5 questions on Non-Fungible Tokens in Digital Art answered
This article will answer 5 major questions on Non-Fungible Tokens and how they are changing the crypto art world. From viral internet memes to moments in sports history, keep reading to learn about the newest trends taking over digital art.
1.What Are Non-Fungible Tokens?
Non-Fungible Tokens (NFTs) are unique digital assets. They are part of a blockchain and verify who owns a specific item. “Non-fungible” means something is one-of-a-kind and can’t be replaced with the same item. For instance, a movie ticket cannot be replaced with any other movie ticket as the ticket is unique to a time and place. Fungible items differ in they can be traded for the same item. For example, if you replace one bitcoin with another, you’ll have the same thing.
2. How are Non-Fungible Tokens working with Digital Art?
Crypto art has existed for a while but exploded in popularity since the start of 2021 as a hot tech trend. The first use of NFTs was for an online game, Cryptokitties, which let users trade and sell digital kittens. There are lots of digital marketplaces where users can buy and sell items. While sellers can accept any currency for their NFTs, cryptocurrencies like Bitcoin and Ethereum tend to be the most popular. How it works is buyers get the license or right to own a digital item.
Digital Art
Bloomberg reported digital artist Mike Winkelmann, known as Beeple, sold an NFT of his digital art: “Everydays: The First 5000 Days” for $69.3 million. Beyond the price, it is also notable that the sale went through the auction house, Christie’s. This shows that even the most traditional institutions are embracing this new industry.
When questioned about the worth of these digital works, NFT supporters think of it like this
While there are many copies of the Mona Lisa, there is only one original. Owning the license to digital artwork is the same. There will be copies of a piece of work online, but there is only one original that the buyer now has sole access to.
This, however, is challenged as some art that has many copies are also selling for insane prices. For example, Grimes just sold thousands of copies of the same NFT for $7500 apiece
Other Non-Fungible Token Examples
Tweets
A few weeks ago billionaire Jack Dorsey, CEO of Twitter, sold his very first tweet which reads “just setting up my twttr” from March 21, 2006, as an NFT.
The link to bid went live on March 5th and after just 24 hours the highest bid was up to $2.5 million. Anyone can access Dorsey’s tweet so long as he doesn’t delete it, but only the highest bidder will gain the rights to the NFT.
Sports Moments
Beyond art and tweets, NFTs are taking shape as sports history moments and sporting merchandise. Mark Cuban, owner of NBA team Dallas Mavericks, says he sees a future of digital goods in the NBA. Namely, Cuban wants to sell virtual Mavs gear to fans.
The NBA has already entered the NFT industry. They set up NBA Top Shot as NFT sports highlights. You can think of this as digital collectibles, similar to the physical trading cards we used to collect as kids. The NBA has already done $200 million in NFT sales, so it’s likely NFTs in sports will see great success.
Memes
What is an internet trend without cat memes? An NFT of the Nyan Cat meme just sold on a crypto art platform for 300 ETH (Ethereums), about $560,000. The internet loves memes, so we can imagine the Nyan cat is only the beginning of NFT memes.
3. Who can Use NFTs?
In a word, anyone!
Celebrities such as Lindsay Lohan and Post Malone have jumped into the world of NFTs, selling videos and experiences online. Digital marketplaces make the exchange of NFTs easy for anyone. If you have something to sell or enough currency to purchase an NFT, then NFTs are for you.
NFTs are still relatively new, so there is a first-mover advantage. Memes and tweets are just the start of it. There is still so much unexplored space in the industry. Therefore, those who get there first will benefit from media exposure and new audiences.
4. Are there any Downsides to Non-Fungible Tokens?
Like every new trend, there are some pitfalls which need to be considered when looking at the attractiveness of the industry.
Digital Nature of NFT
The very nature of NFTs is digital. For instance, anyone can access a tweet or a meme. What a buyer may spend millions of dollars on is technically available online at no cost. The NFT marketplace is still pretty new and what is trendy now could soon be realised as a waste of money. It’s too early to tell, and so the volatility of the industry is a drawback.
Sustainability
Energy consumption is a pertinent issue. Much like cryptocurrencies, NFTs use up huge resources. Forbes reported that blockchain companies are attempting to decrease their consumption to become more sustainable. The Ethereum blockchain, for example, has already made strides to become more carbon-neutral and energy-efficient.
Bit Rot
Bit rot is where a digital item becomes inaccessible. This happens because the file format is obsolete, websites no longer exist, people forget their login credentials or other failures in data storage. Of course, security is a concern for someone who has just spent millions on an NFT but physical art also has preservation concerns.
5. So, What does the future of NFTs look like?
The real answer is no one knows. Mark Cuban called the area of blockchain technology and NFTs the “wild west”. Given the infancy of the trend, NFTs could become a vehicle for investment, accepted real estate, and more. There are many different areas to explore and the industry is ripe for opportunity.
Now that you know the basics of NFTs, read more on why business leaders need to be thinking digital to ensure survival.
Sources:
https://www.theverge.com/2021/3/1/22308075/grimes-nft-6-million-sales-nifty-gateway-warnymph
https://www.theverge.com/2021/2/18/22287956/nyan-cat-crypto-art-foundation-nft-sale-chris-torres
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