digital communities — how much would you be willing to pay for one?

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

John Wolpert is a co-founder of TreeTrunk.io, a ConsenSys Mesh company. TreeTrunk is the first to implement the EIP-4910 NFT smart contract, distributing royalties on-chain while protecting digital originals under zero-knowledge cryptography. Wolpert also serves as co-chair of the Baseline Protocol standards body, which uses zero-knowledge cryptography and blockchain technology to improve information security in multi-party IT workflows.