NFT's

A digital art piece created by Beeple, tweaked using cryptocurrency technology to make it one-of-a-kind, sold at an auction recently for nearly $70 million. Twitter founder Jack Dorsey’s first-ever tweet is being sold as an NFT and currently has bids hitting $2.5m.

These transactions are making headlines and have captured the attention of artists and collectors alike. These artefacts are known as Non fungible tokens or NFT’s, they are essentially assets that can be sold over the internet and have no tangible form and cannot be replaced by anything else, therefore “non fungible”. In economics, a fungible token is an asset that can be exchanged on a one-for-one basis. Think of rupees or bitcoins - each one has the exact same value and can be traded freely. A non-fungible object, by contrast, has its own distinct value, like an old house or a classic car.

How do NFT’s work?

NFTs are part of the Ethereum blockchain so they are individual tokens with extra information stored in them. That extra information is the important part, which allows them to take the form of art, music, video, JPGS, MP3s, 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.

NFT’s are designed to give you something that cannot be copied- ownership of the work.

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.

Sure, anyone can download a copy of Beeple's art from his social media feed, print it out, and hang it on the wall. Just like you can take a photo of the Mona Lisa in the Louvre or buy a print from the museum gift shop. But that doesn't mean you own those original artworks because your downloaded file won't hold the information that makes it part of the Ethereum blockchain.

NFTs can be bought on a variety of platforms. However, you’ll need a wallet specific to the platform you're buying on and you'll need to fill that wallet with cryptocurrency.

Because of the high demand of many types of NFT, they are often released as 'drops' (much like in events, when batches of tickets are often released at different times). This means a frenzied rush of eager buyers when the drop starts, so you'll need to be registered and have your wallet topped up ahead of time.

The Internet has made it increasingly challenging for artists, especially digital, to make a living from their art, and NFTs are a possible answer to that problem.

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.

One purpose of NFTs is that they can be used to trace an object's digital provenance, allowing a select few to prove ownership. In the broader picture, it's a way to create scarcity - albeit artificial - so that you can sell something for higher prices thanks to its scarcity.

One day, NFT’s could revolutionise the way we take loans, create and execute agreements to exchange money, property, or any asset through smart contracts.

There is one drawback however, NFTs use a monster amount of energy in their creation. So much so that many protesters are worried about the very real impact the craze could have on the environment. According to CryptoArt.wtf, one piece called 'Coronavirus' consumed an incredible 192 kWh in its creation. That's equivalent to one European Union resident's entire energy consumption for two weeks. Even a 'simple' GIF can equate to the same consumption. Artists however can make sure this doesn’t happen. Beeple has already promised that from now on all his drops are going to be carbon negative.

As the world moves toward a digital economy, NFT’s are undoubtedly going to play a huge part in that, hopefully in a sustainable and environment friendly manner.