It might seem like NFTs, or non-fungible tokens, are everywhere nowadays. Michael Jordan, Taco Bell and even Dolly Parton have gotten in on the investment trend, generating so much buzz that Collins English Dictionary named "NFT" its 2021 word of the year.
But do all those people know what they're talking about? Maybe not.
According to a new poll from Money and Morning Consult, only 1 in 4 U.S. adults can actually say what an NFT is.
Money teamed up with decision intelligence company Morning Consult to test Americans' awareness and knowledge of NFTs. And although roughly a third (35%) of our 2,210 respondents said they had a general sense of or knew exactly what an NFTs is, just 26% could correctly pick the definition of an NFT out of a lineup.
The rest were... confused.
What is an NFT?
In short: NFTs are unique digital assets, bought with crypto (often ether), for which ownership data is stored on a blockchain. NFTs date back to 2014, but they spiked in popularity last year, in part due to record-breaking art auctions that saw a Beeple collage sell for $69 million and a Pak project generate nearly $92 million.
While 26% of respondents in our survey chose the correct definition for an NFT, about 12% reported thinking NFTs are digital assets bought and sold with traditional (fiat) money like U.S. dollars rather than cryptocurrency. Some 12% said they believed NFTs themselves are a kind of cryptocurrency. Another 7% said they thought NFTs are physical assets traded on the blockchain, and the remaining respondents — 43% — said they didn't know or had no opinion.
Charlotte Principato, a Morning Consult financial services analyst, wrote in an email that the results were not surprising.
"Although NFTs have been in the headlines a lot in the past few years, they are still a relatively new digital asset compared to cryptocurrency," Principato added. "Their utility is also slightly less straightforward. While cryptocurrency has the word ‘currency’ in it and consumers can grasp the concept that it’s used to pay for things, a ‘non-fungible token’ is a less self-explanatory name, and I suspect many consumers struggle with the idea of what to do with an NFT."
Understanding of NFTs varied based on demographics.
More males (32%) than females (20%) selected the actual definition of an NFT. So did younger people, though Gen Z lagged slightly behind the millennial generation. Respondents between the ages of 35 to 44 were most likely to know what NFTs are, with 31% picking the right answer, compared to 29% of 18- to 34-year-olds, 22% of 45- to 64-year-olds and 24% of those 65 and older.
Both of these trends track with previous research showing young men are the group most likely to have used crypto. It's hard to pinpoint how many people actually own NFTs, but blockchain data firm Chainalysis estimates the market in 2021 reached roughly $44 billion.
We also found people tend to overestimate just how much they know about NFTs. Among the Money/Morning Consult respondents who said they knew exactly what NFTs are, only half (53%) actually chose the correct definition. On the flip side, adults unfamiliar with NFTs truly were unfamiliar: Just 3% of those who reported they'd never heard of NFTs selected the right answer.
Principato said it's likely the people who reported grasping the concept of NFTs are crypto owners. But the biggest barrier to widespread understanding is in the very nature of NFTs: the fact that they, and related products, involve a complex mix of blockchain and crypto technology.
"In reality, cryptocurrency is both the gateway and the barrier to the world of not only NFTs, but DeFi and Web3 as well," she added.