NFT: understanding the technology that promises to change the digital art market

April 16, 2021

fter the revolution caused by Blockchain and the success of Bitcoin, it was time for another digital novelty to explode on the internet. This is the NFT, a kind of "crypto-collectible" that has been gaining space among artists, game developers, and other professionals who deal with authorial works.

You may have heard lately something about the sale of the Nyan Cat GIF, pieces of art by the singer Grimes, or the first tweet from Twitter CEO. These three things have in common the fact that they were marketed via NFT. But what is it all about and why should I pay for something that can simply be accessed and copied over the internet?

Nyan Cat GIF sold for around U$600.000,00

What is an NFT?

Abbreviation for “Non-fungible token”, an NFT is the registration of ownership of a digital object on a blockchain. Any type of media, including, but not limited to, art, videos, music, GIFs, games, tweets, and memes. The non-fungible part means that the object is unique, making it irreplaceable, unlike other cryptos, such as Bitcoin (BTC) and Ethereum (ETH).

As you can imagine, digital assets of the most diverse natures - images, music, videos, etc. - are in general fungible goods. This is because all of these files can be easily replicated without loss of quality or limit on the number of copies created. Thus, as a rule, it is understood that a digital file can be replaced without major problems, without causing any damage to the owner.

The idea of NFTs is precisely to reverse this logic, that is to say, to assign non-fungibility to digital assets. In this way, an image, a video, a song, among others, will have a unique identifier, differentiating that file from the other copies transmitted over the network. Based on this unique identifier, therefore, it is possible to sell the property of an “original” file - a legitimate copy, which thus starts to have value as a collectible.

NFT Evolution

From now on, everything became a crypto collection. NBA moves? A Lebron James dunk was sold for U$208.000 in Top Shot, successor to the Cryptokitties. Memes? An image of Nyan Cat was sold for almost U$600.000. Even tweets can be sold in the format: Jack Dorsey, the founder of the network, sold his first post for U$2.9 million.

According to designboom, on March 12, 2021, NFTs had a historic and record sale. Struck exclusively for Christie’s Auction House (a London auction house), a monumental digital collage (Everydays: the First 5000 Days) by artist Mike Winkelmann, also known as Beeple, was offered as a single sale lot for around U$69 Million.

This business made history in the sector since this is the first major auction house to offer purely digital work with an exclusive NFT and the first to accept cryptocurrencies. The sale also ranks Beeple among the three most valuable living artists.

Everydays: the First 5000 Days sold for more than U$60 Million

But why pay for an NFT when I can see it for free?

Okay, you already understood what NFT is, but it's not yet clear why pay for one, right? Why would anyone pay millions of dollars for something that doesn't even exist in the physical world?

Unless you are an art collector or a cryptocurrency enthusiast, you will probably never buy an NFT. For ordinary people, this is far from reality or ambition, since the art or item is a click away to be viewed or replicated on your computer, cell phone, or any other digital device.

Cryptokitties, with an average sale price of U$106,50

However, for the world of art commerce, having the NFT of a product represents having ownership of that piece. And that gives you the right to do whatever you want with it, without the creator giving an opinion or questioning. Besides, there is the possibility of earning (a lot) money from the valorization of art or the blast of the artist's popularity. An NFT bought today for a few cents can be sold in a few weeks for a few million dollars.

The main advantage of this technology is the guarantee of authenticity, without this implying extra expenses or the need for a regulatory authority. However, the benefits of using NFT go far beyond.

CryptoPunks, with an average sale price of U$41.294,00

The reduction of bureaucracy in the purchase and sale of articles is a reflection of this. In the traditional model, if you buy a painting in Italy for example, you need to find a specialized courier to bring you safely, arrange all the import paperwork and still pay the import fees. With NFT, all of this is simplified, making it possible to establish only a direct agreement between buyer and seller.

Another advantage for artists is that they can automatically add royalties to digital contracts signed on the sale of assets. So, even if the token is resold several times later, the artist will continue to receive part of the money forever.

Did you understand how revolutionary this technology is? Do you believe NFTs will maintain their current popularity or are they just the result of the “hype” related to crypto?

Join Our

Thank you! You've successfully subscribed to our newsletter.
Oops! Something went wrong while submitting the form.