NFT (non-fungible token) is a blockchain solution (blockchain is the centralized database that stores assets and transactions of virtual money – cryptocurrencies), through which you can confirm the originality and ownership of a digital file. Tokens of this type represent a digital or physical asset, which can be a piece of art, music, or even real estate.
NFT is unique and non-exchangeable, meaning that it cannot be exchanged for another (e.g., a banknote is convertible because it can be exchanged for another banknote), and also in most cases it cannot be shared. It is created by writing a file to the platform, which in turn creates a unique NFT token and stores it in a global folder. This ensures that it can neither be counterfeited nor a copy created. Thus, unlike cryptocurrencies where all coins will be created equally, non-exchangeable tokens are unique.
Most commonly, NFTs are created on the Ethereum blockchain. Unconvertible tokens can be stored on a wallet like other cryptocurrencies and can be traded on open trading platforms. The value of each NFT is unique.
The history of this type of token dates back to 2015, but recently it has attracted more and more interest. Perhaps due to the spectacular amounts for which NFT works are sold.
The first solutions that used NFT were games. One of the most famous games is CryptoKitties, which was created in 2017, involves creating and trading digital cats that can be bought with cryptocurrencies. Each cat had unique characteristics (age, breed, color). Once purchased, the cat is owned by the investor and its value on the market can increase or decrease. Virtual cats are capable of reproducing. According to Techcrunch: in 2017, about 15% of all trading done in the Ethereum cryptocurrency was actually CryptoKitties.
However, it is increasingly common to see the use of this technology to sell digital art.
In February 2021, the famous gif Nyan Cat (you can see what it looks like here) turned 10 years old and on this occasion, its creator – Chris Torres, decided to sell the art through the Foundation cryptocurrency platform. The gif was sold for $600,000. The buyer with the nickname – oxy7eb2…3f6b – remained anonymous. Despite the sale, the existing gif will still be available for online distribution. The sale of cryptocurrency art allows the buyer to act as a collector – he/she is recognized as the owner of a digital artwork based on a popular gif.
In March 2021, Jack Dorsey, co-founder of Twitter, put his first tweet up for sale for $2.5 million. What actually gets bought is a digital certificate of the tweet, unique because it was signed and verified by the creator along with the metadata of the original tweet. It is believed that in the future, owning the first tweet will be comparable to owning the first edition of a rare book, so its value may even increase. The sale was made through the Valuables platform.
Digital artist Mike Winklemann – Beeple – has sold an NFT work he created – titled Everydays – The First 5000 Days (you can see what it looks like here) – for $69 million at stock house Christie’s. The sale ranks him among the top three most valuable living artists, according to the auction house. The artwork included a jpeg file and Ethereum blockchain code, but did not include the art copyright.
The Museum of Crypto Art (MoCA), created by cryptocurrency collectors and investors Pablo Rodriguez – Fraile and Colborn Bell, was also recently launched. MoCA is a virtual art gallery, launched in April 2020 as part of Somnium Space, a virtual space built on the Ethereum blockchain. Upon entering the MoCA website, we are taken to a virtual museum with our own avatar and the ability to chat with other users. We move around the museum using the mouse and we can get acquainted with the works of art exhibited there. You can visit museum here.
Opponents of NFTs point out that there are some drawbacks to cryptocurrency art – especially when it comes to power consumption. Like bitcoin, NFTs are powered by computer processes designed to validate data. Ethereum, on which most such cryptocurrency platforms are based, is much more efficient than bitcoin. Ethereum is still in the process of reducing power consumption so it may become a more popular solution to use for NFT.
Legally, NFT does not transfer copyright or trademark to the holder. However, this is not a bad thing because similarly, when we buy a physical image we do not get the copyright to it. It is the same with tokens. Purchasers of this type of artwork only receive the “title” of owning the digital artwork, to a very limited extent, as they are purchasing an infinitely reproducible image file. Such artworks come with a license that gives the purchaser the ability to display the artwork for their personal use (e.g., in a game world or virtual museum). Artists retain the intellectual rights to the created works.
Thanks to this form of art, the creators of memes, gifs, or other online works can directly profit from their work, which would otherwise spread freely on the Web. Through this solution, creators can make money on their works in a safe way and protect their originality.
Author: Agata Konieczna
