What is an NFT?

“NON-FUNGIBLE TOKENS” (NFTs) leapt from the more obscure corners of the internet into the mainstream in March 2021 when Christies, a British auction house, sold a digital work of art for $69m. What it actually flogged was an NFT, a cryptocurrency chit that proves a buyer owns an intangible marker connected to a unique piece of digital art, music or other item. Much like René Magritte’s painting of a pipe that proclaims “this is not a pipe” an NFT is not the thing it represents. Tweets, videos of basketball dunks and even the source code to the world wide web have been sold as NFTs in recent months. From June to September they generated almost $11bn in sales, an eight-fold increase on the previous four months, according to DappRadar, a market tracker. What exactly is an NFT? And why are people spending tens of millions of dollars on them?

An NFT is a record on a cryptocurrency’s blockchain (an immutable ledger that can record more than just virtual coins) that represents pieces of digital media. Invented a few years ago, it can link not only to art but also to text, videos or bits of code. Promoters of NFTs claim that they solve a thorny problem with digital art: how to own an original. For creators who freely upload their work or sell it as identical copies, the concept of an original is difficult to pin down. Exclusivity is impossible to enforce when digital files can be shared freely on the internet. But collectors want the cachet that comes with having an exclusive claim on an artwork. This is where NFTs fit in.