The Wild And Practical World Of NFTs
Over the last couple of decades, there has been an ongoing conversation about digitalisation. Whilst the formation of the internet gave rise to many phenomena we had never dreamed about before, there were also many previously established and long-standing industries that morphed into the online sphere.
The music industry, for instance, has been immensely altered by the introduction of streaming services and digital downloads which have taken the place of CDs, tapes and records. Fiat currency, too, is now rivalled by the creation of cryptocurrency, which has been steadily growing since 2009.
As we move into the world of Web3, we’re beginning to see a number of traditional methods change and develop into digital means of production and distribution. Take NFTs, for instance. Technically, NFTs are just another iteration of digital assets; things that can be bought, traded and stored wholly within the digital realm. But, along with this, NFTs are a part of the arts and culture scene, which is undergoing a rapid evolution as they gain significance and prominence around the world.
Today, more and more artists are favouring this unique digital means of output over traditional, physical art and, on top of this, culturally and historically valued artworks are inspiring online tokens that exist solely on the blockchain.
But what does this mean for the art of the future, and is the selling of historic artworks really a force for good when it comes to preserving our heritage? Well, to answer these questions, it is first important to understand the beginnings of the blockchain and how NFTs first came to light.
The Blockchain Broken Down
To give you a brief rehash, the blockchain is a digitalised, public ledger which allows people to trade and sell without the need for a centralised authority. In this way, instead of a centralised bank processing payments and acting as a middleman, payments are made using smart contracts, allowing parties to transact with each other without the need for any government or organised regulation.
When thinking about how NFTs come into this, it is useful to narrow down the blockchain to a specific network. In this instance we will refer to Ethereum, seeing as it’s the largest platform which allows for NFTs. Ordinarily, on Ethereum’s blockchain, payment methods come in the form of Ether (ETH) which is a fungible, digital token. Users can trade Ether, as well as any other token, but they can only trade it for the amount it is worth at the time (cryptocurrency is an extremely volatile market, with ebbs and flows taking place daily).
Although ETH has long been the tried and tested token of Ethereum, the last few years has seen the rise of a new form of payment. It comes in the form of NFTs, and so far it has been transforming and revolutionising the world of crypto and art as we know it.
NFTs Broken Down
Put simply, NFTs are a new form of digital asset. Standing for “non-fungible token”, each NFT is original and unique. It predominantly takes the form of digitalised art, but the worlds of fashion, jewellery, and music are also embracing NFTs as a new mode of expression.
To give a little more information, both fiat and crypto currency are fungible tokens which are easily swapped and transacted through centralised banks or the cryptocurrency blockchain. If one were to buy and trade Bitcoin, for instance, then they would be swapping their coin for another coin of the same value and identity as the token before it. With an NFT, however, this is not possible.
An NFT is created specifically to be unique and entirely irreplaceable. For instance, if someone were to own the Mona Lisa, then they would be in ownership of something which could not be traded or swapped for anything remotely similar. If someone were to own ETH, they would be able to swap it out for another token and be left with exactly the same thing. This is the core principle of NFTs. They are created, signed and then placed into the blockchain as an isolated, individual token.
The Benefits Of NFTs
Although they are not segregated into a niche corner (an NFT can be virtually anything), NFTs most commonly appear as art pieces, images, drawings or videos. As mentioned previously, they have drastically changed the world of art in a way that either has people scratching their heads or getting filled with excitement at the prospect of its future.
For young artists, especially, it is hard to say NFTs are anything less than a positive. The world of art, traditionally, has been a difficult sector to form a living out of, especially for indie artists trying to break onto an established scene. In the same way that digital music streaming has created an avenue for independent labels, so too has the NFT scene formed a doorway to younger artists who are in need of a more solid income which is dictated by them.
According to the rules of NFTs, a single non-fungible token can be created and sold for however much the buyer and seller deems it is worth. This has created an immense opportunity, as more and more artists are creating pieces digitally and earning their income through placing it on the blockchain and allowing users to deem its value. Not only this, but it has also created a level playing field for new, under-represented voices in the art world, as artists have full control of the message, the value, and how the art is sold.
The Government Intervention
Although the empowering and revolutionary nature of NFTs are front and centre of the discussion today, there is always another side of the scale that must be taken into account.
As of today, many NFTs are either an entirely original piece of art or a digitalisation of culturally significant works. This, however, has created some friction amongst those who are trying to protect their cultural heritage. In Italy, for example, the government has currently banned museums from selling NFTs.
This is due to the recent $240,000 sale of the Michaelangelo work “Doni Tondo”, which was sold by the Uffizi Gallery last year. In this instance, the gallery (who technically own the digital rights to the art piece) received only $70,000 from the sale, which is less than one-third of the overall achieved price. In order to protect the rights of these art pieces and the heritage sites themselves, the ministry has subsequently requested all cultural institutions to put a stop to any agreements with NFT providers. In the meantime, they will attempt to work out a way to regulate any digitised artwork contracts which have been put in place.
The Teething Problems
As well as this, the world of NFTs is still in its early stages, with an endless vista of opportunities which has not yet been trodden on. Due to this fact, the NFT sector of the cryptocurrency market is not very liquid, meaning the selling price of NFTs can be especially volatile, particularly in times when the market as a whole is going through a cold patch. Add in the fact that the value of NFTs are determined by price appreciation, and you’ve got a volatile market where the tokens you own don’t exactly have a value that you can count on.
Although this is an issue, it is important to remember that a volatile playing field is inevitable when an online sector enters its teething phase. The more people understand and utilise NFTs, of course, the more suitable the contracts and the market itself will be. Just as it was for cryptocurrency tokens, NFTs are a new breed of digital asset, meaning it will take a bit of time for any notches to be ironed out and the market to reach its true potential.
The Future Of NFTs
Taking everything into account, however, it is fair to say that the future of NFTs is still looking bright. With sectors such as sport and fashion industries (there has been a recent rise in digital clothes being sold as avatars for social media and the metaverse) joining in with the fun, the sector has been growing exponentially and has even failed to quieten down during crypto’s current bear market.
Not only do NFTs offer a wide range of creative opportunities for artists, but they are also a practical and worthwhile pursuit for anyone looking to build a digital collection and add some weight to their digital portfolio. This is why we can expect to see more industries and individuals taking advantage of the revolution in the coming years, which will only help to build NFTs in the right direction when it comes to the road to Web3 and a digitalised future which everyone can embrace.
Do You Need Cryptocurrency To Buy Or Sell NFTs?
NFTs are a sector of the internet that is entirely based around the blockchain, so you will need crypto to buy NFTs. How many you will need, however, is entirely dependent on the NFT you’re interested in. The price of NFTs is decided by the buyer and seller coming to an agreement on its prospective value.
Can You Only Create And Sell NFTs on Ethereum?
Most NFTs are held on the Ethereum blockchain, but there are other blockchains which can support them, such as Binance Smart Chain, Tezos, Solana and Flow.
Will Ethereum’s Merge Interrupt NFTs Growth?
Ethereum is supposed to merge to POS in the near future, meaning all transactions on the blockchain are validated by specific users who have input a deposit. It is due to be a far more sustainable and stable way to validate transactions and create new blocks, so (unless the system fails, which is unlikely) there is nothing to suggest that the merge will interfere with how we create or sell NFTs.
How Can You Tell If An NFT Is Authentic?
One of the best ways to tell if an NFT is authentic is by using Google’s reverse-check tool, which will allow you to find out who the original creators are. You can also read the reviews of the seller and look into previous dealings with buyers, as this will give a good indication of their track record and legitimacy in the sale.
Can I Create And Sell An NFT Myself?
Of course. Anyone can create an NFT, although the steps from creating it to selling it can get a bit complicated. Here’s a little breakdown if it’s something you’re interested in:
Pick Your NFT
Of course, before you get into the whole selling business, you first need to create an NFT. This can be done by determining the digital asset you want to trade, whether it be a painting, picture, meme, GIF, or just about anything you can think of.
Set Yourself Up On The Blockchain
Next, you should choose the blockchain (most commonly Ethereum) to begin the minting process. It is important to remember that you need to own the rights to the asset before you begin, however. Minting an NFT that doesn’t belong to you can get you into a lot of legal trouble.
Set Up A Digital Wallet
Once again, you need cryptocurrency to fund your initial investment, so if you haven’t already done so, you need to set up a digital wallet.
Choose A Marketplace
The next step is to find and pick out an appropriate marketplace. Make sure to do a lot of research so that you get somewhere which is a good fit for your specific NFT.
Upload Your NFT
The marketplace that you choose should have a step-by-step manual on how to set up your NFT, so read it thoroughly before uploading.
Choose Your Selling Process
Last but certainly not least, you need to choose a process by which you can sell your NFT. Ordinarily, users of the Ethereum blockchain either set up a timed auction or start an unlimited auction, which means you have the control to end the auction when the NFT has hit a price which you are happy with.