What Are NFTs? (How AI Art Is Involved)

What are nfts

If you're in any way into cryptocurrency or online art, then you may have heard the term 'NFTs' being thrown around a lot lately. But what exactly are they?

NFT stands for non-fungible token.

In this article we'll give you the ultimate rundown on what are NFTs, where they came from, and how you can get your hands on your very own AI art non-fungible token!

What is a Fungibility?

So, time to go back to economics 101.

A commodity that is 'fungible' is something that can be exchanged for the same value, and is completely interchangeable. 

The most common example of this is money.

For instance, $20 bills are fungible - they can be swapped for another $20 and you wouldn't notice the difference, or you could swap them for 2 x $10 or 4 x $5.

Whichever way you exchange them, it makes no difference - the value is the same, meaning you essentially have the same commodity. You still have $20, regardless of how you try to cut it.

So, something that is non fungible is something which cannot be exchanged or interchanged with anything of the same value - as there is nothing exactly like it.

In this sense, a non-fungible commodity can be assigned value and bought, but as it is completely unique, it is non interchangeable for anything else like itself.

What is a Non Fungible Token?

Hopefully you now understand the concept of fungibility - here's where it gets exciting.

A non-fungible token is a piece of data on a virtual ledger that symbolizes a non-fungible item. The most popular tokens right now seem to be pieces of art, though they can also stand for games, music, and other virtual files.

In blockchain, which is the digital ledger, an NFT represents ownership of the item. Despite this, owning an NFT doesn't award you with copyright claims to the item, nor does it mean you possess the original file of the item.

In this sense, NFT's are a way of digitizing rare and collectible items, or a way of preserving and commodifying things that originated on the internet.

If you're struggling to understand, here's another analogy. Van Gogh's 'A Starry Night' is worth an estimated $100 million. However, you could easily buy a poster of it for $5.

Many people get confused as to why NFT's are so popular given that it's so easy to see memes and digital art without owning it. But, it's the same concept as owning the original A Starry Night, rather than a poster or print of it.

The value of an NFT comes from its originality and thus its scarcity, and this is precisely why people are paying big bucks for them despite being able to see the same images for free across the internet.

Owning an NFT is a way of owning collectibles in the digital age. Many people pour money into collectibles such as Pokemon cards or autographed memorabilia - this is exactly the same, except online.

The NFT is a way of authenticating a work of art or other digital file, and is often autographed in some way by the original creator of the piece.

Many are arguing that this is revolutionary both for the art world and the general digital world. Enabling a system of ownership through a blockchain ledger turns files into digital assets, making them more likely to be memorialized.

In this sense, treating NFTs as collectibles means that internet history will be better preserved than if we let memes and digital art exist without formalized ownership.

Where NFTs originated

It's difficult to know exactly when the first NFT came about, as what some people class as the original non fungible tokens don't quite fit the definition for others.

Colored Coins

However, many people think NFTs began with colored coins on the bitcoin blockchain around 2011 or 2012. They were offered for a single satoshi, which is the smallest unit of the bitcoin cryptocurrency. The colored coins were viewed as collectibles, just like NFTs are now.

Counterparty and Pepecash

In 2014, the platform Counterparty was established. This is a peer-to-peer online financial platform which allows users to create and exchange collectible items in the bitcoin blockchain.

Counterparty is where Pepecash became a thing, as it allowed users to start trading rare memes of Pepe the frog, which generated its own cryptocurrency in order to create the 'rare pepe directory'.

Prior to its popularity at the hands of rare Pepe memes, the platform gave rise to the Force of Will collectibles cards, and in-game purchases for Spells of Genesis.


In 2017, CryptoPunks came into existence. This is what many people in the business consider to be the real starting point of NFTs.

They were invented by John Watkinson and Matt Hall and are a series of character headshots - 10,000 in total - each of which is unique. They look like little pixelated characters, a bit like how you'd see a character in an 8-bit video game.

The name 'cyberpunks' is a tribute to the 'cypherpunks' of the 1990s, who pioneered cryptocurrency experimentation before the formulation of Bitcoin.

They were scattered across the Ethereum blockchain though all 10,000 were found. Ever since, they've been traded as the OG NFT. Initially they weren't being sold for much, but recently many have been going for upwards of 20 ETH - that's around $42,100 USD.

In March 2021, the 'alien' cryptopunks became some of the most expensive NFTs on the face of the earth, selling for 605 ETH - around $1.1 million USD.

The success of CryptoPunks is what kickstarted the ERC-721 standard, which lays out the rules and regs for everything relating to NFTs.


NFT game


Later that year, CryptoKitties was born. CK is an online game in which you can own, collect, and breed cartoon cats. Each cat is 100% unique, much like CryptoPunks, and they can be bought and sold.

The game is a 'DAPP', meaning decentralized app - it runs on the Ethereum blockchain in order to make the game more democratic and cut out difficulties with publishers.

Because these are interactive in the sense that they can be 'bred' with one another, they quickly became viral and launched NFTs to the craze they garner today.

Cryptokitties are now typically a few thousand dollars, though the rare ones often sell for 5 figures. The most expensive Cryptokitty to ever sell went for 600 ETH - at the time, around $390,000 (now, over $1 million). It was the 'dragon' kitty, considered to be one of the rarest Cryptokitties out there!


Decentraland came online in 2017. It's a VR world game on the Ethereum blockchain that allows users to buy the virtual equivalent of a plot of land, and users are limited to playing only within spaces they own or public spaces.

When the game first came online, its ICO was 86,200 ETH after just half a minute. At the time, that was equivalent to $26 million USD. (For a good example of how much the ETH market has boomed since, 86,200 ETH at the time of writing is now $158 million USD).

Each space is a 10m x 10m parcel of land. Each NFT guarantees one of these land parcels. To date, the most expensive square of land sold for 345 ETH, which was $224,000 at the time.

Dapper Labs

Following Cryptokitties' success, the founders started Dapper Labs, a startup working on "blockchain-based experiences" and games.

As well as their success with decentralised gaming, they've more recently secured over $305 million funding following the success of their NBA Top Shot NFTs.

When they first started, they attracted $12.5 million in funding from venture capital. Today, they're valued at $2.6 billion, with shares being bought by big names such as Michael Jordan and Shawn Mendes.

NFT Marketplaces

After these initial forays in getting NFTs off the ground, NFT marketplaces came along.

2018 saw the opening of OpenSea (probably still one of the most popular marketplaces for NFTs) and SuperRare. Both focus primarily on turning digital art into digital assets, though they also sell other items such as trading card tokens and in-game accessories for DApps.

Rarible was founded in 2020, which has quickly risen to fame as one of the platforms with the biggest sales. It's where Beeple's work made news in 2020 and 2021 after selling for millions of dollars.

How an NFT becomes an NFT

It's definitely a bit difficult to understand how an NFT becomes an NFT and not simply a shareable meme in the first place.

An NFT becomes an NFT at the point that it enters the market; when an artist or owner uploads the original copy of the file to an auction marketplace, it enters the blockchain ledger as the original file. This ledger certifies and formally documents the original owner of the file.

Once this initial entry into the blockchain has happened and the file has become an NFT, it can be bought and sold using crypto currency. Most NF tokens seem to be bought and sold using Ethereum, probably given that the blockchain most commonly used to verify NFT's is Ethereum.

NFT Explosion

Since the world shut down due to the COVID-19 pandemic, NFTs have pretty much exploded. This also comes in tandem with the recent explosion in cryptocurrency investment, which has been slowly boiling away over the last few years, but has been especially popular during the pandemic.

With more people stuck at home, they have the time to research investments, as well as more money to invest. This has seen the price of Bitcoin and Ethereum increase massively - in 2020 alone, Bitcoin saw a 160% value increase, and the price of Ethereum increased 12-fold.


Beeple is a digital artist who really blew up in the past year. He began trading his art as NFTs only in October 2020, but since then has made millions.

The first big sale of his was 'Crossroads' - a piece of digital art containing two animated gifs, which would change depending on who won the US presidential election in November 2020. At the time, it sold for $66,666.66.

It resold online for $6.6 million USD, just a few months later in February 2021.

Later that month, the auction house Christie's - long lauded as probably the most high profile auction house for fine art in the world - sold a .jpg collage of 5,000 images created by Beeple for $69,346,250. That makes it the most expensive NFT in the world, and the third most expensive artwork by a living artist in the world.

The artwork was called 'Everydays: the first 5000 days' and was bought in ETH by MetaKovan, the guy who founded MetaPurse, a platform that aims to fund NFTs and other crypto startups (entirely using cryptocurrencies).

It is the first time that an auction house has accepted ETH as payment for an artwork, and the first time an NFT has gone to sale using this platform instead of online marketplaces.

Beeple, whose real name is Mike Winklemann, has caused ripples in the crypto community after his artworks sold.

He has happily admitted previously that he believes NFTs are a 'bubble' within the crypto world, saying that people who buy and trade them for exorbitant amounts are 'crypto grifters', simply looking for the next crypto- based thing to make money off of.

After his artwork sold for millions, he had the equivalent of $53 million worth of ETH converted into USD - which is probably a smart move for somebody who suspects that the bubble might burst soon!

Nyan Cat

Nyan Cat

One of the things kickstarting the wide acknowledgement of NFTs recently was the sale of Nyan Cat.

Nyan Cat first burst onto our screens in 2011, as a half-Pop Tart, half-cat gif. It quickly became an all-time favorite meme, and spawned a bunch of spin-off YouTube videos, merch, etc.

In 2021, the original creator of Nyan Cat, Chris Torres, remastered the OG gif and put it up for auction as an NFT. On February 19, it sold for 300 ETH, which was equivalent to approximately $590,000 at the time.

It took place on the brand new platform Foundation, a new marketplace designed for trading digital art NFTs, which had launched only two weeks prior to the auction.

Torres was excited about the proposition, as it allowed him to directly monetize his pop tart cat meme - something which had proved more difficult prior to the existence of NFTs.

Jack Dorsey

Co-founder and CEO of Twitter, Jack Dorsey, sold the first ever tweet to exist recently.

The tweet, which was tweeted by Dorsey on March 21st, 2006, reads "just setting up my twttr". It was sold via the platform Valuables by Cent - a crypto platform that lets users create NFTs from their original tweets and trade them as valuable assets.

The tweet sold for $2,915,835.47 - which is 1630.6 ETH. It's the most expensive tweet to ever sell, and people are hoping that its sale will help to memorialize iconic moments of internet history.


Electronic musician Grimes has made headlines a lot over the past couple years thanks to her relationship and subsequent child with tech giant Elon Musk, but in February 2021, she was the focus of NFT hype.

She dropped an exclusive digital art collection called 'war nymph' in collaboration with her brother, Mac Boucher. The entire collection sold for just under $6 million in less than 20 minutes of being up for auction.

The collection was made up of still digital images, as well as short videos that were accompanied by never-before-heard music by the artist.

It sold on the well-known platform Nifty Gateway, and a portion of the proceedings were donated to Carbon180, in order to offset the carbon emissions associated with trading NFTs.

Kings of Leon

In March 2021, Kings of Leon became the first musicians to ever release an album as an NFT. While their album is also available through all the regular channels such as Spotify, Apple Music, and vinyl, their exclusive NFTs come as a package with extra perks.

As well as the album, buyers also receive extras depending on how much they bid. The first one offers a special edition of the album and vinyl that won't be released anywhere else, the second gives buyers front-row tickets to a show of their choice from every tour the band ever does, and the third offers exclusive pieces of art associated with the band.

It was sold via YellowHeart, a blockchain technology company working on exclusive releases such as KOL's.

The band made approximately $2 million from the sale, and donated $500,000 to the Live Nation 'Crew Nation' fund, which is aiming to help those working in the touring music industry affected by the lack of live shows during the pandemic.

Buying NFT's

Beeple NFT

NFTs, particularly AI art NFTs, are becoming big business. If you like the sound of NFTs from what we've discussed so far, then perhaps it's time to jump on the market and start buying!

NFTs don't require any previous knowledge of cryptocurrency, though it's handy if you do already know a bit, or at least have a crypto wallet open.

If you don't, it's easy to get started. Some NFT platforms use their own wallets, while others are compatible with external wallets such as from trading platforms like Coinbase.

Where to buy NFTs?

NFTs should only be bought from special marketplaces and from auction houses like Christie's, because they have to be backed up by ERC-721 - the token backing up each NFT which lays out the contracts for owning, buying, and selling the token.

Using these marketplaces guarantees that the NFT is a certified ERC-721 token and therefore will be used appropriately. Trying to buy them from other, shadier corners of the internet will only get you stung - especially considering that NFTs can be permanently 'lost' if sent to the wrong ETH address.

Two of the most popular marketplaces are OpenSea and Rarible. Rarible is where Beeple sells a lot of his stuff, for instance, but OpenSea is considered the biggest and original open marketplace for buying an art piece token.

There are many others, too - just make sure that they have good reviews and reputable write-ups before you go ahead and invest all of your crypto currency in any one particular platform wallet.

Why buy NFTs?

The other big thing to cover is why you should be buying NFTs. Many people have seen the craze recently in the news and decided to jump on the bandwagon.

They simply see it as a new way to make millions of dollars, especially if they already have large crypto wallets to play with. However, this shouldn't be the reason why you get into NFT trading - while it's quite possible that you might acquire a piece that later sells for a much higher price, the chances are you won't.

While we don't think NFTs are going anywhere any time soon, it is possible that this initial 'bubble' will burst and the NFT trading market, much like the price of crypto, will crash at some point in the near future.

Naturally, no investment is 100% safe - that's the point of being comfortable with investing. However, with NFTs generating such a huge buzz at the minute, you should err on the side of the sceptics and only invest if you're truly interested in ownership of exclusive works of art, virtual real estate, or collectibles.

With the hype around NFTs quickly hotting up thanks to high-profile sales and investments, we could soon end up with a GameStop type scenario where people who think they're getting in on a get-rich-quick investment end up losing out.

So, essentially, you ought to be buying NFTs because you love the artist/artwork or you're excited about NFTs as a new technology, and not for the money making potential. If you're interested in digital art ownership, it's a great way to start your collection.

What to buy?

Looking to get into the NFT game but not sure what to buy? Here's a few things worth getting in on.

AI Art

Did you know AI Arthouse recently released their very own NFT collection on OpenSea?

Yep, you heard us. Earlier this year, we launched our first ever full NFT collection, with 1000 limited pieces. Each piece is entirely unique and one-of-a-kind, made by neural networks that generate art in a variety of genres. Every NFT sale entitles the original buyer of the NFT to a physical 12" x  12" print of their piece.

Most pieces start at 0.1 ETH, currently around $192 USD. However, we recently released the first ever piece of 'liquid' art made by an AI - that is, a .gif of a variety of AI generated artworks that each feed into one another.

The piece originally sold for 12.684 ETH, roughly $23,500 at the time. It's now valued at 150 ETH - more than 10 times its original valuation!

This really goes to show that buying an NFT of an AI artwork, rather than just the original print, is truly a valuable and worthwhile experience.

Our AI artworks are made entirely by artificial intelligence machine learning, and have no help from humans - beyond the initial programming of their algorithm. 

Collectible Items

As well as art, you can collect rare and interesting objects by using NFTs.  For instance, one of the things that has taken off recently is the NBA Top Shot.

NBA Top Shot is run by Dapper Labs, the start-up we mentioned earlier founded on the back of CryptoKitties. The NFTs are memorable highlights of the NBA, along with pieces of artwork and animations relating to basketball.

They're sort of like the new baseball cards - they commemorate players and special moments that will be remembered for years to come in the NBA community.

Since their opening, more than $230 million has been spent on these highlights. The most expensive one, a video clip of Lebron James, sold for $200,000.

But besides sports clips, there are other collectible items for sale as NFTs.

The first exclusively NFT shoe brand, Balex, has taken off on Rarible recently. Their sneakers are funky and unique, selling on average for around 0.05-0.08 ETH. That's roughly the same price as a physical pair of sneakers.

You can also own videos and memes - on April 1st 2021, 'Salt Bae's original viral video went up for sale for 21 ETH.

NFT Skepticism

NFTs have gotten pretty popular, though they've also garnered some negative attention.

David Gerard

David Gerard is a fairly well-known blogger and author of two books - 'Attack of the 50-foot Blockchain' and 'Libra Shrugged: How Facebook Tried to Take Over the Money'.

He's perhaps one of the most prolific 'crypto-skeptics', with a blog dedicated to blockchain and crypto currency news commentary.

That doesn't mean that he thinks all blockchain/crypto related things are bad - he's just skeptical about grandiose claims about them changing the world and the global economy forever.

Gerard thinks that NFTs are the new 'magic beans' of 'crypto grifters'. In layman's terms, that means he thinks they're a new way for people who understand cryptocurrency to rip off those who don't and get really rich from it.

He's expressed concerns specifically about artists being made to think that they could make millions from this new technology, when in many cases, they might actually make less than they would in the real world from an art sale.

Further, Gerard is worried about how NFTs can be fraudulent. For instance, there have been some instances where artists who tweet their artworks have had NFTs made of their works by other people without their initial knowledge.

This means that someone else is profiting from your artwork - simply because you haven't established it as an NFT.

These are definitely valid concerns, but perhaps the biggest concern with NFTs is something that David Gerard has actually touched on before - keep reading to find out.

NFTs and Climate Change

One of the biggest concerns that people have with NFTs is the amount of energy used to keep them on the blockchain.

This isn't necessarily with NFTs directly, but more specifically with blockchain such as Ethereum. These blockchain and their associated cryptocurrencies have to be 'mined', and their value is made up in large part by how difficult it is to mine them and how much energy goes into mining them.

Because of this, Ethereum - being one of the most popular blockchains out there - essentially pollutes the same amount as an entire country. It requires huge supercomputers in warehouses being permanently hooked up to electricity, mining away 24/7.

Naturally, this is a problem, as it makes blockchain pretty unsustainable. It makes blockchain a major carbon polluter, something that can't continue in the future if we want to have a shot at protecting the world from climate change.

The important thing to recognize here is that it's the fault of the technology that NFTs are built upon, not actual NFTs themselves.

There are also a few different options for going forward, including developing blockchain that doesn't involve excessive 'mining', or using sustainable energies such as solar to power the mining.

Future of NFT's

The future of NFTs looks pretty bright. While there are concerns about the investment 'bubble' of non fungible tokens, as well as the energy usage of Ethereum, we're pretty certain that NFTs are going to stick around.

The technology is well established and enough money has been poured into start-ups related to the venture to indicate that it's here to stay. Once a solid solution for the energy consumption problem has been implemented, there's no stopping what NFTs could do to the future of the art and crypto worlds!

One thing to look forward to is the potential of NFTs to document the history of the internet.

Formalizing and putting a contract on a piece of artwork, a meme, or viral internet phenomenon means it'll be much easier to document and keep a record of in the future - which is helpful considering that a lot of the internet gets 'lost' easily when webpages are taken down.

MetaKovan, who bought the most expensive Beeple painting, has said that he aims to acquire NFTs to support the concept of a 'metaverse', where virtual worlds collide and museums for things like NFTs are accessible from this world.

A similar thing happened with the rare Pepe memes, and there is now a 'Kek museum of history and future', which features exclusive rare Pepe NFTs as a form of memorializing the strange creation of pepe and everything he has come to represent.

Moral of the story is that NFTs aren't just a fad, we think they're really here to shake up the art world permanently. They're good for artists who get paid directly, and they're good for people who want to invest in alternative ways of owning art in the future.

They're also great for the future of AI art, where the creation and uniqueness of each piece can be publicly verified.

Happy tokenizing!