Digital Art: What’s an NFT? — Everything you need to know.

Source: Oshomah’s — Forgotten Culture NFT, Image courtesy of the artist and Rarible.

For a fact, I personally became inquisitive about the NFT craze when I saw the huge amount of dollars just basically flying around, from Grimes getting millions of dollars for NFT, to Beeple’s ridiculous grand sale of $69 million, and yeah the money-centric part of my brain immediately reminded me of how I’d lost out on Bitcoin back in 2015 when 1 BTC was around $200 — $300.

So the next step was to make very heterogeneous research and I think I have cracked the code and now have a broad understanding of how it works.

Fun fact: I got the image above from a twitter post few hours before publishing this article by a Nigerian Artist Oshomah who sold his art within 24 hours of listing on the Rarible platform.

Okay, I know you’re either already excited or curious to learn more, so let’s start with the basics as usual:

What Are NFTs?

“NFTs are just a bunch of fictional brouhaha coined by some guy somewhere who just wants to make money off everyone”…

Okay, I promise that was a joke :)

NFTs, or non-fungible tokens, are a type of cryptocurrency created on a smart contract platform such as Ethereum. They are unique digital objects that are really cool to own or even profitable to trade. So think of them as digital collectible cards. They typically started out as something only enthusiasts care about, but if you get a rare one, it could be worth a lot one day.

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…here I am using buzzwords while trying to explain in simplest terms, let’s get to understand the Fungibility thingy:

What are Fungible vs. non-fungible tokens?

Fungibility refers to an asset’s ability to be exchanged with a similar asset without sacrificing its value, meaning all the currency’s units (i.e., tokens) are the same and equal, like the dollar or a vag of salt.

Non-fungible tokens are the opposite — every cryptocurrency unit, or token, is unique and cannot be replicated.

Let’s understand this with an example.

So let's assume you take a loan of $200 from a friend. And you definitely have to pay back, now the question is do you really need to pay him back with the exact same note he gave to you?

No arguments it’s a huge NO.

So we can all agree you can pay back with another $200 note. In fact, you can decide to break it down to 2 100-dollar notes or even 50 50-dollar notes. It will be perfectly fine because dollars (or paper currencies in general) are, for the most part, fungible.

Now, let’s suppose you borrow your friend’s model X tesla. Do you think it would be normal for you to return some other Toyota to him? Okay, what if you destroy the car and return the tires, engine, headlights, etc.? Well in my opinion “You about to be heavily fined by the court”.

So, back to context, what did you notice happened here?

The tesla counts as a collectible, which is why it is non-fungible.

So to come to a conclusion on Fungible vs. non-fungible, this is basically the fundamental difference between a fungible asset and a non-fungible asset.

So while we’re clear that “non-fungible” property can be used for many things. We just have to admit that the current NFT craze is mostly occupied by digital art and collectibles. And this has the history of art collections embedded in them because people just tend to figure out that a unique, digital object can be interesting, super cool, and even have a significant monetary value. It’s why the space has recently blossomed, encompassing thousands of projects involving artworks, gaming, and sports.

How do NFTs work?

Non-fungible tokens can be created on contract-enabled blockchains with non-fungible token tools and support. Ethereum was the first to be widely used, NEO, EOS, etc now also have NFT standards. So most NFTs are part of the Ethereum blockchain which is immutable, meaning it cannot be altered. No one can undo your ownership of an NFT or re-create that exact same one. They’re also “permissionless,” so anyone can create, buy, or sell an NFT without asking for permission... Although It is important to note that other blockchains can implement their own versions of NFTs.

So see NFTs as individual tokens with extra information stored in them. That extra information is really the important part because it allows them to take the form of art, music, video (and so on), in the form of JPGs, MP3s, videos, GIFs, and more. Because they hold value, they can be bought and sold just like other types of art — and, like with physical art, the value is largely set by the market and by demand.

That’s not to say there’s only one digital version of an NFT art available on the marketplace, though. In much the same way as art prints of an original are made, used, bought, and sold, copies of an NFT are still valid parts of the blockchain — but they will not hold the same value as the original.

And don’t go thinking you’ve hacked the system by right-clicking and saving the image of an NFT, either. That won’t make you a millionaire because your downloaded file won’t hold the information that makes it part of the Ethereum blockchain. Make sense?

Okay, so just in case this might be getting all complicated again, I would just quickly explain:

How NFT is different from Bitcoin?

Non-fungible tokens differ from popular cryptocurrencies such as Bitcoin (BTC), because, unlike other cryptocurrencies, you cannot exchange NFTs but only buy and sell it on special marketplaces.

NFTs have become hugely popular with crypto users and companies alike because of the way they revolutionized the gaming and collectibles space. Since November 2017, there has been a total of $174 million spent on NFTs.

Are NFTs really important?

Thanks to the advent of blockchain technology, gamers and collectors can become the immutable owners of in-game items and other unique assets as well as make money from them. In some cases, players have the ability to create and monetize structures like casinos and theme parks in virtual worlds, such as The Sandbox and Decentraland. They can also sell individual digitals items they accrue during gameplay such as costumes, avatars, and in-game currency on a secondary market.

For artists, being able to sell artwork in digital form directly to a global audience of buyers without using an auction house or gallery allows them to keep a significantly greater portion of the profits they make from sales. Royalties can also be programmed into digital artwork so that the creator receives a percentage of sale profits each time their artwork is sold to a new owner.

NFTs & Climate Change

Source: Alexis Rockman’s “Central Park,” from 1997–98. Image courtesy of the artist.

I know this might sound funny or ridiculous but a Twitter user replied to Dorsey’s Tweet about the NFT pointing out a complaint that minting NFTs causes pollution. Although technically this is quite inaccurate, and it is likely in reference to the large amount of energy required, with some estimating 76-kilowatt-hours for each NFT while others calculate as high as 340-kilowatt-hours used. Even at the lower power estimate, this would be enough to fully charge a Tesla Model 3 with the long-range option, which gives a range of 353-miles. It is a significant amount of power used and most power generation is still reliant on fossil fuels, hence creating pollution.

The blockchain industry is aware of this issue and work is being done to reduce the energy consumed for NFTs and other transactions, so the conflict with environmental efforts may be greatly reduced in the future.

Okay, enough of all the tech talks, let's get to learn how we’ll benefit from this or rather make money too :)

Are NFTs a good investment?

Beeple, Everydays — The First 5000 Days NFT, 21,069 pixels x 21,069 pixels (316,939,910 bytes). Image courtesy of the artist and Christie’s.

One thing we need to differentiate here are the two terms “Buying” and “Investing” because it’s a totally different thing to buy an NFT because you like it, or maybe even to earn (or lose) a few quick bucks is one thing. But investing in NFTs is another. Again, it’s a growing space. Even a Van Gogh painting or a rare Babe Ruth baseball card required some passage of time before becoming very valuable.

Given the digital nature of NFTs, it’s hard to compare them to prized physical artworks, such as statues and paintings. On the other hand, we live in a world where one Bitcoin is worth more than $50,000, so things from the digital realm can certainly be very valuable and even sustain that value over longer periods of time.

In any case, if you plan to invest in NFTs, you’ll need to dive deep into this complex world because each NFT market is slightly different. It’s also pricey — trading on Ethereum can be quite costly as the network’s recent congestion is causing fees to rise. Finally, you’ll need to think strategically and follow the often rapidly changing cryptocurrency trends.

In short, it’s possible to earn money by investing in NFTs, but you’ll have to do your homework.

How to bid? Any internet user can go to a dedicated platform, like Rarible or OpenSea, to upload the file which will become the NFT. Fees are usually less than $30 per file, paid in cryptocurrency. Once the NFT is on the platform, the creator can sell it. The creator also has the option of setting a percentage that he or she will receive from all future sales of the file.

You’ve got this far, so you might now be wondering: can just anyone get involved?

Technically, yes, everyone can sell an NFT. Anyone can create work, turn it into an NFT on the Blockchain (in a process called ‘minting’), and put it up for sale on a marketplace of choice. You can even attach a commission to the file, which will pay you every time someone buys the piece — including resales. Much like when buying NFTs, you need to have a wallet set up, and it needs to be stuffed full of cryptocurrency. And this requirement for money upfront is where the complications lie.

The hidden fees can be prohibitively astronomical, with sites charging a ‘gas’ fee for every sale (the price for the energy it takes to complete the transaction), alongside a fee for selling and buying. You also need to take in account conversion fees and fluctuations in price depending on the time of day. All this means that the fees can often add up to a lot more than the price you get for selling the NFT. But different sites have different fees attached, and some are better than others so it’s worth doing your research.

Whether or not NFTs are here to stay, they have certainly become a new plaything for the uber-rich and there is real money to be made if you can make it happen. NFTs gives new meaning to digital art, and the prices seen at sale indicate it is a real part of the future of art, and collectibles in general.

Where can I buy NFT tokens?

NFTs can be bought on a variety of platforms, and which you choose will depend on what it is you want to buy (for example, if you want to buy baseball cards you’re best heading to a site like digitaltradingcards, but other marketplaces sell more generalized pieces). You’ll need a wallet specific to the platform you’re buying on and you’ll need to fill that wallet with cryptocurrency. As the sale of Beeple’s Everyday — The first 5000 days at Christie's (above) proved, some pieces are beginning to hit more mainstream auction houses, too, so these also are worth watching out for. In case you missed it, that Beeple piece was the one that went for $69.3 million.

Here is a list of sites that sell NFTs:

NFTs are also making waves as in-game purchases across different video games (much to the, erm, the delight of parents everywhere). These assets can be bought and sold by players, and include playable assets like unique swords, skins, or avatars.

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Unconsciously always drawn to disruptive innovations & keen on writing new points of view or exceptionally enhancing previous ones.