If every era has its quintessential collectible, something that speaks to the historical moment and becomes a seeming route to riches, ours is clearly the “non-fungible token” (or NFT). Over the past year, NFTs — which include, among other things pieces of digital art, digital cards featuring NBA highlights, and limited-series music albums, all recorded on the blockchain — have become objects of obsession and financial speculation, fueling hundreds of millions of dollars in transactions, the biggest of which happened just a couple of weeks ago, when a 10-second video clip created by digital artist Beeple sold for $6.7 million. If NFTs have captured our imaginations, it’s because this fad fuses so many potent social and financial trends. It has a cryptocurrency angle, a virtual-reality angle, a meme angle, and it’s a social media-fueled speculative frenzy on top of it. NFTs are us.
But what are they, actually? In effect, they’re digital assets created from whole cloth. “Token” simply means that an NFT is an item on the blockchain, like bitcoin or Ethereum’s ether: its existence has been permanently recorded there from the start, and anything that happens to it — a sale, a trade, etc. — in the future will be permanently recorded as well. It’s the “non-fungible” part that really matters to the potential value of NFTs, since non-fungible means each NFT has a distinct identity, and cannot be simply exchanged for another. One bitcoin is exactly like another, just as one dollar is exactly like another, so it makes no difference which particular dollar you own. NFTs, by contrast, are all distinct “objects.”
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Interestingly, though, this doesn’t mean that NFTs are necessarily unique in terms of their content. NBA TopShot is an NFT platform for the sale and trading of what are essentially digital basketball cards, featuring highlights of great plays (like this phenomenal shot block by…