The new crypto craze is all about Non-Fungible Tokens. They make it possible to “own” digital assets such as digital art, event tickets, sports cards, in-game items, virtual clothing, and virtual real estate.
Virtual Assets? Like Digital Pokemon cards?
Who cares about that? Well, Mike “Beeple” Winkelmann cares because he sold $3,500,000 worth of digital art last year using NFT’s. Now world-renowed auction house Christies is auctioning his next work.
Use your imagination a little bit. We already spend 30% of our time in virtual worlds. This amount will only increase. Just like we have art, fashion, and collectibles in real life to show who we are, we’ll do the same virtually. We’ll signal status just as much in the virtual world.
In real life, it doesn’t make much sense either to see how much people pay for stamp collecting, Pokemon cards, and art. Why would this be different in a digital world?
Companies are already jumping on the opportunity. The NBA makes it possible to “own” certain moments in NBA history.
What does it mean to “own” a Digital Asset? What is an NFT?
You can buy a poster of the Mona Lisa for €10 but you don’t own the original Mona Lisa. The value is in ownership. But how can you own a digital image if you can just download and copy it? Before NFT’s there was no good way to prove ownership of a digital asset.
So how does an artist create an NFT to prove ownership? An artist mint’s an NFT on a blockchain. This creates a token that traces the artwork back to the original artist. The NFT states who the creator is, when it’s created, and includes a URL to the artwork. The NFT can be sold, traded, collected, and more. Just like an event ticket or domain name can. If you want some more technical background on how this works, read this article.
Compare an NFT to a digital certificate of authenticity. All you need to know about an NFT is that it can prove who created the art and who owns the art. Because it lives on the blockchain no central authority can alter this information.
An artist can sell artwork for €1000. Years later it can sell for €3,000,000 but the original artist gets nothing from this. But NFT’s are pieces of computer code and can include extra rules such as royalty payments. For example, every time the NFT is sold to a new owner, the original artist can get 10% of the purchase price. This way art can become a recurring revenue stream for an artist instead of a one of sale. NFT’s are new, so many more possibilities might arise.
Right now this all looks stupid
Paying thousands to own a Digital Donut? And you may be right. It’s overhyped at the moment and people will lose money. However, the technique is new. Who knows where we will be in 20 years. Maybe in the future having a rare digital Ferrari is cooler than having an actual Ferrari?
With VR/AR applications growing steadily it will be interesting to see how these worlds come together. I’m just happy to see a new generation getting excited about digital art.
Interested? Explore some NFT Platforms: