Crypto Renaissance - NFT
It’s undoubtedly the beginning of a golden age of crypto, from art and culture to finance to hopefully even social change.
In early March, Blockchain company Injective Protocol bought a piece of art worth $95,000. Then the executives lit it on fire. At the end of the spectacle, which was shared live on the internet, the group unveiled a copy of the art, this time in digital form. The creation, by elusive British artist Banksy, was called "Morons (White)."
"Morons (White)", the Banksy painting acquired and digitized by Injective Protocol
As for the digital format, it's getting more hype than the painting and the burning put together. It's a rising type of technology called a non-fungible token, or NFT. Think of an NFT as a unique proof of ownership over something you can't usually hold in your hand — a piece of digital art, a digital coupon, maybe a video clip. Like the digital art itself, you can't really hold an NFT in your hand, either — it's a one-of-a-kind piece of code, stored and protected on a shared public exchange.
Nonetheless, some NFTs are fetching millions of dollars. Investors, futurists, and financial reporters are abuzz, and companies big and small are launching NFTs for profit, publicity, or some of both.
NFT —— What does it mean?
NFT stands for non-fungible token which exists on a blockchain. A token is the sign of ownership of an asset. For example, a concert ticket is a sign of ownership of one space for a concert. A Bitcoin is the title of ownership to the underlying value of the Bitcoin. A token is a digital asset, stored on the blockchain. As the blockchain is transparent, it is easy for all to see who is the owner of what token. Digital art can be easily and endlessly duplicated, but non-fungible tokens allow buyers to confirm ownership
Fungible refers to an asset that is easily exchangeable. A dollar is very fungible, you can give me a dollar in exchange for some good and I can then re-exchange it for another service. A neighbor could borrow a pound of sugar to bake a cake and buy me another one in a few days when he goes to the supermarket. It doesn’t matter that the sugar is different, it is easily replaceable and exchangeable.
A non-fungible token is a unique token that isn’t easily exchangeable with another. The foremost use case is artworks. Artworks have been selling on the blockchain for millions of dollars (or in this case a blockchain native currency, Ethereum). Examples abound but the most famous NFT artist so far is Beeple who first sold 21 pieces of artwork on the digital marketplace Nifty Gateway for a total of $3.5 million. He then went on to sell his masterpiece “EVERYDAYS: THE FIRST 5000 DAYS” at Christie’s for $6.5 million. Beeple is Mike Winkelmann, previously a graphic designer from Charleston, South Carolina.
Beeple’s digital art collage Everydays: The First 5,000 Days sold at Christie’s for a record $69.3m.
Artworks are not the only things exchanged in these marketplaces. More and more volume in the NFT space is coming from digital sports trading cards. In fact, fans of basketball have already spent $230 million trading NBA Top Shot cards. These cards represent certain classic moments for the sport and there is only a limited amount of each. The ownership and the scarcity of these cards are insured by the Ethereum blockchain. Recently, a rare Lebron James highlight sold to the highest bidder for a crisp $200,000.
NBA Top Shot NFT cards
NFT —— What is its value?
The crazy thing about these purchases is that anyone can download Beeple’s artwork or Lebron’s highlight. It is as simple as clicking ‘save image’ on your laptop. What buyers are after is not the artwork in itself but the proof of ownership for that artwork. The buyers are akin to art collectors putting their most prized possessions on display in museums. NFTs represent a way for art collectors to financially encourage their favorite artists online.
As humans evolve more and more, especially in lockdown, it seems only natural that we decide to buy art in the digital world as well. One step further, certain platforms such as Decentraland allow users to buy land or real estate in a digital world.
While this has been no more than a niche sector of the internet, in the last six months it has truly exploded onto mainstream media and seems to be here to stay. While the first experiments with NFTs date back to 2013-2014, the market seems to arrive at a certain maturity and mainstream appeal in 2021.
A number of quality projects have emerged in different NFT areas to make NFT more known and accepted. For example, NBA Top Shot, deployed on Flow, has processed more than 3 million transactions and reached $460 million in sales in the secondary market after 5 months in a public beta. And The Sandbox, highlighted by UGC, enables Assets created by players themselves to be circulated and traded at will, allowing creators to integrate creation and selling.
Of course, games are also the core area of NFT. MANA, which is based on the core of the virtual world of VR based on Ether, and Enjin, a gaming community established in 2009, are among the quality projects, and the existence of these projects has enabled more original gamers to join the crypto asset field.
Several issues remain with the NFT market, however. As the main currency of exchange and the network on which marketplaces are built is Ethereum, transaction fees are very high and it is commonplace to have to pay $50 to transfer the property title of an NFT from its creator to the buyer. On platforms such as Rarible or OpenSea, the current market leaders, not only does each transaction (creation of the NFT, bids, transfer of ownership) costs users large sums, they also amount to the terrible carbon footprint of the Ethereum network.
But if you just want to participate in the trading of NFT tokens, then none of this is a problem. For example, NFT tokens such as Flow, Sandbox, Mana, and Enjin can be traded on the MEXO exchange, where you can own your own NFT tokens without paying Gas fees and through simple trading operations.
If you want to distribute your own NFT work, There is hope, however, as Ethereum is planning to change its architecture by the beginning of 2022 to be much more eco-friendly. In the meantime, certain marketplaces have found technical solutions to these limitations.
The rise of the creator economy
The most exciting part of the NFT revolution is that artists who specialized in digital arts will finally be compensated for their work. Until now, it was very hard for artists to monetize their creations because of the very nature of digital art and its infinite reproducibility. Now, true fans of the artists will be able to directly support them with any middle-men or platform.
Mainstream artists seem to have caught on to this trend with artists such as Grammy-winning Kings of Leon releasing their latest album as an NFT. It’s also the case of Grimes, Lindsay Lohan, or even Soulja Boy who all released NFTs representing music, digital artworks, or even the ownership of a limited-edition vinyl.
NFTs are the hottest item in the recent crypto craze and as mainstream artists start to discover them they will only become more popular and coming soon to a digital market near you.