Since the artist known as Beeple1 sold an NFT of a digital collage for over $ 69 million at Christie’s auction in mid-March 2021, everyone in the art world – and other communities – has talked about NFT. Depending on who you listen to, NFTs are the future of art and will bring long-awaited transparency and accountability to the art market. Or they are a dangerous fad. Or they are ‘nothing sandwiches’ that offer something to buy with cryptocurrency that otherwise goes unused in digital wallets.

So what is an NFT? NFT is the abbreviation for “non-fungible token”; a TVN has been defined as a digital certificate of ownership or a digital record of a transaction. The record is ‘knocked out’ i.e. created using blockchain technology which is stored on a decentralized computer network rather than in a centralized ledger. And NFTs are bought using cryptocurrency, most commonly Ethereum.

NFTs are not limited to the art world. Recently, NFTs of texts, music and audiovisual works seem to be everywhere. There has even been talk of using NFTs to create patent files.

What has caused a lot of confusion is that owning a TVN does not mean that you own a physical object, such as a work of art. It’s more like buying a digital deed for a house: you have the title search and maybe a picture of the house, but you don’t get the house itself. And the image you have may be accessible to many others.

In addition, the purchase of a TVN does not include ownership of any intellectual property. This is a fact clarified recently by the estate of artist Jean-Michel Basquiat when an NFT of a drawing by Basquiat titled Free comb with pagoda was auctioned off on the OpenSea platform to a buyer who believed their purchase included copyright. When a spokesperson for the estate stepped in to explain to the successful bidder that the estate retained ownership of the copyright in the design, the sale was canceled.

Some NFTs come with “smart contracts” that spell out what is being bought and what is not. Recently, there have been “smarter contracts” which are attempts at clarity. As with any transaction, documentation is a prudent step and can prevent a repeat of the Basquiat situation or other confusion.

NFTs are presented as permanent records for the future. But there are also those who protest that blockchain technology and cryptocurrency use so much energy that their use will accelerate climate change and endanger the future of the planet. Perhaps, but the art world, which requires a lot of travel including by plane, is not exactly known for its ecological practices. The irony of art experts criticizing NFTs is not lost on digital artists.

Nonetheless, some in the art world are hopeful that DFTs can be useful in terms of provenance tracking, that is, the registration of ownership of a work of art. It appears that NFTs have the potential to create and preserve a history of art transactions that could bring more confidence to the art market. Perhaps NFTs could be used to track editions of works of art produced in multiples, such as prints and photographs. Of course, all of this would require opinion leaders in the art world to agree on certain standards and principles. And the question arises: is transparency really an objective for the art market? Some would say that art dealers, galleries and auction houses prefer the opposite.

So will NFTs be forgotten like VHS and Beta tapes? Or is there a bright future for NFTs that will bring transparency and trust to the art market and perhaps other markets? We will have to wait and see.

[1] Beeple’s real name is Michael Winkelmann.

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