Unless you’ve been living under a rock for the past 18 months, you’ve probably heard the term ‘NFT’. After all, it was Collins Dictionary’s word of the year in 2021. Big moves. Whether you’re a Collins Dictionary reader, have seen it pop up whilst scrolling through Twitter, or from that one friend at the pub who reckons they’re Warren Buffet reincarnated, it’s getting hard to ignore the buzz around NFTs. Despite the buzz, there’s still a great deal of confusion which begs the question, what exactly is an NFT? And where the hell did they come from?

To my disappointment NFT isn’t an abbreviation of ‘not filing taxes’, instead it means non-fungible-token. Look at it as a unique digital asset with a blockchain-based record from which you can track the ownership of digital artwork or collectibles. NFTs can take many forms, for readers of a certain age group think the Charlie Bit My Finger video, which was turned into an NFT that sold for $761,000. For those of you more in the know, think Bored Ape Yacht Club’s collection of NFTs. They exist in digital spaces which means you can’t touch them but this is all about ownership.

Non-Fungible Tokens

There’s a lot of technical terms and jargon to cut through, so let’s first look at the term non-fungible. A fungible good can be exchanged for another of the same value/type. For example, if I have a regular $1 bill, it can be exchanged for another regular $1 bill, as they have identical value. A non-fungible good is, of course, the opposite. If Danny DeVito signs and dates a $1 bill - it becomes unique (non-fungible) and can be easily differentiated from regular $1 bills - they would not be equivalent in value.

Now let’s look at the term token. In the context of NFTs and blockchain, a token is a unique record of data that lives on a smart contract, which can be interacted with and tracked through the blockchain. Given that the blockchain acts as a ledger for all transactions occurring within it, one can always trace the owner and creator of an NFT by looking at the history of transactions. This provides an extremely powerful tool for ease of tracking ownership over digital assets.

Why do NFTs matter?

Why should we be paying attention I hear you ask? Well, for those of us in creative spaces, whether you’re a photographer, graphic designer, illustrator, or whatever your discipline is, NFTs provide a greater level of autonomy over their work. If, for example, a photographer wants to create an NFT, their digital artwork (a photograph) will be ‘minted’, and due to the blockchain-based record of ownership, each transaction of that artwork will be recorded and traceable back to the original photographer, who can also can set royalties of future sales. The provenance, traceability and openness of NFTs make them important tools for Creators.

For Collectors, NFTs enable access to truly decentralised and open ownership of new assets, and token-gated experiences which can drive exclusive and meaningful interactions which enhance the Creator-Collector experience.

Ownership and Intellectual Property

Ownership and intellectual property rights are often, incorrectly, used interchangeably in the context of NFTs.

Ownership

If you’re the owner of a piece of artwork, there is no better use than blockchain to prove ownership and provenance. The records on the ledger of transactions provide provenance and traceability, proving that you are the true and original owner of the art piece. If they’re unable to prove they’re the owner of the artwork through publicly accessible blockchain, a potential replica is worthless.

Intellectual Property

Owning an NFT does not always mean you own the copyright rights - unless specifically stated by the owner of the smart contract/collection, the artist will retain the copyright.

Much like the advent of social media, NFT art can be a democratizing force in an industry desperate for change. Web 2.0 paved the way for the rise of Instagram and other social media platforms, helping artists connect with fans on a level not seen before. Web 3.0 innovations such as NFTs look set to enhance the artist-collector experience. NFTs are helping to place the ball back in the court of the creator and as the saying goes, when life gives you lemons, mint them and sell them as an NFT.

READ MORE: Introducing the first-ever government-backed NFT - Ukraine + Fair.xyz