What Is an NFT and Did It Turn the Art World Upside Down?

NFT (Non-Fungible Token) used to be one of the most popular words in the art world. It presented a new way of investing in art or digital assets such as GIFs or tweets.

338 billion USD – this was the amount reported by the company NonFungible of Non-Fungible Tokens sold in 2020. This means that their value increased over 8 times since 2018. Do NFTs have the potential to revolutionize the art world?  Why was this trend increasing and what does art tokenization mean? We have gathered everything you need to know to understand this digital movement.

What Is NFT and How Does It Work?

When purchasing a digital asset such as a digital artwork, tweet, GIF, or any other digital file, the buyer receives an NFT token – a type of serial number encrypted by the artist’s signature. Therefore, the token becomes a kind of signature or rather a certificate of authenticity. Such a transaction is registered in blockchain (a digital system of recording information in a way that makes it nearly impossible to commit any fraud) and becomes public. It cannot be changed, deleted, or canceled. The buyer of the digital asset becomes the official owner of the good which is often widely accessible and available to larger audiences. The NFT token can be resold and as a result, the title to the digital asset can be transferred to the next buyer.

The History Behind NFT

The history of NFTs dates back to 2017 when an American Studio Larva Labs developed Crypto Punks – 10,000 unique collectible characters traded through NFTs. Each of them came with a proof of ownership stored on the Ethereum blockchain. The Crypto Punks are the first NFT on the Ethereum platform and an inspiration for the ERC-721 standard – a standard that currently lies behind most digital art pieces and collectibles.

The Most Famous Transactions

One of the most famous transactions was the auction of Nyan Cat on the Foundation platform. Nyan Cat is the name of a well-known YouTube video dating back to 2011. The video shows an animated cartoon cat that has a Pop-Tart as his torso. The short movie follows the cat flying through space and leaving a rainbow trail. Nyan Cat currently has over 185 million views on YouTube. Chris Torres, the creator of Nyan Cat sold it in February 2021 on the Ethereum platform for as much as 580k USD. The platforms use Ethereum (ETH) as their main currency, it is the second-largest cryptocurrency after Bitcoin (BTC). Bids for Nyan Cat started at 3 ETH (about 1,544.38 USD) and closed at 300 ETH at the time of the sale.

Another transaction that gained a lot of interest from the public – Jack Dorsey, CEO of Twitter sold his first tweet as an NFT for 1,630.58 ETH which at the time of the sale was equivalent to 2.9 million USD. The tweet which said “just setting up my twttr” was published on 21st March 2006. It was listed for sale on March 6th this year and by March 9th reached the highest offer from Sina Estavi, CEO of Bridge Oracle who finally won the auction.

The element that we can buy or sell with NFT is basically anything that is digital, from a painting to a piece of music. We might think, what is the point of buying it if there are millions of copies all around the internet? True. But NFTs are a form of digital asset in which ownership is recorded in a blockchain. It is the same as having an original Monet painting on your wall while various copies hang in the homes of people all around the world. However, the original Monet piece is the only one and therefore is exceptional. It is the same with digital art and NFTs. An artist may create multiple copies but only one of them is considered and certified as the original.

Where to Buy and Sell NFTs

There are many various marketplaces where you can buy and sell NFTs. The most popular are OpenSea, Rarible, SuperRare, and Foundation. OpenSea describes itself as being the largest NFT marketplace which offers not only art pieces but a wide range of collectibles including arts, trading cards, and sports collectibles. If you are selling items on OpenSea, you can do it for a fixed price, a declining price listing, or an auction listing which gives a variety of tools and financial models for the artists.

NFT Tokens Change the Art World

We are all asking ourselves if NFTs will become a main trend in the future of art. Since Christie’s has offered at its auction a purely digital artwork, we can see that the trend is increasing and entering the mainstream of art sales. In March 2021 an artwork by Mike Winkelmann, the digital artist known as Beeple, sold at Christie’s for 69 million USD. The work is a collage of 5000 digital images, created by Winkelmann for his Everydays series. This sale made his work the third most expensive art piece of a living artist at the time. 

What impact can NFTs have? First of all, they can strengthen the artists themselves and impact the growing trend of the creator’s economy in which artists will have more possibilities to sell their works directly to collectors. NFTs also contribute to the development of digital art.

This trend used to be extremely popular with wealthy millennials who see high-end art purchases as a great financial asset and an important part of building a comprehensive wealth strategy. However, it is worth adding that NFTs might be a revolution for art museums and galleries and the way they earn money. Perhaps such institutions will start selling or renting parts of their works or entire works with blockchain technology.