Because in the world of art, and beyond, everyone is crazy about NFTs

Because in the world of art

Non-fungible tokens are used to prove ownership of a digital work - from a tweet from the Twitter founder to a work of art. And they have become a millionaire market

Beeple - Everydays (courtesy: Christie's) What do a meme that turns ten these days, the video of a dunk by LeBron James and a digital artwork have in common ? Which are all three of the non-fungible tokens, nft, sold by the weight of gold through the blockchain. Yes, the crypto-world has been overwhelmed by a new frenzy which - this time - concerns art and more generally all digital collectible objects.

What does it mean that a meme was sold? On the blockchain? What does LeBron James have to do with it? If you are confused, you are in good company: the blockchain sector always gives headaches to those who try to decrypt it and NFTs are no exception. What the hell is a NFT? In short, a non-fungible token is a "digital token" saved on the blockchain which unequivocally demonstrates how the owner of this token is also the person who owns the digital work connected to it. Before going into the technical details, however, let's see what are the events that have made the NFT the topic of the month.

The nft bubble

On February 19th, the famous gif of the Nyan Cat is sold at auction, on the specialized site Foundation, at a price of 545 thousand dollars paid in ether (the cryptocurrency that powers the Ethereum blockchain). The news causes a sensation, the New York Times also deals with the topic and the question that everyone is asking is: how do you buy - and therefore own - a meme that everyone can see on YouTube for ten years now?

A legitimate question that becomes more pressing as it turns out that that meme was not an isolated case. A few days later, the clip of a (crazy) dunk by LeBron James is sold for 208 thousand dollars. You can see it at this link (free). And then all hell happens. The historic auction house Christie's sniffs the deal and begins exhibiting digital art NFT. A work (or rather: a large package of works) by Beeple is sold for 70 million dollars. To give you an idea, only two works by living artists (Jeff Koons and David Hockney) have reached higher prices. To give you another idea, in 2014 one of Monet's famous Water Lilies was sold for 54 million dollars, 15 less than Beeple.

What's going on? Are we in the midst of classic speculative bubble hysteria? Of course yes: it shows that the youtuber Logan Paul is selling the videos of the most important moments of his Pokémon games for 20 thousand dollars each and that Mark Cuban (entrepreneur and owner of the Dallas Mavericks) has sold one of his tweets. (!) for $ 952. The idea was also liked by Jack Dorsey, founder of Twitter, but instead of selling a random tweet he put his first tweet ever up for auction (which obviously belongs to him). At the moment, someone is willing to spend $ 2.5 million to take ownership of this tweet (whatever that means).

The growth in NFT turnover reflects the exaltation of recent months. According to the Crypto.art portal (which aggregates the most well-known nft resale sites, but not all), in November 2020 sales of nft-based art had reached the value of about 1.5 million dollars. In January they had exceeded 10 million and in March they have already reached 120 million dollars. The frenzy, the irrational expenses and the exponential growth of the turnover all confirm unequivocally that we are facing a speculative bubble that could burst at any moment.

The growth of the NFT digital art turnover But just being in the middle of a bubble doesn't mean there is no value in the NFTs, in the same way as the dot bubble .com did not mean that Amazon and Google were worthless or the cryptocurrency bubble of 2017 that bitcoins were meaningless (as evidenced by the fact that the price today is almost triple what it was then). And then - after having made some examples of the type of digital objects that are sold and what the prices are - let's try to understand something more.

What is a nft

As mentioned, nft stands for non-fungible token ("non-fungible token", if we really want to translate it). More or less, it means that this token is unique and cannot be replaced with its equivalent. A 10 euro banknote is fungible, because if you exchange it for another 10 euro banknote you have the same value in your hand. On the other hand, a Cristiano Ronaldo card autographed by CR7 itself is not fungible, because if you exchange it for the same Cristiano Ronaldo card, but not autographed, you are holding a completely different object.

This is perhaps the metaphor that best explains what a NFT really is: the digital equivalent of an autographed card, which therefore takes on a different value from all the others. A nft is therefore not the digital work of art you purchased, but the token uniquely connected to it that demonstrates that that work is yours. An NFT is the certificate of ownership stored on the blockchain (which thanks to its characteristics does not make it possible to counterfeit, duplicate or steal it).

If a metaphor more linked to the world of art is useful, we can rely on the words of Dannie Chu, CEO of MakersPlace (trading platform nft): “There are hundreds of thousands of prints and reproductions of the Mona Lisa , but since they are not the original created by Leonardo they are definitely worth much less. The same principle applies to NFTs: you can copy and paste an image or a video but the original, digitally signed by the artist, is what has value ".

It is like owning an original Picasso of which an exceptional forger has created hundreds of absolutely indistinguishable copies. The fact that to the human eye there is no difference between the original and the copy does not make the original less valuable. In the case of the set of Beeple's works sold by Christie's, therefore, it is not important - for the purposes of market value - that every single creation is visible on the website of the same digital artist. What matters for the investor is to have an NFT that contains the high resolution file of the work and the artist's digital signature.

Beeple: The First Emoji (beeple-crap.com) Not only that, the blockchain also preserves in an immutable way the history of all the transactions that that work has faced, an important element for the purposes of collecting (buying a work that belonged to Elon Musk can obviously have value in itself). By exploiting blockchain smart contracts, NFTs therefore aim to solve the crucial problem of digital art: how can you own - and therefore attribute an economic value - to something that anyone can copy by "right clicking → save as"?

If things finally begin to seem a little clearer to you, we can immediately complicate them. "Nft, in many cases, do not even contain the work of art in question," explains Mashable, for example. "The object represented by an NFT - be it a painting, a gif, a song or a book - may not even be incorporated into the blockchain. What the buyer becomes the owner of are the metadata of the work stored on the blockchain, which contain the name of the work, a description of the work and what is called a uniform resource identifier ". A sort of link on the IPFS protocol (Interplanetary file system, a peer-to-peer communication system that prevents you from losing your work if any site goes down or fails).

From Cryptokitties to LeBron James

In summary, what you buy - often but not necessarily - is the file of the artwork or digital object and above all all the metadata stored on blockchains that attest to the fact that you own it. In an even more prosaic way: you acquire the right to boast of the ownership of an object that lives on the net and is therefore available to everyone. At this point, it is worth noting that the most used blockchain in the world of NFTs is that of Ethereum, which first introduced the concept of smart contracts (contracts that are automatically executed when the agreement between the parties is satisfied) and on whose platform the first example of successful nfr had already come to life in 2017: the digital card game of the Cryptokitties, in which digital cats were bought and bred whose ownership was exchanged through nft.

The success of the Kitties has been such that some digital kittens have reached the value of 170 thousand dollars, that this game alone was responsible for 95% of the use of Ethereum and that this blockchain (which has never was a champion in managing a large amount of transactions) finally went haywire, which is why the company behind the digital card game - the Canadian Dapper Labs - decided to create its own specialized blockchain, Flow, with related cryptocurrency.

And it is always Dapper Labs that is behind one of the most successful NFT projects: Nba Top Shot, the official platform of the NBA where clips of the most spectacular actions of US basketball players are sold. The total turnover has reached 400 million dollars and is obviously arousing the interest of many other professional leagues. Another example is that of the CryptoPunks, highly pixelated characters that you can collect in quantity. Also in this case, the prices have reached irrational prices (the record is 700 thousand dollars). Art, therefore, has the lion's share, but in this digital world all rare examples of digital objects (the so-called collectibles) have citizenship.

CryptoPunks NFTs make it possible for the very concept of rarity to exist in the digital world. But thanks to this new tool, even objects that until recently could never be collectible can become collectible. For example, wouldn't you like to own a song? Not a rare vinyl, just the song: the intangible good. As TechCrunch explains, Linkin Park’s Mike Shinoda has sold the nft of their new single Happy Endings. Obviously owning that song does not give you any rights in terms of copyright or commercial exploitation. Basically, it's like owning a digitally signed mp3.

There is another important element, especially for those who sell their works of art: thanks to smart contracts, some NFTs give the possibility to automatically receive a fixed fee every time the work is resold. If you are a digital artist and today you agree to sell your jpeg for a thousand euros because you need to pay the rent, you may find yourself in the annoying position of assisting, in the future, at the sale of your work for one million euros without however receiving a extra lira from this new transaction. Thanks to smart contracts you can instead hack into the code that you are entitled to 5% of each subsequent transaction, thus making the sale of your works something from which you can continue to earn over time. Not bad.

As always, not all that glitters is gold. On the one hand, there is the risk that someone takes possession online of a work that is not his and tries to sell it, trusting that no one will notice (the blockchain guarantees the authenticity of the transactions and keeps the data, but cannot verify the authenticity of the data that is entered in the first place). Then there is the risk that someone will sell the NFT of a single work and then decide to create another NFT of the same work (such as those who sell limited edition vinyls and then print new copies). And then there is the serious problem of environmental impact: in fact, NFTs use the same mining mechanism that makes the creation of bitcoin so expensive from an energy point of view (the Ethereum blockchain is making the transition to a much more sustainable system. , but it will still take a long time).

Between speculative bubbles, limits in the attribution of authorship of the work, risks of scams, lack of intuitiveness of the phenomenon and environmental impact, the cons of NFTs are many and must be carefully investigated. But having succeeded in bringing the concept of unique and rare objects into a world, such as the digital one, characterized by infinite reproducibility represents a real revolution.


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Topics

Art Art, graphics and photography Blockchain Cryptocurrencies Finance Fintech globalData.fldTopic = "Art, Art, graphics and photography, Blockchain, Cryptocurrencies, Finance, Fintech "

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