Simple answers to complex questions about the most fashionable blockchain trend.
What is NFT and why do people buy digital art
You may not have noticed, but the world has been shaken by a new gold rush for several months now. Here are just a few news items.
In early March, the Canadian singer Grimes, better known as the common-law wife of Elon Musk, earned in 20 minutes The mother of Elon Musk's son in 20 minutes earned $ 5.8 million using NFT $ 5.8 million by releasing a collection of NFT (tokens). Around the same time, digital artist Mike Winkelmann, who became famous under the pseudonym Beeple, sold We talked with Beeple about how NFT mania led to his $ 69 million art sale one token for almost $ 70 million. Prior to that, with the help of other NFTs, he earned over $ 3.5 million.
A painting by American artist Banksy Morons (White) worth 95 thousand dollars was bought and then burned, having previously turned into an NFT-token. Then the same token was sold. Banksy's picture was burned and turned into a virtual asset at the Sotheby’s auction for 380 thousand dollars.
If your NFT news triggers one reaction: "WTF ?!" Mitchell Clarke's article will help clarify.
What is NFT?
NFT (Non-Fungible Token) is a non-fungible token.
Of course, it does not clarify the situation, sorry. I will be more detailed. A token is a kind of certificate of ownership of some kind of digital value, its equivalent. Any digital content can be valuable (in the case of NFT): a drawing, a gif, a file, even your brain - if it is digitized and stored electronically. Tokens can be compared to paper money, which is equivalent to one or another piece of gold. Only they cannot be touched: they exist only in the format of a digital code.
And the definition of "non-fungible" generally means that NFTs are unique and cannot be replaced by anything else.
For example, bitcoins are valuable but not unique. They are interchangeable: exchange one bitcoin for another and you will have the same. Each NFT is one of a kind. If you change it to something else, you get something completely different. It's like swapping out a Pokemon card for a 1909 Honus Wagner T206 collectible baseball card worth over $ 3 million Most Expensive Baseball Cards Ever Sold dollars. Outwardly, the artifacts seem to be the same, but their meaning and value are fundamentally different.
Where are NFTs stored?
Most tokens are part of the Ethereum blockchain.
Blockchain is a chain of information blocks. They contain records of transactions made within a distributed, that is, located on many computers at the same time, database. Each such block is interconnected with others: you can remove or change it only by making edits to the rest. This helps to control the accuracy of information along the entire chain.
Ethereum is a cryptocurrency, just like bitcoin or ripple. But its blockchain (a database that stores information about all the "coins" of a digital currency) also supports NFT. At the same time, each token has additional digital marks that make it unique and distinguish it from Ethereum coins.
It is worth noting that other versions of NFT may be implemented on other blockchains. Actually, such alternatives already exist TRON introduces NFT standard TRC ‑ 721.
Why buy NFTs?
When you buy an NFT, you get the exclusive right to the content it contains. Become its rightful owner. It's like collecting art.
Even a post on social networks can become such a product. For example, billionaire Jack Dorsey, co-founder and CEO of Twitter, recently tried to sell Please do not give billionaire Jack Dorsey money for his tweet as a token to his very first tweet. This one, dated 2006.
just setting up my twttr
Its cost already exceeds Please do not give billionaire Jack Dorsey money for his tweet a couple of million dollars.
But what's the point of buying NFT if the same tweet is freely available?
Yes, this is a slippery moment. Indeed, you can read a tweet, look at a drawing, download music from the Web, copy a digital file many times, even if someone else owns a token with the unique characteristics of a given object.
However, NFTs are designed to give you something that cannot be viewed or copied: exclusive ownership of the original digital object (although its creator can still retain copyright, as is the case with physical works of art).
Compared to physical collecting: yes, anyone can buy a copy of Monet's engraving or look at its reproduction in a museum. But only one person owns the original.
In digital art, the copy is in no way inferior to the original. So why is the original needed?
It depends on whether you are an artist or a buyer.
If you are an artist
Tokens give you the ability to sell artwork that would not otherwise have a broad market. Imagine this: you got the idea for a really cool digital sticker for a messenger. Where will you sell it? To the iMessage app store for a penny? No way!
In addition, for NFT, you can enable a function with which you will be paid a percentage every time your issued token changes ownership. If your work becomes popular and appreciates in value, you will receive good dividends.
If you are a buyer
One of the most obvious benefits of buying tokens is that in this way you will support the artists (creators of music, other content) that you like. Plus, you can publish this content online without worrying about copyright.
And, of course, you will have the right to brag about the fact that you own a digital artwork with a verified record on the blockchain.
If you are not a one-time buyer, but a collector
Tokens can work like any other speculative asset. You buy an exclusive right to a particular digital object and hope that its value will increase in the future and you will be able to sell NFT at a profit.
But how can digital pictures compare to works of art?
At least with the help of numbers. Take the same digital artist Beeple and legendary Monet mentioned above.
Beeple's digital collage Every Day: The First 5000 Days was auctioned at Christie’s for more than $ 69 million. Here it is, by the way.
Monet Painting Of Waterlilies Sells For $ 54 Million At Auction For $ 54 Million At Auction For $ 54 Million, Which Is 15 Million Less, In 2014.
Another example. The starting point for the start of the technology of non-fungible tokens was the CryptoKitties game hosted on the Ethereum blockchain. It allowed users to buy, collect and sell virtual animals.
CryptoKitties kicks off the development of NFT
Each cat in this game is tied to its own token, that is, it is a digital product and can be bought or sold. For example, the NFT for the right to own this digital animal in 2018 sold Someone just bought a cryptocurrency cat for $ 172,000 for $ 172,000.
NFT for the right to own this cat was sold for 172 thousand dollars
It is now available for purchase by Dragon. 896775. Gen 9 for 964 thousand dollars.
If you find it difficult to imagine who is willing to buy digital art and for how much, think about the people who play online. There are already The DeanBeat: How non-fungible tokens (NFTs) will change games games that allow you to bind tokens to items. For example, you can buy an NFT with virtual parcels. Or with an exclusive right to a unique game weapon, helmet, armor.
Can NFTs be hijacked?
Hard. The appeal of blockchain technologies lies in the fact that each token is protected by information stored in it about the sequence of millions of transactions made in the database. Only the rightful owner has the key to this information. It is theoretically possible to steal a token (that is, to enter a different owner) only if an attacker gains access to this data. This is difficult to implement, so stealing a non-fungible token is definitely more difficult than a painting from a museum.
However, the ‘How I lost £ 25,000 when my cryptocurrency was stolen’ has already happened before. So a lot depends on how reliable the platform is, where the NFT is stored, and how much effort scammers are willing to put in.
How reliable is digital art investment? Where will it be in 500 years?
Good question. Indeed, over time, the quality of images deteriorates, file formats no longer open, sites crash, people forget passwords to their wallets.
However, the physical works of art that are kept in museums and home collections are also shockingly fragile.
I want to make the most of the blockchain. Can I buy NFT with cryptocurrency?
Yes. Probably. Many marketplaces accept Ethereum for payment. But technically, every token seller can invoice in whatever currency he wants.
Will NFT trade with seals contribute to global warming and melting Greenland?
This is definitely something to look out for. For NFT, the same blockchain technology is used, the energy intensity of which is known to many for mining cryptocurrencies.
There are people who are working to neutralize this problem. However, non-fungible tokens are still tied to cryptocurrencies and, accordingly, are also indirectly responsible for greenhouse gas emissions.
There have been cases (for example, here's Twitter) when digital content creators took off their NFTs after learning about how this could affect climate change.
Can I build an underground bunker to store my tokens?
Like cryptocurrencies, NFTs are stored in digital wallets (note that the wallet must be NFT-compatible). However, you can always put the wallet on your computer and hide it in an underground bunker.
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