Are NFTs Dead?

To most people, non-fungible tokens (NFTs) are those weird, often abstract and (they think) ugly pieces of digital art that sell for thousands of dollars if not more. On the surface, that seems right. Strange digital artwork of apes, dogs, cats and other abstract images are being sold for a lot of money. To be exact, these are priced in crypto such as Ethereum, Solana and most recently in Bitcoin.

But are NFTs just about digital art? 

On the contrary, NFTs are more akin to digital certificates of ownership rather than the art itself. When you buy a real physical painting, you might be issued some sort of certificate by Sotheby’s or Christie’s that you bought or won the painting from them through auction. Or you could have bought the real painting from an art gallery. In any case, normally there is official paperwork that accompanies the painting to prove that you are its current owner.

So think of NFTs that way; you are buying the digital certificate of ownership of that artwork that proves you are the new owner.

NFTs are different from crypto tokens. Crypto tokens such as Ethereum and Solana all have the same price at a given point in time. So for example, if the spot price of Ethereum today is $2,000, then everyone who holds one Ethereum has that same spot price for today. 

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Not so with NFTs. Just like a particular house, car, watch or artwork has its own unique price, so does each NFT. So a Banksy NFT that is a unique piece of digital art might be worth $500,000, but that price is specific to that particular NFT. An NFT by unknown artist Joe Smith might sell for $100, but it is specific to that NFT or NFTs in that collection.

The thing to remember is that NFTs are actually digital certificates of ownership. So in the future, if a jurisdiction allows it, the land title of a property might have both a paper certificate and a digital NFT that you need to possess to be called the owner of that land. 

NFTs track provenance, or the sequential chain of ownership. Since the NFT is on a blockchain, a buyer or seller can see who previously owned that asset (represented by the NFT), who sold what for how much, any modifications to the property (if tracked) and whatever the NFT is designed to track. It then makes it easier to establish provenance. The blockchain explorer on the web would show that the asset used to be owned by Bob, then it got sold to Susan, then sold to Luther and so on.

Larry Fink, the CEO of asset management firm Blackrock, sees a future where many of our transactions that involve asset transfers are done on the blockchain. It is one good way to mitigate — if not eliminate — fraud and fake certificates of ownership, since the provenance is on-chain and cannot be faked. 

NFTs are definitely alive. They are more than just digital images of apes, dogs, cats and other amusing animals. On the contrary, some of our future transactions involving our major assets and possessions such as physical art or land may involve holding the NFT of that asset to prove that we are the owner.