Everything you need to know about the Non-Fungible Tokens – NFTs, Explained, the latest in the crypto craze.
Non-Fungible Tokens (NFTs) is a massive buzzword in the world of cryptocurrency at the moment. In the Crypto world, any object that can be digitally transferred from one person to another is called a ‘Token.’ Tokens, unlike coins, do not have the privilege of residing on their own blockchain. They depend on an existing blockchain to function and can be assigned a programmable value that can be recorded and maintained using a private key. An example of a token could be the general coins themselves. Bitcoin, Etherium, Litecoin, and many that you probably have heard of, have a value assigned to them that can be exchanged for goods or services. However, payment tokens are not the only kind of tokens. There are three more types – Non-Fungible Tokens, Utility Tokens, and Security Tokens. In this article, we will be focusing on NFTs alone.
What are Non-Fungible Tokens, and How do they work?
An NFT is, in essence, a collectable ‘Digital Asset,’ which holds value as a form of cryptocurrency. NFTs are uniques files that live on a blockchain and verify ownership of a work of ‘Digital art.’ Buyers typically get limited rights to display the digital artwork that they own. In many ways, they are just buying ‘bragging rights and an asset they would resell later. The technology has exploded over the past few weeks – and Winkelmann, more than anyone else, has been at the forefront of its rapid rise. NFT is a record that shows who owns a unique piece of ‘Digital Content.’ Any part of digital content can be minted into an NFT, from songs, photographs, and digital art worts to tweets, memes, podcasts and published articles.
NFTs are part of the Ethereum blockchain. They are individual tokens with additional information stored in them. The additional information is the critical part that allows them to take the form of music, art, video, and so on in JPEGs, MP3s, GIFs, Videos, and more. Since they hold value, they can be bought and sold just like any other art type – like with physical art; the value is set mainly by the market and demand. Also, art prints of original art are used, made, bought, and sold; copies of an NFT are valid parts of the blockchain, but they will not hold the same value as the original. These “one-of-a-kind” assets can be bought and sold like any other piece of property, but they have no tangible form and exist only in the form of certificates. NFT can be neither broken down into smaller values like most currencies nor can be exchanged with one another for equal value. As their unique value and authenticity characterize them all, digital art cannot be duplicated.
Why are the NFTs Niche?
NFTs are considered niche in the same way digital art is considered niche. It is expensive and relegated to a core audience that resides deep within the crypto world. They have gained a lot of popularity, primarily due to the association with high-end digital art. It had gotten a lot more mainstream in recent times when a mysterious investor spent a record USD69 million worth of cryptocurrency on a digital collage – “Everydays – The First 5000 Days” is a virtual mosaic sold by Beeple, also known as Mike Winkelmann through a first of its kind auction at ‘Christie’s as the first purely digital artwork ever offered by a major auction house. Until October 2020, the most Mike Winkelmann had ever sold a print for was $100. A few factors explain why Beeple’s work has become so valuable:
- He has developed a large fan base with around 2.5 million followers across social channels.
- He is famously prolific – as part of a project called “Everyday,” Winkelmann creates and publishes a new digital artwork ‘Every day.’
- The project is now in its 14th year.
- NFTs, for the moment, is being seen by many as the way digital art will be acquired and traded going forward.
- Christie’s is legitimizing force for both NFT as a technology and Winkelmann’s art. The 255-year-old auction house has sold some of the most famous paintings in history – Shakespeare created during his lifetime and the last discovered painting by Leonardo Da Vinci’s.
- The collector who bought a Beeple for $69million and resold it for 100 times that; just four months later, he started collecting digital art a year ago and co-founded the ‘Museum of Crypto Art’ in part to display his growing collection. He sees Winkelmann’s rising sale prices as a way of proving to the public that ‘Technology matters.’
The Mysterious buyer of US$69 million digital artwork at Christie’s auction revealed:
The mysterious Singapore investor, Mr Vignesh Sundaresan – handle ‘Metakovan,’ revealed his identity – the person who bought the digital artwork Everyday – The First 500 days using cryptocurrency. Metakovan, the chief financier of the crypto-based fund ‘Metapurse,’ had caused a stir in the world of art when he bought the landmark work by digital artist Beeple at the Christie’s auction on March 11th, 2020. After days of intense media coverage and speculation over his real identity, he announced himself to be Mr Vignesh Sundaresan, an “Entrepreneur, Coder, and Angel Investor” in blockchain technologies. He and his collaborator ‘Anand Venkateswaran,’ who goes by the handle ‘Twobadour’ revealed their names in an article on ‘Metapurse’s Substack account.’
The two immigrants from Tamil Nadu, India, in an interview with Strait Times, said, “The point was to show Indians and people of colour that they too could be patrons, that Crypto was an equalizing power between the West and Rest, and that global south was rising. There are countries like India that are thinking of banning Crypto. If my story can inspire someone and make them say, ‘Let us not ban Crypto,” I would be happy to reveal myself for that. The pair run Metapurse, which claims to be the world’s largest Non-Fungible Token (NFT) fund. The image file is linked to an NFT – a non-duplicable digital certificate of ownership for digital assets is authenticated using blockchain technology. Metakovan paid for the work using Ether, the world’s second-biggest digital coin. Christie’s auction house had previously said the work was sold to a Singapore buyer by Metakovan (Tamil for “king of meta”) but did not reveal his legal name. You can learn more about their journey and their future roadmap here.
How to buy the NFT Tokens?
NFTs can be bought on a variety of platforms, and it depends based on what you choose to buy; e.g., if you’re going to buy Crypto Art Collectibles, you will go to digitaltradingcards platform. Similarly, other marketplaces sell more generalized pieces. You will need a wallet specific to that platform you are buying on and will need to fit that wallet with cryptocurrency. Due to high demand for many NFTs, they are often released as ‘drops’ (much like in events, when batches of tickets are often released at different times). This means a frenzied rush of eager buyers when the drop starts. Hence you will need to be registered and have your wallet topped up ahead of time. NFTs also make waves as in-game purchases across different video games (much to the, erm, the delight of parents everywhere). These assets can be bought and sold by players and include playable assets like unique swords, skins or avatars. Following is a list of sites for your reference which sell NFTs:
Who has been using NFTs?
NFTs have a moment with NFT art creators, including artists, gamers, and brands across the cultural spectrum. For artists, stepping into the NFT space includes another segment and format to create and share their artwork which offers their admirers another way to support their work. With pieces ranging from small, quick-to-make GIFs (Rainbow Cat, which NyanCat sold for $690,000) to more ambitious works. Artists can offer the public a wide range of ways to buy art and make money in the process.
NFTs to include in video games, something that is shaking up the concept of buying assets in-game. Until now, any digital assets purchased inside a game still belonged to the game company – with gamers buying them temporarily to use when playing the game. But with NFTs, the ownership of assets has shifted to the actual buyer, meaning that they can be bought and sold across the gaming platform with additional value applied based on who has owned them along the way. Games are beginning to be made entirely around NFTs, proving how they are shaking up the gaming industry. It would be expected that the well-known artists would receive big bucks in return for their work, something that was relied upon when an anonymous group of ‘art enthusiasts’ recently burned an original Banksy to turn it into an NFT (find out more in this video).
The NBA has NBA Top Shot, selling digital collectables in trading cards embedded with iconic moments from the game. With a plan to add virtual jewellery, accessories and clothing that can be used across social media, the NBA seeks to find ways to expand this revenue stream as far as it can go. Even tweets hold value, with Twitter co-founder Jack Dorsey selling off the first-ever tweet for a massive $2,915,835.47. Musicians are also selling the rights and originals of their work and short videos to clips of their music, and you can even buy digital real estate and 3D assets like furniture.
A ‘digital home’ has recently been sold for an out-of-this-world $500,000. ‘Mars House’, designed by Toronto artist Krista Kim, was described by digital art marketplace SuperRare as the ‘first digital house in the world’. Created with an architect and video game software, the owner will explore the mansion on Mars using virtual reality, including sunbathing outside the house (in the Mars atmosphere).
Controversies of NFTs
There’s a lot of money to be made in the NFT market. But you also may have heard there’s some controversy surrounding NFTs, in particular concerning their impact on the climate. NFTs use a monster amount of energy in their creation. So much so that many protesters are worried about the genuine impact the craze could have on the environment. According to CryptoArt.wtf, a site set up to calculate the carbon footprint of NFTs (which is now offline), one-piece called ‘Coronavirus’ consumed an incredible 192 kWh in its creation. That’s equivalent to one European Union resident’s total energy consumption for two weeks. But that must be a particularly huge piece, you may ask? Nope, a ‘simple’ GIF can equate to the same consumption.
To summarize, Artists can help by making efforts to create carbon-neutral artwork (Beeple has already promised to do this in the future – “I can assure you that moving forward that all of my drops will not just be carbon neutral but carbon NEGATIVE”). But the problem goes deeper than that because of the way cryptocurrency systems are built. Ethereum, Bitcoin and the like are built on a ‘proof-of-work system (like a complex series of puzzles) to keep the financial records of its users secure. This system uses an incredible amount of energy. Ethereum alone uses about the same amount of energy as the entire country of Libya. ArtStation was so worried about the climate’s impact that it recently backtracked on its decision to sell NFTs after a massive backlash. But it may not be so controversial forever, as organizations are trying to make a difference. Check out what Blockchain for ‘Climate’ is doing to improve the situation here.
