It seems you can't go 10 minutes without hearing about NFTs. But what are they, exactly? Well, there are about a thousand articles you can find with a simple Google search, but since you're already here, we'll give you a basic rundown.
NFTs are digital assets (images, videos, music, etc.) that use blockchain technology to provide proof of ownership and provenance.
Blockchains are essentially immutable and publicly accessible online ledgers. Once a record is added to a blockchain, that record can't be changed or erased. Blockchain busted into popular culture consciousness with the rise of Bitcoin, a type of digital currency/coin/token recorded on the Bitcoin blockchain. This particular blockchain is an online ledger that shows the recorded history of every Bitcoin that has ever been mined, owned, purchased, and sold.
Now, here is where NFTs come in. NFT stands for “Non-Fungible Token.” Bitcoin, like a single US Dollar, is "Fungible," meaning that every single Bitcoin, like every US Dollar, are worth exactly the same and can be exchanged without any increase or decrease in value.
NFTs, however, are tokens representing unique digital assets, recorded on a blockchain showing the records of who created (or minted) the image, who owns the image, and any previous owners of the image. Since one digital work of art isn't of equal value of another piece of digital art, they are "Non-Fungible".
Essentially, blockchain technology has made it possible for the first time in the history of online digital art to prove ownership and provenance of unique digital works.
Still a little confused? Here's an IRL artworld example:
Vincent van Gogh created Starry Night in 1889. Upon his death, he left the painting to his brother, Theo. When Theo died just six months later, he left the painting to his wife, Jo van Gogh-Bonger, who sold it to poet Julien Leclercq, who sold it to artist Claude-Emile Schuffenecker, who sold it back to Jo van Gogh-Bonger, who sent it to the Oldenzeel Gallery in Rotterdam, who sold to Georgette P. van Stolk, who sold it to the Paul Rosenberg Gallery, who then sold it to its current owner, the Museum of Modern Art in New York in 1941.
We have to trust that all this change of ownership information found on a website is correct, and that someone, somewhere, has copies of all the receipts. But if Vincent van Gogh was able to mint the painting as an NFT on a blockchain, all these records would be automatically updated on the blockchain as each transaction occurs, and they would be publicly available for anyone to see for themselves.
So you may be asking yourself, "Anyone take a screen shot of a digital work of art, why would they spend money on it?"
And you would be correct.
However, the IRL equivalent of this would be photographing Starry Night, creating a digital copy of it. No one is likely going to care if you do it just to look at it for your own personal enjoyment. But there would be problems if you tried to sell copies of Starry Night, touting the copies as originals. With NFTs, digital images now have provable ownership.
Another more relatable scenario here might be with music. Let's go back in time to the olden days, like in 1993 when CDs ruled the music industry. Say your friend bought Nirvana's seminal album Nevermind on CD, and you burned a copy of it to listen on your state-of-the-art Discman. DGC Records, who published the album may not like that you burned a copy, but they aren't going to know, and they aren't likely to sue you over it, either. However, if you start burning copies and tried to sell them to people and record shops, you would likely find yourself in legal hot water if DGC Records found out.
This is what we mean when we say provable ownership and provenance of NFTs. Make sense?
Alright, so let's take this IRL examples further for other features of NFTs.
Maybe you've grown older, had a couple of kids, lost a bit of that teenage angst and have decided to sell your CD collection. Or maybe you're the Director of MoMA and an oil baron has made an offer too good to refuse for Starry Night.
As the owner of either of those assets, you are free to sell them should you so choose. Maybe the value of that asset has increased significantly and you've ended up making yourself a nice little profit.
As an owner of an NFT, you too are able to sell your asset just as you would a CD or a painting. But here is one very important distinction between NFTs and CDs and paintings: If an artwork that was originally purchased through WheelHouse Art's NFT gallery is later sold, the original creator will automatically receive a commission from that sale, and every time it gets sold in the future.
If you sell your Nevermind CD, Nirvana won't get paid anything. If MoMA sells Starry Night, the Vincent van Gogh estate won't receive any compensation. But, WheelHouse Artists will get paid every time their work sells. This unique feature allows artists to benefit from the value built on their careers over time.
Pretty cool, huh?
BTW, this is type of artist compensation is what inspired WheelHouse Art to provide living artists with commissions from our secondary art market sales, regardless of whether the artwork is made of digital pixels, pastels, or oil paint. Huzza!