NFTs - Nonfungible Tokens an Art Revolution

March 14, 2021  •  Leave a Comment

NFTs or Nonfungible Tokens are a new concept that has set the art world on fire.  Nonfungible means you can't exchange the referenced item for another thing of equal value because it is one of a kind. The "T" in NFT refers to token or a unit of cryptocurrency on blockchain such as Bitcoin.

When you purchase an NFT you are purchasing a certificate of authenticity that serves as proof that a specific version of the digital art is uniquely yours. The transaction contains the actual code that expresses the visual component of the art as well as documentation establishing title or ownership and the rights that are attached to that ownership. What is so significant is that NFTs create a market, that allows for the seamless and secure transfer or art ownership that previously was not possible.

It appears that one of the products of this ease of transfer is that new forms of selling and investing in art is being created. Art expressed as an NFT includes, paintings, photography, film, music, dance, poetry, books, video games, animated GIFs, collector cards, and other forms of emerging digital expression.

 

Beeple NFT sells for $69,000,000

 

"MetaKovan, the pseudonymous founder of MetaPurse, is the buyer behind the $69 million dollar winning bid for a Beeple NFT auctioned at Christie’s yesterday. It was the third-highest sale price ever for a work of art from a living artist.

“When you think of high-valued NFTs, this one is going to be pretty hard to beat,” MetaKovan said in a statement published by Christie’s. “And here’s why — it represents 13 years of everyday work. Techniques are replicable and skill is surpassable, but the only thing you can’t hack digitally is time. This is the crown jewel, the most valuable piece of art for this generation. It is worth $1 billion.”

The $69 million NFT is a collage containing 5,000 mostly digital illustrations from Mike Winkelmann, better known as Beeple, that were created for his Everydays series, in which he creates a new artwork every day. Winkelmann’s popularity online and his prolific output surely contributed to the sky-high price, but a key driver was also the growing hype around NFTs."

MetaPurse is a private investment firm that has been formed to acquire NFTs as financial investments.

https://www.theverge.com/2021/3/12/22327594/metakovan-beeple-highest-auction-price-69-million-nft

Some artists, especially photographers, may offer the option of acquiring actual photographs of the digital art expressed in an NFT. The NFT may serve to validate the legitimacy of limited-edition art and or it may be the instrument that holds the actual financial value of the expressed art.

"The underlying thing that you're buying when you purchase an NFT is code that manifests the images of the art," said Donna Redel, who teaches courses on crypto-digital assets at Fordham Law School. "You're buying a different format of art."

When you buy an NFT, you may or may be not purchasing the copyright or trademark to the item and there may be any number of other digital versions of the item.

NFT advocates and recent transactions affirm that owning a piece of code in a blockchain can be an incredibly valuable thing and can be highly marketable.

As an example "You're not buying the picture," said Jake Brukhman, founder of cryptocurrency investment company CoinFund. "You're buying the property rights to the picture."

Blake Finucane wrote one of the first academic papers on tokenized art that is now defined as NFTs. And that means they're not interchangeable. Each one is special and identifiable. It's that non-fungibility that helps keep track of things like provenance and authenticity. Finucane says that, in turn, this creates scarcity for digital art. Elena Zavelev has spent much time explaining NFTs to art professionals as the founder of New Art Academy in New York including how NFTs can be used to monetize works of digital art.

https://www.npr.org/2021/03/04/973791982/a-small-choral-group-is-betting-big-on-tokenizing-their-art-with-blockchain

But like with other collectables, whether it's baseball cards, rare books or fine art, having an original is special. The minting of the specific digital art on blockchain establishes its originality and its providence as part of a permanent open digital record. The blockchain digital record preserves the original image code as well as all transfers of ownership and rights. The minting of the art on blockchain creates scarcity and thus value. The fact that there may be unlimited numbers of copies of the art on the internet does not diminish the valuation of an NFT.


As an example CryptoPunks avatars have earned millions of dollars for their creators. You can download one of the avatars, but collectors would not consider it authentic. Authentic CryptoPunk avatars have sold for as much as $900,000. In such NFT transactions there is no visual difference between an original and a copied version other than the metadata that expresses its blockchain minting.

 


 

On March 11, 2021 the above CryptoPunk 7804 NFT created by Larval Labs sold for $7.8 million dollars. CryptoPunks are “unique collectible tokens that live on the Ethereum blockchain,”

https://www.larvalabs.com/cryptopunks/details/7804

 

 

Not all NFTs are originals. Many are the digital equivalent of a reprint or reproduction. But in this case, the reprint has what is essentially a unique bar code, or "token," on the blockchain, which is a decentralized record-keeping system. Instead of one institution having a ledger of transactions, blockchain uses a vast global network of computers that all hold each other accountable on the preservation of a shared permanent public record.

This means that it is very hard to remove an NFT from the Web as well as almost being impossible to edit the history of an NFT and establishes an NFT's minting (origin) as authentic and affirms its transaction history.

 

How are NFTs bought and sold?

All NFT transactions are in cryptocurrency so you have to purchase a cryptocurrency, like Ethereum or Bitcoin. You can then go to an NFT marketplace and participate in an auction or directly purchase a selected piece of art. Bids and direct purchase prices on the marketplaces are expressed in the form of the accepted cryptocurrency.  The marketplaces function very similarly to Ebay. Some of the popular marketplaces include KnownOriginRarible and OpenSea.

 

You can bid on an NFT and wait for the auction to end. If no one outbids you, you get the ownership and agreed to use rights for the piece of art in question. Your purchase becomes part of the permanent blockchain record and as the owner you have the right to sell it at any future time.

 

NFT Marketplaces

https://knownorigin.io/

https://rarible.com/

https://opensea.io/

 

How are NFTs Minted?

In order to create an NFT you go to one of the NFT marketplaces and upload a file containing the code that defines the expressed art. This process is called "minting" an NFT.

As part of the minting process, the artist establishes use rights and ownership status as well as determining if the item is one of a kind, limited edition or if there are multiple copies or if it's part of a collection.

 

Once the minting is complete collectors can begin bidding on the art.

Digital artists can build a royalty into their NFTs that will apply to future sales, which is why many artists see great promise in NFTs: NFTs can cut out the middleman and open up a new-ways to monetize digital art.

 

As millions of dollars in transactions pour in for NFTs, advocates believe NFTs will soon expand beyond transacting: art, music, video clips and memes. One startup people use their NFTs as collateral for loans. Silicon Valley investors say the commercial possibilities in the NFT world are limitless.

 

How Long will a NFT Exist?

Blockchain is an emerging technology, however because it is increasingly being used for financial transaction, recording of births and deaths, land title, legal documents, business records and other fintech recorded on a global network of hundreds of thousands of computers it may have an enduring presence. This offers an intriguing platform for artists, one that assures the preservation of one’s creative work for many generations and perhaps for many centuries.

 

How do you know is a NFT is Authentic?

When an NFT is minted, in addition to the code that defines a high resolution-resolution image, metadata is minted with each token. This includes names and links, the most important piece of data is the SHA-256 checksum. This long string of characters allows anyone to verify the authenticity of the token’s associated artwork file. This data helps to prove that the token is genuine and that it is unique.

To validate an NFT you would check its SHA-256 and if it matches, you know you’re looking at the original art file that was minted with the token.

 

NFT and Northstar Gallery

I would welcome thoughts on minting some of the images from the Northstar Gallery Stone Spirits series as NFTs Will minting an NFT enhance the value of a related traditional fine art print? I have been very interested in the impact of the digital revolution on traditional art, how it will be exhibited, experienced and viewed. 

 

 


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