NFT or non-fungible tokens are the latest fad that shook the internet after Beeple’s digital art creation was sold for $69 million. Wondering what’s that? Well, read till the end to figure it out.
What is NFT?
Fungibility is defined as the ability of an item to be replaced by another identical unit. For instance, consider a $1 note in your pocket, it has the same value as the $1 note in someone else’s pocket. Non-fungible tokens are the exact opposite of that. They are cryptocurrency assets that are unique as individual units and cannot be replaced. This makes NFT useless as a currency but a golden opportunity for various other things. Like what? Digital art for that matter.
What is NFT based on?
These crypto-assets are based on the infamous blockchain technology. Blockchain technology has been known for decentralizing data and making bitcoins a reality. Data is stored in blocks and these blocks follow a timeline that can be viewed by anyone and everyone. This reduces the chances of data tampering or manipulation as any changes in the data can be verified by the multiple nodes of the blockchain, that have the same data timelines.
Now we come to the point where we link NFT with blockchain. NFT came into the picture when the security and copyrights issue of digital artwork surfaced. Arts like photographs, graphics, posters, photoshop creations, memes, etc. can be easily replicated. This reduces the value of the art that was originally created by the artist. However, when artists tokenize their artwork and create an NFT for it, they put an end to duplication of their work, as the NFT acts as a certification of the authenticity of the artwork produced by them. So, even if someone copies their work, the authenticity and ownership of their art remain intact due to NFTs.
What does it mean when people tokenize their artwork?
In 2018, Maecenas disrupted the art industry when they auctioned Andy Warhol’s “14 small electric chairs” using blockchain technology. They “tokenized” the artwork into multiple digital tokens and auctioned it. Due to this, Warhol’s painting which was originally valued at $1.7 million was revalued at $5.6 million. Before this, art auctions took place in real-world locations with access to fewer people. With blockchain-based auctions, that changed.
How does one tokenize artwork? Well, that’s where NFTs come in. By converting artwork into multiple digital tokens, one can fragment the ownership of artwork using blockchain, just like one purchases ownership of a company by purchasing its stocks.
NFT as a medium of making money
With the recent rise of NFTs, everyone is wondering what really creates the buzz around them. Of course, artists are making the money that they deserve which is why the art industry is experiencing a boost. But the question is, why are non-art enthusiasts getting attracted to NFTs? The answer is its tradability. NFT’s owned by someone can be further sold by an investor to another investor. Mark Cuban was in light recently when he invested in NFTs and sold his own NFT too. This means, just like cryptocurrency NFT became tokens that can be bought and sold. The market capitalization of NFT as of 2020 was $338 million and it is expected to rise further.
Hence, the advantages of NFTs are as follows:
- True value to the artist and art. Now the artists can get paid what they deserve for their artwork. They also get to maintain authenticity and prevent duplication of their creations with NFTs.
- Budding artists do not have to pay a heavy brokerage fee to galleries or brokers to get their artwork sold. Auctions using blockchain technology help them get more recognition and more bidders.
- Also, NFTs are turning out to be a lucrative investment option as they fragment the ownership of one artwork into tokens and these tokens become tradable instruments like bitcoins and ether.
NFT sale that caught eyes- Beeple
At the beginning of March 2021, Mike Winkelman, also known as Beeple sold his artwork for $70 million as an NFT. These digital tokens became popular when brands like the NBA and Nike got in on the trend and artists like Grimes sold art collections for nearly $6 million in under 20 minutes.
Beeple’s $69 million sale is the first NFT sale made by Christie’s — an auction house that came into existence in 1766. Before this auction, the archaic auction house considered the price of Beeple’s work not estimable. 33 individuals bid were placed on the piece and over 90% of them were new visitors to Christie’s site, which clearly shows the power of NFTs.
So, it is pretty evident that NFTs are going to change everything with their progress making it another revolution, and later NFTs would become people’s identity, like our social media accounts. What we might collect in our wallets would speak about us and our personalities.