NFTs Explained: Why People Are Paying Millions for Digital Art
On March 11, 2021, Christie’s auction house sold a digital artwork called ‘Everydays: The First 5000 Days’ by an artist known as Beeple for $69.3 million — making it the third most expensive work ever sold by a living artist. The buyer received no physical painting, no sculpture, and no print. They received a digital file and a non-fungible token, or NFT: a unique cryptographic certificate of ownership recorded on the Ethereum blockchain. To many observers, the sale seemed incomprehensible — why pay $69 million for something anyone could copy and view online? Understanding the answer requires understanding what an NFT actually is.
An NFT is, at its core, a way of establishing proof of ownership over a digital asset using blockchain technology. The blockchain — a distributed digital ledger maintained by thousands of computers simultaneously — records ownership in a way that is transparent, permanent, and theoretically impossible to tamper with. When you buy an NFT, you are not buying the underlying image or video file — you are buying a unique token that says, on the public record, that you own the ‘original.’ The analogy most often used is fine art: millions of people have prints of Van Gogh’s Starry Night, but only one institution owns the original, and that ownership is what commands the price.
The NFT frenzy of early 2021 extended far beyond digital art. Twitter founder Jack Dorsey sold his first-ever tweet as an NFT for $2.9 million. The NBA launched TopShot, selling NFT video highlights that generated over $230 million in transactions in under a year. Musicians including Kings of Leon and Grimes released albums and artworks as NFTs. Sports teams, luxury brands, and media companies rushed to explore how blockchain-based ownership tokens could create new revenue streams.
Sceptics were numerous and vocal. They pointed out that most NFTs were bought not for cultural value but as speculative assets — purchased in the hope that someone else would pay more later. The environmental cost of the energy-intensive Ethereum blockchain drew strong criticism. And the question of what an NFT owner actually owns — given that copyright in the underlying work typically remains with the creator — was never resolved to everyone’s satisfaction. When the NFT market crashed in 2022, many buyers found that prices they had paid bore no relationship to subsequent market values. The technology persists; the gold rush, for now, has passed.