The world of art is at the center of attention yet again. But this time, it’s not about a painting of a white stripe on a blue canvas that sold for $43.8 million. A new breakthrough in technology called NFTs, or non-fungible tokens, is disrupting the digital art industry and turning the collectors’ dream into a race for virtual ownership. In this all-digital world, the infamous Nyan Cat meme sold for just a shade under $600,000, a column from the New York Times raked in $560,000, and a digital render collage by Beele made history by selling for a whopping $69 million at a virtual Christie’s auction.
Now everyone’s talking about NFTs, and digital artists are getting in on the hype in hopes of making the headlines with a six-figure win.
Cryptocurrency Strikes Again
Recently, the news is all over cryptocurrency––Bitcoin this, Bitcoin that, Bitcoin made a new all-time high––and it’s no doubt that sky-high coin prices have a lot to do with the rise of NFTs. Cryptocurrency and NFTs are inherently connected through blockchain technology, which uses cryptography to protect data stored in a digital ledger of transactions.
Whenever a set amount of data is processed on the blockchain, the network creates new blocks locked with a special code called a cryptographic hash. While new blocks can be created, old blocks can’t be edited as they are immutable, so each token’s movement can be traced from minting to all the times it was used in transactions.
Some blockchains are unique in that they offer a platform where anyone can create tokens. Ethereum is one of the biggest players in this niche as its network has a token standard for almost any kind of digital asset. For instance, new cryptocurrencies minted on its platform will follow the ERC-20 standard. Meanwhile, most NFTs on the market are ERC-721 or ERC-1155 tokens created in the Ethereum blockchain.
The Value of Non-Fungibility
NFTs, or non-fungible tokens, are tokens that act more like a certificate of ownership than a currency. Bitcoin (BTC), for example, is a fungible token, which means that there can be millions of Bitcoins in existence. All of those coins are interchangeable with each other––one doesn’t hold a different value from another. So it’s entirely possible for person A and person B to both own a BTC!
In contrast, no two of the same NFT can exist at the same time. If you were to create a digital artwork titled “Butterfly” and turn it into an NFT, then you’re essentially the sole owner of that piece, even if others have the same image saved on their computers. Think of it this way: millions of people use the Nyan Cat meme daily, but only the person who owns the NFT has legal ownership over it––and that can go as far as licensing and more.
The secret to this ownership lies in the existence of public and private keys. When you create an NFT on a blockchain like Ethereum, you’ll receive a private key, which essentially decrypts the layer of cryptographic security hiding the digital asset. The private key is extremely important in proving ownership––it’s the only way to access the asset and is what collectors vie for in the market of one-of-a-kind virtual goods.
On the other hand, a public key can be generated from the private key. It’s a way of sharing the digital asset between the seller and buyer and, at times, used to prove that you own the asset without having to release the private keys. This exchange gives NFTs a sense of exclusivity and value because there can be no two of the same keys in existence.
However, in terms of monetary value, NFTs live in a gray area. They’re speculative assets without a value backed by consensus. Unlike Bitcoin, for example, where economics may agree that it’s worth $60,000, there’s no way to put a price tag that everyone agrees with on an NFT. Rather, virtual assets are worth how much a buyer is willing to pay for them. The only reason Beeple’s work sold for $69 million was that someone was willing to pay for it––and the same goes for other NFTs on the market.
Awakening A Years-Long Obsession With Virtual Goods
From making $66,000 from his piece called ‘Crossroads’ in early 2020 (it has now been resold for $6.6 million) to raking in $3.5 million with another sale in December, Mike Winkelmann––better known as Beeple––has been making headlines, even before his $69 million jackpot. This success story may have drawn anyone new to NFTs and more, as the new age of virtual asset collection has empowered struggling artists from all over the globe. And now everyone wants in on this trend.
However, before Beeple, there was CryptoKitties, which drove the first explosive NFT market in 2017. People spent millions on one-of-a-kind cat PNGs, driving the Ethereum blockchain beyond its limits and causing processing fees (called gas) to soar. This pattern makes it clear that there’s a real interest in virtual goods; people are now spending their money on more than just tangible assets. Real-world ownership is limited: artworks are easy to destroy, and there isn’t enough space to fuel worldwide materialism. In the digital sphere, ownership is limitless, and that’s why people are excited over NFTs.
Today’s NFT hype is reminiscent of CryptoKitties’ peak, bringing in discourse over both excitement and speculation about this reawakened trend.
Easily-to-Access NFT Marketplaces
Creating and selling NFTs is easier than it sounds. You don’t need an exclusive membership to turn your art, music, video game assets––anything digital––into an NFT and put them on marketplace listings. While some platforms, like SuperRare, are more curated and difficult to get into, others require no more than a few minutes of your time to enter!
OpenSea and Rarible are beginner-favorites for buying and selling digital art and gifs as they don’t require heavy authentication. However, because of the massive influx of new NFTs being put up on these sites, you’ll need to gather a market through social media or pray to the front-page algorithm before getting a chance at making a sale. Ether fuels these platforms, so note that you’ll have to pay high gas prices based on how busy the Ethereum blockchain is.
On the video game front, DIGITALAX is leading the virtual fashion marketplace with fashion-forward game mods. Transactions are done through $MONA, a utility coin that backs ESPA’s complete game industry support integration––from developers to designers and Esport players.
More and more designers and art marketplaces are opening up to the world of NFTs. While this explosion of interest hasn’t been without controversy, only time will tell how far it can go in today’s digitally-inclined society.