What are non-fungible tokens (NFTs) and why is Matt Hancock launching his own?

Matt Hancock has become an unlikely promoter of non-fungible tokens (NFTs) after launching a collection to help a Ukrainian constituent’s fundraising.

On Tuesday, the former health secretary released a video in which he announced he had created From Ukraine With Love to help sell the works of artist Oleg Mischenko – who left the war-torn country to be with his family in west Suffolk, where Mr Hancock is MP.

The former top Tory, who recently starred in I’m a Celebrity...Get Me Out of Here! speaks to the camera over the top of soft piano music in the short plug.

The Mischenkos had to flee Ukraine when the invasion began in February 2022, Hancock said, with Irina and Marianna – Oleg’s wife and daughter – moving to the UK. The father originally stayed behind.

“Oleg is an artist who has exhibited right across Ukraine,” Mr Hancock said. “Now he has managed to come here too and he will be exhibiting some of his extraordinary artworks of Ukraine, many of which have been destroyed by the war.”

He added that an NFT collection has been launched with Coinbase to raise funds for Ukraine Humanitarian Appeal.

“Please support this country by supporting this wonderful art,” said the independent MP.

Hancock is one of the first politicians to become involved in NFTs, but what are the tokens and how do they work?

What is an NFT?

If you’re familiar with the world of cryptocurrencies, then chances are you’ve also come across the concept of NFTs.

An NFT is a way to prove that you own something digital.

If you bought an expensive piece of art, you’d be able to touch it or hold it and perhaps display it in your home. Any attempt to copy or reproduce it, no matter how good a facsimile, would never be the genuine article. It’s like owning a print of the Mona Lisa compared with owning Leonardo Da Vinci’s actual masterpiece.

The potential problem with digital art, and any other digital file, is that people can create identical digital copies. Copying is as simple as right-clicking an image and saving it to your device.

So why would somebody pay for a digital asset that an infinite number of others could also own by saving it to their devices?

NFTs provide a method of authenticating the original, true version of the file, and its legitimate owner.

NFTs can be associated with any kind of digital file, but one of the most popular over the last couple of years has been social media profile pictures. In particular, the Bored Ape Yacht Club collection of unique, programmatically generated profile pictures in the form of cartoons of monkeys, have sold for as much as £2.9 million.

But NFTs aren’t just for digital art. Someone paid £2.2 million for an NFT of the first tweet ever posted on Twitter, for example. It’s even been proposed that digital copies of property deeds could use NFT technology to more efficiently and securely authenticate ownership.

In Hancock’s example, purchasers will be able to own their own copy of one of Mr Mischenko’s works. Coinbase, which is hosting the sale, says there are 386 items of the artist that can be minted – one has already been taken.

The artwork sale for Ukraine that Matt Hancock has launched (Matt Hancock / Coinbase / Oleg Mischenko)
The artwork sale for Ukraine that Matt Hancock has launched (Matt Hancock / Coinbase / Oleg Mischenko)

How do NFTs work?

NFTs harness the same technology that cryptocurrencies use to prove who owns Bitcoins, Ethereum tokens and other crypto assets.

Blockchain technology provides a record of transactions that is decentralised – that is, held by many people at once – and cannot be changed. It’s that immutable record of transactions that makes NFTs useful as a way to prove who owns a digital asset.

Once an NFT has been purchased, the sale is recorded on the blockchain. The record of the transaction cannot easily be changed, which means NFT owners can point to the record of their purchase on the blockchain to prove their ownership.

In the end, a Bitcoin is as much a digital file as a digital cartoon – they’re both just lines of computer code. However, there is a fundamental difference between cryptocurrencies and NFTs, and that’s in how each asset is valued.

Any one Bitcoin has the same value as any other Bitcoin at a given moment in time. Each NFT, meanwhile, is unique – no two have the same value just because they’re both non-fungible tokens.

Which celebrities have promoted NFTs?

Other artists that have been involved include Damien Hirst, who released NFTs of himself burning some of his work.

Models Bella Hadid, Paris Hilton, and Lindsay Lohan have also launched their own collections, as has singer Grimes and rapper Snoop Dogg.

Of the less likely characters to come forward, skateboarding pro Tony Hawk has invested while former footballer John Terry launched Ape Kids Football Club last year, which were a series drawings of monkeys.

One of the more elaborate models is Eminem’s Shady Con, which allowed the rapper’s fans to attend a virtual festival with a soundtrack that could only be heard within an NFT.

What’s next for NFTs?

After reports stating that the tokens may have had their day, a survey by Coin Wire found 78 per cent of the 100,000 NFT users said they had confidence in the future of the form. About 4 million people worldwide are said to be NFT users.

In addition, Reuters reported that total NFT sales on the Ethereum blockchain – which hosts most trading – jumped to $780.2 million in January from $546.9 million the month before, according to market tracker CryptoSlam.

Digital artwork is reportedly the most popular form to share, with Bored Ape Yacht Club designs, similar to those peddled by John Terry, fetching hundreds of thousands.

The average NFT sale price is a more modest but not cheap $372.38, according to CryptoSlam.

Teng Yan, lead researcher at Delphi Digital, estimates 30,000 to 50,000 people are actively trading NFTs right now.

“[In 2023] we will see another 2021-style run when we are able to really bring on board the next big wave of participants into the space,” he said.