Used to certify digital content and works of art, NFTs (Non-Fungible Tokens) are at the heart of a rapidly growing market. In March, Christie’s sold a work that exists only in digital JPEG format for $ 69.3 million. Over the same period on the NBA Top Shot website, more than 100,000 users raised more than $ 250 million by buying and selling basketball game videos. But what is behind the phenomena? Everything is explained by a three-letter acronym: NFT. For a long time an acronym that is heard more and more often and now at the center of the pages of the largest international newspapers.
Non-Fungible Tokens are digital certificates of authenticity. With NFTs, the concept of buyers interested in the “digital ownership” of something is introduced. Apparently these are intangible contents / works, replicable n times and the same as many others. However, these are unique works, thanks to a certification that takes place via blockchain, the technology applied to cryptocurrencies but also used in other contexts. The blockchain serves to certify NFTs and thus make them marketable as works of art. However, the most common applications concern videos of basketball, fashion and video games.
Having entered the market for about three years, you already hear talking about a (dangerous) speculative bubble, but it must be said that NFTs are an authentic means through which digital contents are able to obtain value and to see their uniqueness recognized. They are still a new tool: a few months ago not even Beeple, the artist whose work sold for 69.3 million dollars, was very clear what they were.
“Non-Fungible Token”, we explain well the meaning of the name. “Token” means a series of digital information contained in a given file. The adjective Non-Fungible, on the other hand, expresses exactly what that product / good must not be: that is, be replicable and replaceable. A bottle of wine exists in various forms, one wine is as good as another (if of the same level, quality, etc.) An authentic work of art is not. It’s unique. An original product preserves the idea for which it was born, its history and also of the person who created it. None of the copies to which it will be replicated will contain all these characteristics (values).
Authentication via NFT ensures that that product retains its originality. Therefore, in the case of digital works of art, the signature of the author is recognized, who is the only one who owns the property, until he sells it. In the event that NFTs authenticate copies, they count as “limited edition” works.
The technology to support NFTs was created between 2010-2015, appearing for the first time in a CryptoKitties game, a digital reality where digital kittens were bought and raised, even more interestingly, the figure, the kittens were sold. for amounts exceeding 150 thousand dollars (sold in cryptocurrencies).
According to a report presented by NonFungible.com and L’Atelier (a research company of BNP Paribas), in 2018 the NFT market was 41 million dollars and in 2020 it rose to 338 million dollars. A value that the forecasts give in significant growth for 2021, while remaining lower than that of cryptocurrencies (currently around one trillion dollars).
Technically speaking, for an NFT to exist there is always a need for a blockchain, literally “the chain of blocks”, which is a control system that tracks various types of operations and transactions.
In the case of NFTs, the blockchain serves to certify the authenticity and history of a file and its metadata.
Today the blockchain most associated with NFTs is Ethereum, also used for the cryptocurrency Ether.
Ethereum therefore allows you to create something similar to contracts, in which to say, for example, that the author of an NFT will take a certain percentage on each future sale of that specific NFT, and in which it is always possible to know who owns something, who bought it and then resold it in the past, and at what price.
The above piece of art is like a Pokemon card for a hell-creature merge of Homer Simpson and Pepe the frog. Homer Simpson is, well, Homer Simpson, and Pepe is an internet frog that’s popular on 4chan and other areas of the internet. The NFT for this art recently sold for $320,000. The crazy part? The person who sold it wasn’t its creator. He bought it back in 2018 for $38,000. So as preposterous as all of this NFT business is, it’s worth noting that some people are actually making a lot of money flipping them.
Nyan Cat, arguably 2011’s hottest cat meme, was back in the news last February following the sale of a digital recreation of the artwork for 300 ether (equal to $600,000).
At the moment, the most famous among the NFTs is undoubtedly Everydays – The First 5000 Days, a collage of five thousand digital works created (one a day) by Beeple, stage name of designer Mike Winkelmann, the best known author of digital art .
The auction for the work represented a turning point because the Christie’s auction house had never sold anything that was just an NFT, because in doing so it accepted payments in cryptocurrency and because the work sold for 69. 3 million dollars. Paying all that money was an individual known only by the pseudonym Metakovan, owner of Metapurse, which is believed to be the largest NFT fund in the world.
Buying an NFT means buying and obtaining a simple file. However, NFTs are not only related to digital art. In this regard, the example of NBA Top Shot is useful. On NBA Top Shot, users buy (and resell) limited edition videos, with a certain circulation that indicates their rarity and therefore determines their price.
NFTs can be songs, videos, gifs, tweets, or anything else that is digital. It does not necessarily have to be a quality product, because what is worth in an NFT are the properties that the owner decides to associate with it. If we talk about Twitter, the first tweet written by the Twitter founder is worth a couple of million dollars, in its only version certified through the NFTs. But why on earth would I want to buy an “original” twitter when I can take a screenshot of that given tweet at no cost? The answer is simple: why buy an authentic Renoir and not print a jpeg of one of his works from a computer? Originality is the answer.
The most famous platforms in which NFTs have established themselves are: Nifty Gateway, OpenSea and Known Origin. In most cases, by purchasing an NFT you are purchasing an intangible asset, which – if it is an image – you can at least print. But that print, ceasing to be digital, is a copy, as will that of anyone else who decides to print it in turn.
In theory, those who own the NFT of an image, rather than try to limit its diffusion, should rather hope that that image becomes as known, widespread and shared as possible. A widespread comparison is that with the Mona Lisa: the real one, painted by Leonardo da Vinci, is only one; but its reproductions are many, and it is largely thanks to the reproductions that today the original work has such artistic and cultural relevance.
Even for cryptocurrencies there was talk of a speculative bubble, yet it is a market that still exists. So it will be for NFTs as well. Many argue that NFTs are only just beginning and will continue to grow. and in increasingly broader areas.