A flurry of recent purchase and sale activity in non-fungible tokens (NFTs) – a special type of digital asset on a blockchain that’s unique and non-interchangeable – is popularizing use cases for blockchain. Some have likened NFTs to digital collectibles, but the implications of their rise has far-reaching implications for digital product creators, and the use and adoption of digital assets.

Why should we care?
NFTs operate like a digital signature confirming the authenticity and ownership of digital creative products. While cryptocurrencies like bitcoin and ethereum are considered fungible because they can be exchanged with one another, NFTs are unique and can’t be exchanged for something else. Last week, the purchase of a piece of digital artwork whose authenticity was confirmed by an NFT, for the equivalent of $69M in the Ether cryptocurrency, kicked off new interest in NFTs. Recent NFT sales, including a digital card from quarterback Tom Brady that sold for $1.3M earlier this month, and an animated flying cat with a Pop-Tart body selling for $600,000, are also popularizing use cases for blockchain and cryptocurrencies, since NFTs are usually purchased with cryptocurrency. As a result, it’s been argued that NFTs could make cryptocurrencies more “palpable” to the average person. But critics allege that NFTs are bad for the environment, due to the energy costs of mining cryptocurrency. They note that NFTs can enhance wealth disparities among artists and can encourage scams. There are also concerns around lax standards for NFT creators that prove ownership of original work. NFT overall sales are up 55% since 2020, from $250 million to $389 million, a recent report suggests.