New Fascinating Terrain. NFTs — What They Are and Why They’ll Change Everything
NFTs, or Non-Fungible Tokens, are the latest darling of the crypto-revolution. Yet what exactly are these new cryptographic tokens and how have they exploded onto the mainstream with such force that everyone from Tim Berners Lee to Grimes to William Shatner is getting in on the act?
Is it all just a flash in the sizzling crypto pan? Or are we witnessing the birth of a nascent asset class that promises to store value, open up new artistic collections, generate new, intimate connections between artists and fans of their work, provide income to creators and, of course, give rise to an all-new thriving art market in the digital landscape we all inhabit?
Judging by the length of our final question, we clearly think the latter. Yet let’s explain exactly what NFTs are and why they will change the future of content creation.
Fungible versus Non-Fungible
A fungible item is something that can be exchanged for something else of equivalent value. If (at time of writing!) we give you $46,000 and you give us 1 bitcoin then we’re both happy. The two items are of equivalent value and, crucially, can be traded back just as easily. Fungibility refers to items that store value and can be easily swapped for other items, the way you can swap your Euros for Great British Pounds or a weighting of gold — at market rate of course.
A non-fungible item refers to something that is unique and whose value is not easily delineated and is prone to change. Art is the classic example. Edvard Munch’s The Scream has a value, but that value is entirely based on what someone is willing to pay for it at any given moment or whatever the buyer demands for it.
Moreover, these unique items sometimes never get traded. The seller just wants to hold it at any price and it is therefore beyond a value estimation. You could turn up to the Louvre with the private key to the Satoshi Wallet and they still probably wouldn’t give you the Mona Lisa in exchange (fools).
An Explanation of Non-Fungible Tokens
NFTs then, as Non-Fungible Tokens, are blockchain-inscribed certificates of ownership that give their owners a permanent cryptographic token that states they are the rightful possessors of a piece of art. We all know the blockchain is secure and immutable, so this “piece of paper” can never be lost, nor the art destroyed. It’s a permanent artifact that all history can see.
To do this, a creator can “mint” an NFT on a blockchain (Ethereum is the most commonly used blockchain, but there are others) and then put it out to tender and have it bidded upon the same way an artist sends their work to an auction house or hosts it in a gallery to let people view it and purchase it. A buyer who wants the NFT can then purchase it with a cryptocurrency and become the proud owner of that artist’s work.
However, what they don’t do — and this is where it gets confusing for some — is prohibit others from downloading the digital media and using it or “owning” it themselves. They are not copyright-enforceable (not yet, anyway, but it’s doubtful they’ll become so either) and they do not give the owner full rights to any piece of digital media they own an NFT for.
Think of it like the difference between a print of The Starry Night, by Van Gogh, and actually owning the original. Every art student’s dorm room or fancy hotel has one of them, but only one person owns the original. The person who owns it can look at it and go “yes, I own that.” That’s worth a lot to humans.
The Possible Value and Use-Cases of NFTs
That is where the principal value of NFTs comes from. Yet it’s not restricted merely to bragging rights. NFTs can grant certain rights to their holders. Sometimes they have “sell-on clauses”, similar to the way a soccer player might have in their transfer deal. If a club re-sells a player they buy, some of that often goes to the team who first sold him to them. This means that perpetual income can be created from being the first to own an NFT. NFTs can also give their owner the rights to an image to use as their profile picture, or deployed in public spaces.
Primarily, holders of NFTs can display their collection in a digital gallery that they can then flaunt to other denizens of cyberspace. They can also be one-of-a-kind tickets to one-time shows or content, something that Ashton Kutcher and Mila Kunis enacted to great effect with their animated series Stoner Cats, which could only be watched by holders of the NFTs they minted as “tickets”. The tokens are yours for life, and let you into the party too. Each stoner cat sold for 0.35 ETH a pop, and have gone on to command even higher prices on the secondary marketplace. Sports teams from multiple disciplines have already begun toying with the idea of minting tickets as NFTs, or providing other collectibles to auction off to their fanbase — with all the possibilities of secondary markets that entails.
The Rise of NFT Collections
Another way that NFTs have exploded in popularity is the rise of collections. CryptoKitties was an early trailblazer to that effect. The salivating hordes went wild for their opportunity to collect the cats, each represented by their own ERC-20 token. Cryptopunks has taken this to the next level, with some of the punks in the collection worth $100,000s of dollars apiece.
Humans have always wanted to catch them all, and NFTs give a chance for people to carefully cultivate their collections, adding and enriching to it over time and then showing it off to other people in the community. Yes, you can download those pixels, but you don’t own them. You can’t see it in the digital gallery attached to my wallet.
As adversarial as this sounds, it’s actually the opposite. Just like trading Pokemon cards on the school playground was a fascinating and bonding experience all those years ago, so NFT collections promise to gather communities together to show off — and trade — their wares.
Empowering Artists
The beneficiaries of all this, then, are creators. By that, we don’t mean merely the extravagant sums paid for Beeple’s First 5000 days, or Jack Dorsey’s The First Tweet. Yes, some artists at the top are going to make a killing, ’twas ever thus. Certainly, some of the early-adopting celebrities cashing in can feel a little gauche. However, the true revolution of NFTs is the fact that anyone can mint them and anyone can sell them.
If you’re an artist and you want to sell ownership of your work to someone who wants to support you, then you can do that. There is no gatekeeper, no gallery, no “art world” who has to validate your creation before you can cash in on it. The democratization of art has begun thanks to the possibilities of NFTs minted on the blockchain. You can create your art, mint it on the blockchain, and push it out into the market. At least, you can with NFT Tech’s new platform.
Challenges the NFT Market Faces
That’s because the world of NFTs is not without its current issues. Minting costs for artists are particularly brutal. Depending on the Ethereum traffic and current fees, the costs to mint an NFT can be more than you could ever hope to get. Not all NFTs are — or are supposed to be — multi-million dollar items. Most are meant to be cheap and available to the everyman collector. Also, trading NFTs for NFTs directly is nearly impossible right now.
It can somewhat suffocate the market when there isn’t a fixed, fair, agreed upon price for the items being traded. Moreover, if you mint your NFT on the Ethereum blockchain, for example, it can be devilishly difficult or even impossible to migrate that NFT to another chain — which can hamper its value if your buyer has been amassing their collection on the Binance Smart Chain. Finally, NFTs have a value — that much is clear — but how do you unlock that value? It should be possible to take loans against the value of your collection the same way someone would happily let you use the original of Gustav Klimpt’s The Kiss as collateral to access hard currency.
NFT Tech’s New Engine to power the Revolution
NFT Tech is solving all of these issues. Our liquidity matching engine uses oracles to derive a fair market price for NFTs and allows them to be traded as fluently as you would a standard cryptocurrency on an exchange. Artists who want to mint work on our platform can do so for free, and list it for free on our auction house. We know that artists are the lifeblood of the NFT revolution and our tech is designed to remove all barriers to them publishing their creations on the blockchain and making a living from the wonderful work they do.
NFT Tech supports cross-chain NFT migration so if you mint an NFT on our own native NFT Tech Super Chain, you can still comfortably move it to other blockchains if that’s where your buyer wants it to reside. Finally, NFT Tech allows you to take loans and stake your NFT or NFTs as collateral, so your collection is more than just a pretty face.
NFT Tech is the all-in-one marketplace for creators, traders and collectors to contribute to the burgeoning NFT economy and let their art and their collections — and their money — rise above the rest.
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