A non-fungible token that employs blockchain technology...does that sound gibberish to you? How about buying a cat meme for millions of dollars? A little absurd? Don’t worry, we’re with you on this.
In the art world NFTs have been a buzzword which can be both confusing and frightening given their technical jargon (umm what in the world is CryptoPunk?) along with the complex listing process. In this blog we explain all things NFT, down to its very basics – what NFT means, how to put your NFT for sale, how to make an NFT investment and some examples in simple and easy language – to help you get started.
What does NFT mean?
The abbreviation NFT stands for: Non-Fungible Token. Let’s look at each term further.
Fungible: A fungible asset/token is one that can be interchanged/replaced with something of a similar value. For example, money. A 100 rupee note can be exchanged for two 50 rupee notes. Similarly, an empty notebook can be interchanged with another notebook of its kind. This ability of an object or asset to be readily substituted with a similar kind of object or asset with the same value, makes it fungible.
Non-Fungible: Something that cannot be interchanged is therefore, non-fungible. Take paintings for example. An original Van Gogh painting cannot be replaced with two Picasso paintings, nor can it’s value be replaced with an identical painting made by a fan. There is only one kind of original painting and that attribute makes it non-fungible.
Things which are fungible: Bitcoin, money, paper, etc.
Things which are not fungible: Painting, a song, an antique, etc.
Token: In the case of NFTs, the word token somewhat synonymous with an ‘asset’. It can be understood as a digital certificate of ownership of the said asset. Since the meme, art or music sample is completely digital and lacks tangibility or a physical form to it, tokenization helps give NFTs the credibility that you would give to a physical piece of art. The token is essentially a valuable piece of property with a unique identification that ensures the impossibility of replicating or duping an NFT.
Now let’s piece it all together: An NFT is a digital, one-of-a-kind asset that is bought and sold through a blockchain (more on that in the next section) with a unique identification that ensures its originality.
Trivia: The first NFT created or minted was Kevin McCoy’s ‘Quantum’. He minted this on May 3rd, 2014, way before the crypto art market exploded. As of today, this one of a kind art is on sale for seven million dollars.
Here's a great Twitter thread which summarises the basics of NFTs:
What is a blockchain?
Firstly, I’d like to clarify that no, to buy an NFT you don’t have to go on the scary deep, dark web. In contrast to how they show in movies and TV shows, crypto transactions are completely transparent and safe. Perhaps even safer than other platforms of transactions. First, let’s understand the mechanism used. The technology NFTs use is known as the ‘blockchain’.
Blockchain is an open shared database that stores digital information (in case of NFTs, your ownership of an asset) electronically, one that can be easily traced and rectified (thanks to peer-to-peer reviews). To put it simply, each transaction made is recorded as a ‘block’ and then ‘chained’ together as a list that can be accessed by a selected few to rectify it. One of the most common blockchain networks is Ethereum. The illustration below further simplifies how a transaction on blockchain actually works:
To buy an NFT you can’t use cash, you’ll need crypto. Hence to buy an NFT, the first step is to buy some cryptocurrencies – Bitcoin, Ether, ENJ etc. You can use apps like CoinDCX, Coinswitch Kuber, WazirX and so on to buy crypto.
Note: Before you set up a wallet, make sure the app you use supports the blockchain of the NFT.
Once you have the “money” (crypto) in your wallet, the next step is to go to an NFT marketplace. An NFT marketplace is a platform where you can easily buy or sell any digital asset. It’s essentially like an Amazon, but for digital assets. Some popular marketplaces are Open Sea, Rarible and Foundation. On these platforms, you can find the rarest of collectables to local artists too, from the beloved Nyan cat to a dancing Jeff Bezos.
How do I make and sell an NFT?
Digital art such as that of Kevin McCoy makes up for a huge space in the NFT market. One of the reasons why art curators believe that NFTs are the future for digital art or art, in general, is because it provides artists with the bullet-proof surety that their art cannot be stolen or forged. NFTs are changing the narrative of art infidelity, for the good.
“There is tremendous potential for NFTs in the art market and beyond. As a mechanism, the potential that NFTs have to shift the way that we establish ownership has no bounds.” — Meghan Doyle, an art cataloguer at Christie’s.
However, you needn’t be a digital artist to make an NFT. Anything can be an NFT – a screenshot of a tweet, a music sample or even a picture of your cat. The process of making an NFT and selling it, vary in terms of difficulty and complexity.
Whether it’s your own digital art, a recipe, a meme, song, poetry etc – anything can be a token as long as it’s originally yours. In India specifically, WazirX is the go-to NFT marketplace. Here’s how you can sell your art on WazirX:
Make an account on WazirX.
Set up a digital wallet (you’ll need this to both buy and sell). You need to install Metamask and have the Binance coin to transact on WazirX.
Since the app is in its beta phase, you need to request to become a creator. Once you click on ‘Become Creator’, you will be redirected to a google form application.
It’ll take about 3-4 weeks for you to get approval.
Once approved, click on ‘Create NFT’ under your profile name:
Upload your digital file to the platform and fill out the other necessary details.
What’s great about WazirX is that it does not charge additional listening fees, only a service fee of 5% is charged from the final price after your NFT is sold.
You can now mint your NFT! Make sure your wallet has atleast 0.01 BNB (Binance Coin). The minting fee is usually 1 USD which is about 70-100 INR.
Once minted, you will have to confirm escrowing the NFT which essentially is for buyer protection.
After confirming, your NFT is ready for sale!
Here’s a video explaining step-by-step how you can create an NFT on WazirX:
OpenSea is another NFT marketplace, one of the biggest ones where you can sell and buy.
Here’s how you can sell your art on Open:
Set up a digital wallet, Metamask is a widely used platform to store your coins (and this is where you will also receive the money once your NFT is sold).
Once you’ve installed Metamask as an extension, you must sign in and connect it to OpenSea.
Once you’ve connected your wallet, you can now set up your OpenSea account – your name, store banner and other such details.
Choose what you want to put up for sale and click on ‘Create NFT’ you will see this window show up:
To be able to sell your NFT on OpenSea or any Ethereum blockchain for that matter, you need to pay a gas fee. This gas fee is subject to change.
Upload your digital file to the platform and click on sign.
And voila! You’re done.
Here’s a video explaining how you can create an NFT on OpenSea in detail:
Another great video which shows how to buy and sell NFts step by step:
The Most Expensive NFTs
Much of the buzz around NFT comes from the insane prices at which they’re sold, many wonder why spend millions on a jpeg file? The most expensive NFT sold to date is Beeple’s Everydays which was sold for $69 million.
Considering that Beeple is a well-known and reputable artist who has been creating compelling art for decades now, one might let the absurd price tag slide. But what about the above-mentioned Nyan Cat? Owned by user oxy7eb2 … 3f6b, this meme was sold for over half a million dollars. A meme sold for six figures. Now, I know this is where all the suspicion and speculations about NFT arise, and I understand why. Why are people spending millions of dollars on a gif or a picture that can be copied and pasted by anyone? The answer lies in the simple psychological phenomenon of scarcity.
We place value on things that are scarce. The fact that each NFT is unique and cannot be forged, makes it collectable. Since they are ‘non-fungible’ they are one-of-a-kind and hence, there is a lot more demand and hype.
“Unlike stocks or shares, the value of NFTs are not driven by things like company’s profit, or earnings etc. In the world of digital art, the prices might rise and fall, but not because of fundamentals; instead, consensus alone confers value.” (Bloomberg).
Just like 100 years ago oil paintings were “in”, in 2021 memes are the hot topic. It is no wonder that in the future, the rarity of some memes will create their value.
Advantages and Disadvantages of NFTs
As an artist are you wondering if NFTs are the right choice for you? Let us help you decide with this easy list of pros and cons:
Advantages/Pros:
An investment: There’s no denying that as we’re moving to a world of digital and decentralised money, there is a lot of scope of banking on the huge growth observed in crypto. When buying an NFT, you’re not just buying a piece of art but you’re investing in a volatile but high return market.
Creative Liberation: As an artist the digital space is exciting and promising. You can let go of any worries relating to your art being duped (it’s completely safe) and you can even charge royalties.
“The royalties on all secondary sales have become a fundamental part of what makes NFTs attractive to artists of all kinds. If you can find the audience willing to support you, it becomes the kind of passive income artists have only ever dreamed of.” — Jonathan Mann, Creator of Songaday.
Safe & Transparent: The ownership of your token is completely safe: it can be verified, composed, easily transferred and addressable.
Collectables: Somewhere in 2050 or so, flexing about owning an iconic meme sounds pretty cool. Like any art, a piece that has a pop-culture context tied up to it — gains value. Hence, NFTs give an opportunity for art to collect and own a piece in time.
Disadvantages/Cons:
Scams: While NFTs themselves are legitimate, there can be fraudulent sellers who are looking out to scam with false advertising or straight up fake profiles.
Environment Detriments: One of the most contested disadvantages of block-chained based tech has been the non-sustainable consequences on the environment. “NFTs Are Hot. So Is Their Effect on the Earth’s Climate,” reads a Wired article. In his defence John Crain, CEO of SuperRare explains that Ethereum is like an aeroplane that will take off regardless of how many crypto artists climb on board. (Wired, 2021).
“There is a whole ecosystem of people who are creating emissions, so I don’t think it’s fair to the artists to say that you created this amount of CO2” — John Crain
However, a lot of NFT platforms are looking at more sustainable and efficient ways to handle the transactions.
NFT Examples
Here are some of the NFTs that shook the internet and the digital wallets:
Nyan Cat: Remember the meme of a floating cat? Even after a decade since it had gone ‘viral’, Nyan cat remains a widely recognisable gif. Creator Chris Torres made and an NFT version and sold it for over $500,000.
CryptoPunks: One of the earliest NFTs, crypto punk is considered a modern art movement with 40,000 animated characters created. They are generated through an algorithm which hence, makes each character is unique. The most expensive punk sold was in October 2021 for $532 million.
CryptoKitties: Another kind of collectable NFT, cryptokitties is a game played on Ethereum blockchain where you can “breed”, own and trade virtual creatures. While the project peaked in 2018, the first and the rarest CryptoKitty was Genesis bought by one of the founders. At the time it was bought for 246.926 Ether (about $119,328 at the time). This much Ether is currently worth around $750,383 (source).
Beeple: We’ve already mentioned Beeple for his piece, Everydays: the First 5000 Days, which remains the most expensive NFT ever sold. However, many of his other pieces also rank pretty high up on the list. Ocean Front was sold for $6 million and Crossroad for $6.6million. His absurd, surrealist art makes him one of the greatest digital artists of our generation.
NBA Top Shot: A great example of how brands or companies can also ride the NFT wave can be seen through NBA. In a collection of the best moments or highlights – be it “signature moves, game-winning shots, jaw-dropping blocks, unbelievable jump-out-of-your-seat plays” you can trade these video highlights as NFTs. A LeBron James highlight was sold for $200,000 which goes on to show the multi-faceted space of NFTs. It’s not just digital art that can be a token, even a video highlight can be one.
Indian NFTs: The ripples of the frenzy have reached India as well, and there are some pretty notable ones. Besides the usual digital arts, it has been interesting to see celebrities jump on the bandwagon too. Amitabh Bachchan for example, has his very own collection titled ‘Madhushala’ which include autographed posters and a recitation of his father’s poems. Within 4 days of the auction bid, his collection saw the highest ever bid of close to $1 million.
Future of NFTs
So, what can we expect from NFTs a few years down the line? With over millions of users and billions of dollars already invested in crypto, one thing is for sure: crypto is here to stay. As we become increasingly digitalized, all facets rooting from it, too will become a normal part of our lives. Hence, many experts believe that it cannot just revolutionise the art industry, but also more practical businesses and transactions. With about a 38,000% increase in its trading volume, its value is becoming more relevant and urgent for brands and artists alike. Brands like Coca-Cola, Nike, Taco Bell have already played their hand creating unique digital tokens relevant to their ethos. The complete transparency and safety ensured by blockchain technology encourage audiences to incline towards what best serves them and their money.
Certainly, the value of NFTs is only rocketing to the moon, and it is about time we all catch along.
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