The Non-Fungible Token
An NFT is a digital asset that represents real-world objects such as art, music, game elements and videos.
You may have heard a lot about NFT. Maybe it’s because the artist known as Beeple sold NFT for $69 million. Even a novice artist can now sell their work online and get obscene and inexplicable amounts of money for it. How is this possible and how does NFT work?
What is NFT?
Quite simply: NFTs are cryptographic assets. It’s not the same as crypto currency, which you can immediately withdraw and spend. It’s an object that has passed verification, ended up in the blockchain and is now owned by you, which means it can be sold. So any piece of art or an x-ray of someone’s teeth can become an asset.
Let’s explain the abbreviation. NFT – non-fungible token. Let’s spell it out – N: unfungible, irreplaceable, unique, i.e. has no analogue. The letter “T” – token, tells us that it is an asset associated with the blockchain. Strictly speaking, it is simply a separate unit programmed into the code of the blockchain. NFT cannot technically be destroyed or replaced by another similar token. The owner of such a token becomes the owner of a unique object. And his ownership is reliably protected – after all, all transaction records are in one open blockchain system.
Skeptics do not believe in this uniqueness, predicting the imminent death of the concept of crypto-currencies, but there are also blockchain optimists who are eager to bite their share of the cake on the new market and not miss the opportunity to participate in it .
After all, anyone can create an NFT on an open blockchain like Ethereum.
NFT for collectibles
In the physical world, certified one-of-a-kind items are often referred to as collectibles. It’s easy to see why individuals and large companies (especially in the entertainment industry) create NFTs from their products, the biggest and best example of which is the NBA, whose TopShot program allows fans to purchase and “own” images from a game.
The game fragments can’t be in physical form, but they can be stored on the blockchain and sold to fans. The result is an endless collection that keeps growing. It’s like collecting American baseball team cards, except in the case of NFT, it’s an endless circulation of such cards. Moreover, blockchain is not afraid of rain, fire and weather, so the asset is under more reliable protection than a physical object.
NFT proves to us that it is not the quality, but the authenticity that makes the value of artworks or collectibles.
What can be turned into NFT:
- Digital Arts
- Basketball cards
- A series of featured videos
- Virtual real estate
- Virtual fashion
- Music
- Tweets
Where to buy NFTs?
Actually, buying art in the real world is harder than you think. But NFT makes selling art more democratic. Now you can buy contemporary art anywhere. Anyone with an Internet connection can do it. Popular sites include digital art exchanges such as Rarible, CryptoPunks and Opensea.
NFTs & Artists
NFTs have proven particularly popular among contemporary art. The mechanism of uniqueness works here: artists create their works, and the blockchain helps confirm and preserve their uniqueness. NFT and the blockchain behind it make cheating impossible.
The artist no longer needs an agent or a gallery, they just need to put the work on the exchange and announce an auction. This process is called the mint, and it takes some investment.
Often, the artist gets a percentage of any secondary sales and the work increases in value.
If you used to buy Basquiat’s work for a pittance and then resell it for millions, the artist didn’t get a penny from the resale. Now, if the work is tokenized, the artist continues to receive income as long as the work is purchased. Thus, art begins to feed the artist, not just the already rich collectors.
The Future of NFTs
As we have just read, NFTs promise to change the structure and nature of ownership of contemporary art or any other token, as well as the way people buy and sell. Subsequently, the income of those who benefit from the trade will also change.
Billion-dollar cat memes are fun, but many investors are already convinced that they are not the point.
With NFTs, any asset can become “tokenized.” It is the ideal copyright protection system. This means that it cannot be copied or reproduced for free. The chain of ownership of an object has always existed, but never before has it been possible to trace it with such precision.
And in the future, this could mean that the power over art will be taken out of the hands of middlemen (banks, record companies, platforms) and transferred to creators (game developers, artists). Imagine a world where all songs are tagged so that every artist gets paid for every use of their song without the need for Spotify. Imagine a world where physical assets – real estate, luxury goods are also listed on the blockchain.