Tokens of Art or What is NFT
Teaser
Do you still believe that blockchain is nothing but easy money, gambling, profiteering, speculative trading and anarchy invented by designing minds of crypto geeks? If you do, you are wrong. Apart from being a cultural and economical phonomenon, Blockchain learns art and the concept of uniqueness. How come? Read the article to find out.
What are NFTs?
Non-Fungible? No mushrooms?
Ehm, no, it’s not about pizza fungi, guys. Italian cuisine course is next door, sorry. Here we still talk blockchain. Non-Fungible tokens (NFTs) are not coins, but digital property titles. The term non-fungible means that each token is unique and cannot be replaced by an equivalent unlike for example physical (fiat) money, Bitcoin or Ether where every generated coin is equal to its peers in value and all other properties.
Non-Fungible assets vary in nature and value, despite being based on the same technology as other cryptocurrencies. Mainly, they are Ethereum-network tokens though some other blockchains now support NFTs; each token stores some additional information that defines the underlying artwork and makes it unique. An NFT can represent the right of property to a tangible or intangible object (a drawing, a book, a paper, a tune, an in-game asset, etc.) and they are widely used to represent the title to original copies of art objects.
Wait a minute, original copies? But digital art implies that you can create as many copies as you want and all will be 100% identical. Exactly! The concept is too egalitarian for art connoisseurs and collectors seeing art as an investment. There still must be the original copy with provable provenance, and blockchain with its immutable ledger comes in handy. So the meaning of NFTs is just that: the proof of a property right to an object of digital (mostly) art.
Key NFT features and benefits
Features
- Indivisibility. NFTs are not divided into smaller denominations like satoshi or litoshi
- Traceability of the original owner/creator
- Scarcity that drives up prices of most sought after assets
- Uniqueness as each token has a code that makes it different and distinguishes an NFT from a mere copy of a digital art object
Expected benefits
- Artists’ control over their works
- Stronger copyright protection
- Easy verification of provenance of a work of art
- Simplified selling/buying of works of art
How has it started?
NFTs started as a cooperation between artists and geeks in May 2014 when Anil Dash, Glitch CEO, and Kevin McCoy, a digital artist, united for a brainstorming session that yielded an idea to resolve the then burning issue of an avalanche of artwork exchanged, transferred, published without attribution or compensation whatsoever. Blockchain technology appeared to offer the best way out.
The first demo took place in NY’s New Museum of Contemporary Art and the nascent tech was dubbed monetized graphics. McCoy registered a video on Namecoin blockchain and Anil Dash bought it for $4 and allegedly still holds it.
NFTs have never been patented, although McCoy spent several subsequent years as the main evangelist of the concept.
While defined and tested back in 2014, it took off for real in 2020 and is still all the rage as this article is being written in 2021. Maybe it’s investors sniffing a great business opportunity, maybe it’s the love of pure art, hard to tell.
How do NFTs work?
Why NFTs?
As it is usually the case, the concept was designed with the noble purpose of helping people and making the world a better place. NFTs were supposed to help all sorts of artists and creators to have more control over their work and to sell it faster. Unfortunately, not everything went as planned so far, but the idea is still in place and many NFT enthusiasts support it.
Leaving the sophisticated tech aside, the operating principle of NFTs is basically a blockchain-based catalogue of artwork. It allowed distinguishing an original creation from its copies in the digital world where as we mentioned above copies are 100% similar to the original.
So, how do NFTs work?
Ethereum Proof of Work blockchain NFTs use the ERC-721 standard; it is a smart contract similar to ERC-20, but able to store additional data that defines the artwork. Semi-fungible ERC-1155 is designed to store a class of identical objects; under the same class objects are interchangeable, but not outside it.
Proof of Stake Polygon, Flow and Tezos blockchains also support NFTs.
Criticism of NFTs
At the present level of technology, you cannot store the entire artwork on a blockchain with ledger entries not having enough capacity for it. So, the accepted solution is to either include the web address of an object or its mathematical compression used as a reference.
This faulty approach is still being used now on top NFT platforms with people not buying an actual work of art but a link that can go dead any moment if the relevant website shuts down or owners miss the deadline to pay for the hosting. Is there any guarantee that a buyer will have access to their purchase within, say, a decade?
Another point of criticism is that at present the NFT market is very attractive to scammers, spammers and fraudsters. New tokens are minted without asking permission or even notifying the authors.
Another major cause of criticism of NFTs is the environmental damage, as each transaction when a work of art is recorded takes a lot of computing power and hence resources.
Citing Digiconomist, due to increased computational complexity, an NFT transaction on Ethereum consumes some 332kWh compared to the average of 70.32 kWh. And even an average transaction creates a carbon footprint of some 34 Kg of CO2. To create the same footprint, you would have to watch over 5,700 hours of YouTube videos or make some 76,000 bank card transactions.
Some argue that clean/green NFTs have already emerged, but so far it’s not enough to remedy the previous irresponsible behavior of the community. While green NFTs allegedly offer smaller margins to traders, Kevin McCoy does believe that eventually they will succeed.
That said, we don’t want to discourage you from trying mining or buying NFTs. The market learns from its mistakes and the concept itself definitely has its place in the future market.
Trading NFTs
How to sell NFTs?
To sell an NFT, you first have to create or mint it. But don’t get scared, as an artist or user you don’t need to be an Ethereum developer with expertise in ERC-721 contracts to do it. Just get any popular Ethereum Wallet (MetaMask is the safest option) and choose a reputable NFT marketplace. There you link your wallet to an account and then follow more or less standard procedure of adding your NFT to the marketplace which involves the token minting on the blockchain performed at the back-end. Once you are done, your NFT is available to buyers.
How to buy NFTs?
To buy an NFT, you also need to go to a marketplace, choose an object you like and pay it with crypto or fiat accepted by the platform. Then the ownership of the token is transferred to you and you are free to resell it or hold it.
Apart from marketplaces, there are dedicated NFT projects that are focused on selling NFTs related to a specific area (e.g. sports) or build a whole game universe where assets are represented by NFTs. You can also buy crypto on the website
NFT projects worthy or your attention
- Ethereum Name Services: apparently based on Ethereum blockchain, ENS is a domain-naming service. NFTs minted through ENS can be sold on other platforms like OpenSea.
- Lil Moon Rocket: based on Binance Chain is peculiar for its blind auction idea as you only learn what you buy after the transaction is completed.
- NBA Top Shots: based on Flow Blockchain and offers videos of iconic episodes of games at high prices.
- CodexProtocol: based on Ethereum blockchain, it allows registering and tracing works of art.
- Beeple: this booming initiative is created by Christie’s pet digital artist Mike Winkelmann (aka Beeple) who has seen his art bought for $69m worth of ETH.
- The one and only CryptoKitties never get old since they were launched. This is one of the pioneering NFT projects, basically, a blockchain equivalent of pokemon toys.
- If you like Kitties, try Axie Infinity, another digital game inspired by pokemons. Win by collecting a bigger army of Axies based on NFTs.
- Enjin is a leading NFT project in terms of market cap now and is focused on products for game developers and gamers. It also has its own coin to facilitate transactions; EHJ coin seems to have a great overall potential outside the project itself.
- Decentraland is an NFT-based game universe where you can buy relevant estates, names, collectibles and other in-game assets with the inside MANA coin.
This list is neither unique nor exhaustive. New NFT-based projects mushroom as the technology is all the rage now.
Top NFT Marketplaces
Unlike dedicated NFT projects, marketplaces don’t have any specific purpose, topic or concept. You just get registered there to buy and sell NFTs.
Marketplace
Description
Best beginner option: create, buy, and sell digital items to learn the ropes of crypto and of how to buy NFT art or sell it. The service offers a friendly UI and enables users to quickly mint any data as an Ethereum ERC-721 token.
A simple, free platform for collectors of digital art and collectibles. OpenSea offers transparent registration, zero moderation and convenient sorting options allowing to spot new creators.
Similar to the above, this platform also has its own RARI token that allows enthusiasts to participate in the platform development.
A less democratic community, as newcomers need invitations to start selling their art and they pay for “gas” to mint NFTs. But costs imply that you can find more serious art there like the gorgeous Nyan Cat.
Bear in mind that even if you buy NFTs at a reputable platform, it’s still your responsibility to check the party that’s selling NFTs beforehand. Frauds do occur and more democratic platforms are riskier as they skip moderation and offer their service for free to both artists and admirers.