NFT Art Explained: Definition, Tech, and Pricing Mechanics
With the ever-increasing developments in technology, art and artists have much space to adapt their work and rely on new and valuable technologies to provide solutions. Due to the prevalence of physical artworks in our world, digital creations by artists have long been undervalued and often not considered, in part due to being so freely available everywhere.
Non-Fungible Tokens, or NFTs, are becoming a much more viable solution for artists to create financial value from the digital artwork they produce.
Investors often seek to rely on galleries and auction houses to discover and buy new and exciting art.
The emergence of NFTs is bringing about an artistic revolution, changing how artists can sell their art. These NFTs function as a form of crypto token connected to a digital asset, such as a song, a piece of digital art, or royalties. This, in turn, assists artists in selling their work directly to art connoisseurs.
What is NFT Art?
NFT stands for Non-Fungible Token.
NFT art is a collectible digital asset that can be tradeable in the digital world.
For obvious reasons, traditional works of art such as paintings are valuable because they truly are one of a kind — painted by hand, with a special technique, often with special paint.
As we are well and truly aware, digital files can easily and endlessly be copied and pasted as much as the owner wants. Not so with NFTs. These items are bought and sold with a digital certificate, showing ownership of a unique virtual or physical asset that someone has produced.
Like everything else in our world, these digital items can only have one official owner at a time.
These are secured and protected by blockchain technology, an incorruptible database that cannot be tampered with. Blockchains are a database that cryptocurrencies such as bitcoin and Ethereum utilize and, if they wish, could implement their system for NFTs.
Due to the nature of blockchain, no one can change the record of ownership nor copy or paste to create a new version of the NFT. They can be easily traded, verifiable, and have no tangible existence in the real world. While NFTs utilize the same database as cryptocurrency, it allows them to store extra information, making them work differently.
What is “Fungible” in NFT? How do NFTs work?
When we consider economics, something that is a fungible asset has units that can easily be interchanged, such as money.
The definition of fungible is any item (of goods contracted for without an individual specimen being specified) replaceable by another identical item; mutually interchangeable.
The definition of a token is a sign, symbol, or a piece of stamped metal used instead of currency. For example, a gift is sometimes referred to as a token of the giver’s esteem for the recipient. In the digital world, any representation of value is called a token — and these tokens can be fungible or non-fungible.
Fungible and non-fungible tokens have a few differences, the main being that fungible tokens are interchangeable, divisible, and uniform across all types and usage.
Fungible tokens are any items that are exchangeable and interchangeable with a token of an equivalent type or value.
A $10 note can be seen as the same thing as two $5 notes. We know that these have the same value. In the same way, ether and dollars are fungible, for example, because 1 ETH is equal to $1 and can be exchanged as such.
Hence all cryptocurrency assets are fungible and can be interchanged for other currencies of the same value, such as one bitcoin for another bitcoin.
In addition to this, fungible tokens are easily divided. One unit of a fungible item can be divided into smaller portions of their units.
For example, a bitcoin does not need to be purchased as one full unit.
It is entirely possible to purchase bitcoin in small parts, such as 0.25BTC.
Non-fungible tokens, on the other hand, are not interchangeable, not divisible, and unique in their style and function.
If an item is non-fungible, this is quite simply impossible. The item has such unique properties that it cannot be interchanged with something else of similar value.
For example, the house you live in or a painting such as the Mona Lisa are one-of-a-kind items — they cannot be reproduced, and their value cannot be interchanged.
Sure, you can take a photo of a painting or buy a print of it, but it will never be the same as the original painting you saw.
The term can describe furniture, a song file, real estate, collectibles, or even your computer. Think of rare Pokémon cards, old coins, GIFs, tweets, video game skins, virtual real estate, or some of the rarest Air Jordan’s in the world.
These things all have properties that make them unique, usually with a certificate of authenticity to prove it.
Not only this, but they are also in a scarce supply amongst the assets with infinite availability to the masses.
In the simplest of terms, an NFT makes digital items, works of art, or other collectibles into a “one-of-a-kind” asset that can be bought and sold by their makers and buyers like any other property.
Non-fungible tokens are not interchangeable with any of these same kinds of tokens. They can be artifacts, digital art, game items, avatars, and the like, which have no equal to other NFTs.
Not so with NFTs, which cannot be divided into smaller units. Anyone seeking to buy a non-fungible token must buy the whole unit or not at all.
Uniformity is also an aspect of fungible tokens, which means they each hold the same value across all tokens when they are the same type.
One bitcoin will always hold the same value as another, which cannot be altered.
However, when it comes to NFTs, all tokens are designed and created to be unique, and every NFT is not identical to any other.
This means that their value will also be different and unique.
What is the technology behind NFTs?
NFT relies on blockchain technology.
The decentralized and unique nature of blockchain helps create new ways in which art can be produced and acquired.
The use of blockchain can alleviate some of the power big collectors and dealers hold over the art world, shifting some of the power back to the artists. The move cuts out the mediators in the middle who often seek to take out a big cut of the profit made on an art sale, and this means the artist is of high advantage.
For art investors, a model over blockchain would provide more incentive to provide a backing for new and promising talent, taking advantage of the art valuation growth by joining an artist in the beginning.
Art collectors pay ridiculous sums of six to eight-figure values to acquire a piece of art when often the works they purchase can be seen and shared online for free.
Many critics have suggested that the NFT idea is just the latest fad, much like the Reddit stock market bolster of stocks like GameStop.
However, the NFT craze is attracting groups of artists and investors, speculators and their imaginings seeking to get rich off the NFT idea, while a subtle emergence of a new economy is rising.
How do artists price NFTs?
Anyone can make a token and sell their creations as an NFT, but interest has recently garnered through several high-profile, multi-million-dollar sales.
The price of the NFT defines by the subjective value of your work.
The “value” of any object is not defined by the number of resources and the hours of labor that went into creating and producing it but is variable according to its context and the rationale or perspective of its users. The theory argues that any object’s value is determined by the individual buying or selling it.
In the world of NFTs, the price is based on how the target community perceives it.
One of the most popular meme videos, none other than an animated GIF of Nyan Cat, sold for more than 500,000 dollars. Not even a few weeks after this, the musician, Grimes, sold some of her tokenized art for more than 6 million dollars.
Other, less artistic items have also been sold. The founder of Twitter, Jack Dorsey, sold Twitter’s very first tweet as an NFT, with bids for the item reaching as high as 2.5 million dollars.
An NFT sale by a digital artist named Beeple sold for a huge 69 million dollars, the biggest sale for digital art to date. However, as with cryptocurrencies, there are some major concerns about the impact maintaining blockchain has on the environment.
Why NFT’s are gaining so much momentum in the art world?
There are several reasons why it has gained so much momentum in the art world, from freedom of expression to the removal of the middleman.
Freedom of Expression
One of the greatest things worth celebrating about the NFT system is that it boasts the incredible ability for artists to freely express themselves.
Digital arts medium has no limitations, and the artist, unlike more traditional art forms where the artist is confined only to a canvas or a photo.
NFTs have altered the definition of art, helping to make the art world and art forms more inclusive of digital expression than ever.
Many artists are working in unusual, controversial, and often groundbreaking art styles in digital art, and these are received much interest from the collectors and investors in NFT art. Some of these, such as whirling 3D images, oversaturated street-style artworks, and cartoons, thrive in the online marketplace.
The younger generations who spend all their time on Instagram and all the individuals who are drawn to cryptocurrencies are drawn to the aesthetics, fueled, and given screen-time by the internet.
Mat Dryhurst noted that “the street art and countercultural style are being used to reinforce the impression that most finance-crypto people have that they are the ‘punks’ in the broader tech and finance world.”
Being online, all of this happens without the support network of the galleries of the art world.
In some ways, the galleries are gatekeepers, choosing who or what to display or taking big cuts of the work when it is sold.
The artists who produced NFT art are forming online groups and communities where they help each other and educate one another across their networks.
Several artists from India have produced digital artworks and sold them to collectors in other countries worldwide.
Investors normally have a diverse portfolio, and many big businesses and celebrities use the blockchain platform to purchase and sell NFTs.
Some, such as the NBA Top Shot, are using the official platform of the National Basketball Association to buy and sell basketball highlights online, packaged as digital trading cards. According to its parent company, these sales have amounted to over 390 million dollars in sales since it was launched.
Football star Rob Gronkowski has sold some Super Bowl highlights as trading cards for over 1.6 million dollars, and the rock band Kings of Leon sold some music as NFTs for over 2 million dollars.
Twitter’s founder’s first tweet put up for auction is expected to sell for 2.5 million dollars. As time goes on, NFTs are selling for higher and higher millions of dollars.
Proof for Many
The NFT movement is evidence of the belief that these technological developments, such as cryptocurrency and blockchain platforms, have the chance and the power to change the world as we know it.
Blockchain technology has already been utilized to improve voting security in the United States of America, combatting insurance fraud, and secure the medical information of several United States healthcare enterprises.
Advocates for the blockchain systems say that it can assist companies with ensuring transparency within their chain of supply, streamline processes such as mutual aid efforts, and reduce bias when it comes to the loan application process.
Key Challenges in NFT Space
As with many technologies, there are certainly challenges to be overcome by the NFT movement.
Even as many people benefit from the craze, there is a darker side. There are barriers to entry, as it costs money and requires knowledge of technology to be able to sell an NFT, which could easily prevent certain artists from participating and selling.
There are some concerns that this would especially impact young artists of color, who have traditionally been marginalized within the physical art world. The experts in law are faced with difficult discussions about how copyright laws will impact or need to be updated to catch up to the innovative technology, as some people have stolen and sold the work of others as NFTs without artist permission.
If people can steal something, they will, and “it’s providing another platform for people to take advantage of other people’s work,” said Connor Bell, someone who has experienced this.
Of course, there are also concerns about the impact on the environment.
Creating an NFT requires a huge amount of computing power, and the server farms used to produce such a digital asset are powered by fossil fuels.
An assistant professor of visual arts administration at New York University, Amy Whitaker, notes that “the environmental impact of blockchain is a huge problem.” The majority of the major NFT marketplaces use the Ethereum blockchain, which uses a lot of energy to work.
The system uses a digital mining process like Bitcoin, where computers solve complex Math problems to verify and confirm transactions.
The popularity of Ethereum is mostly due to how it can deal with transactions outside of its blockchain, and this fact makes it a much more flexible system than Bitcoin. Due to its complexity, it is known that it requires enormous amounts of energy to process transactions.
However, some advocates for cryptocurrency consider these fears to be overstated. These proponents suggest that the energy use is offset by energy reductions in other areas, such as reducing manufacturing, shipping, and transportation energy costs. In addition to this, NFTs don’t use natural resources, so no paper or ink is used or consumed in the process.
Notable NFT Projects
Several NFT protocols, or projects, make a lot of money through the sale of NFTs. Mentioned already is NBA Top Shot, but here are some other examples of NFT protocols taking off.
From marketplaces to financial tools, collectibles, and gaming ecosystems, this list of NFT uses has something for everyone.
There are many marketplaces available for NFTs, and the items that follow are a selection of such.
OpenSea is an NFT marketplace, self-described as the largest in the world. Here, you can search for non-fungible tokens, purchase the ones that you desire, and sell the ones you have created. From art to music to trading cards and other collectibles, OpenSea has it all.
Rarible is a place for creating and selling custom NFTs and assets that represent the ownership of the token. Some of these items are artworks and memes and can even include virtual land. The platform contains its cryptocurrency, the RARI.
TokenTrove is a place for collectors of popular crypto assets and digital collectibles. Featuring prominently on the home page are game cards for Gods Unchained, a popular Magic: The Gathering style game on the Ethereum ecosystem, amongst others listed.
A place designed for some of the world’s most creative minds, MakersPlace seeks to provide a platform for digital artworks and their creators, all issued and signed by their creators. It’s a place for authentic and truly unique digital works of art.
KnownOrigin, an artist-driven marketplace for rare digital artworks, is designed to make it simpler and easier for digital artists to create, authenticate, list, and sell the artworks they produce on the Ethereum blockchain. According to its website, every digital collectible is authentic and unique.
Cargo is a platform designed as an all-in-one place for selling non-fungible tokens. It’s a platform to create, manage, display, and sell NFTs, from digital art to gaming items, tickets, etc. It makes full use of blockchain technology, and any digital collectibles owned can be managed through Cargo, whether Ethereum, xDai, or Polygon.
Blockparty is a storefront platform designed for creators and brands, allowing these groups to easily create verifiably unique, connected items that can bring utility and joy to their buyers online and offline.
Mint base is a marketplace containing both auctions and stores, which allows creators to create their non-fungible tokens easily and simply, without worrying about all the technical issues that come with it. It’s a place for digital artworks, music, and event tickets. It’s sometimes called the Shopify of non-fungible tokens.
Zora’s a place to buy, sell, and trade limited edition objects, including some unique NFT marketplace takes. Their items are dynamically priced, based entirely on the supply and demand of an NFT. Items can be fractionally traded, where people can buy and sell parts of an item to determine its value. Some items can be launched before they even exist, allowing the community to purchase before an item is ready to go.
A decentralized marketplace and social network for NFTs, it uses the Ethereum blockchain network for minting items and making the token 100% unique. It can be bought, sold, traded, or HODLed (held by the investor despite drops in value). Super rare has quite the waiting list, with one user said to have waited one and half months for approval.
Nifty Gateway is an auction platform owned by the Winklevoss brothers, specifically working with digital art. It has sold artworks from many world-renowned digital artists, including Beeple, Grimes, LOGIK, and other widely popular creators.
A new form of digital art creation, Async Art is a movement that seeks to create, collect, and trade art; this is unique in that it is programmable. The works located here are split into layers, which can be used to change the image. Art can evolve, react to its owner, or follow a stock price.
Business and Finance
NFTfi is a place where NFTs are used as collateralized loans. Owners of NFTs can put up their assets as collateral for a loan or provide loans to other NFT owners on their NFTs. Using NFTs as loan collateral, especially considering the value of many NFTs is just as helpful as using a car or house.
NFTX is a location that provides liquidity for illiquid NFTs. Liquidity means that an asset can be easily and readily converted into cash without impacting the item’s market price. The platform seeks to form fungible versions of the most popular non-fungible token collections, providing more accessibility for the items and more liquidity for users.
A centrifuge is an online protocol that allows investors and businesses to do a variety of things. It’s a connection point for decentralized finance and allows owners to link assets such as invoices, real estate, and loyalties, tokenizing these real-world assets on the blockchain network.
The upshot, another online protocol, is a website that hosts games asking subjective questions on non-fungible tokens. The appraisals of these NFTs are crowdsourced, which seeks to ensure that the marketplace for all users is fair and honest. Experts are paid for their work and unlock new opportunities for work for many.
Typically, non-fungible tokens are unable to be broken up into smaller pieces. NIFTEX is a place that allows owners of NFTs to break their non-fungible tokens into fungible fractions, which allows owners to open many different possibilities, such as liquidity, valuation of assets,s and much wider, cheaper access to such digital items.
Like any fungible asset, insurance of your hard-earned and expensive items is important. Such is the case, too, with NFTs. yInsure is an insurance platform that has been developed to provide insurance for cryptocurrencies, decentralized financials, and non-fungible assets.
CryptoKitties is an incredibly popular collectible blockchain game where users can purchase, collect, and breed an assortment of cats. You can earn rewards, play puzzles, unlock rare cat traits through breeding and play games with other owners. Each NFT collectible cat is one-of-a-kind, unique and 100% owned by the user. The cat cannot be replicated, removed, or destroyed.
One of the first non-fungible tokens used on the Ethereum blockchain, CryptoPunks are 100% unique, collectible characters. All proof of their ownership is stored on the blockchain. There are 10,000 punks in total, and while originally free on release for those with an Ethereum wallet, they were quickly taken up by their owners. Anyone seeking to own a CryptoPunk must buy or bid on one from their owner.
The National Basketball Association of North America, the NBA, has officially licensed a trading card game through the blockchain. These non-fungible cards are collectibles and official items from the sport. Users can collect common and rare cards and trade them online through the blockchain platform.
Avatars seek to create their own metaverse, where these avatars are seen as a digital collectible in this world. These tokens are generative, addictive, and contain various artworks and styles that make every avatar unique, from their skin color to their hairstyle to their facial features.
Another location for playing cards, SoRare, is a global blockchain-based fantasy football game. Users can buy, sell, trade, and manage their virtual team of players. Players can enter tournaments for free and play against others. Being located on the blockchain, every card is unique, and each is registered as a one-of-a-kind, non-fungible token on the Ethereum ecosystem.
A virtual world in the same vein as Pokemon, Axie Infinity is full of wonderful, fierce, adorable, and strange pets called Axies. These creatures can be battled for glory, traded, bred, and can even be used to earn cryptocurrencies. There are many different Axies available for sale, and as of May 2021, it is considered the most expensive collection of non-fungible tokens in the market.
A space massive multiplayer online game, CryptoSpaceCommander (CSC) contains combat mechanics, a player-owned and operated in-game economy and a huge crafting system. Players have a lot of freedom, from travel to mining to battling others. Everything you own is secured and protected through the Ethereum blockchain, which secures assets and enforces player-to-player contracts.
A trading card game to rival Magic: The Gathering, Gods Unchained is hosted on Ethereum and is totally free-to-play. Anyone who wants can pick up the game and begin and earn cards and in-game currency as they play. Unlike many traditional games, the cards you earn are 100% yours. They are minted and verified on the blockchain, and they are owned by the player. All cards can be sold for in-game currency and traded.
An RPG battling game, MyCryptoHeroes, is built entirely on the Ethereum blockchain. Users collect heroes inspired and based on historical figures, can send them on quests to earn rare items, and can battle against the heroes of other players for fame and glory. The game is the number 1 blockchain-based game based on daily transactions and users.
Systems and Platforms
The PolkaFoundry is a place set up solely for developers. This place is for you for anyone seeking to create decentralized finance or a non-fungible token application. Through Polkadot, you can make NFT auctions and marketplaces, lending platforms, insurance, and more.
Phala is a network that is designed as a privacy-preserving cloud service, working as a part of the Polkadot ecosystem. The system is comparable to all the current cloud services across our devices and works at protecting the privacy of programs managed under its umbrella.
Data and Privacy
Snicker Doodle is a tool built on blockchain technology designed entirely with the focus on protecting users’ privacy. Additionally, it creates value for all shareholders, including data owners, who own and monetize their data as they see fit.
Nonfungible is self-titled the world’s largest NFT data resource for a good reason. It contains a real-time market analysis of different non-fungible token projects and their sales, valuations of portfolios, consulting services, and a large knowledge bank on all things NFT. It exists as a research platform for the NFT market and contains much useful information.
NFT Bank is a useful resource for anyone holding a portfolio of NFTs. It works well as a portfolio tracker, a tool to analyze the worth of your portfolio, check your inventory, and get a much more comprehensive understanding of the NFT investments. It also holds an analytics tool, which allows you to check the provenance of an item, and who and where it came from.
A virtual reality world, Somnium Space is an open-world social game. It can be accessed in both 2D models from a user’s computer as well as through a headset; it contains its own economy, marketplace, games, social experiences, and even ownership of land, all through the blockchain network.
The Sandbox is a community-built project where the creators of voxel block-based worlds can monetize their assets and gaming experiences on the blockchain network. All NFTs are user-generated content, with land, voxel-based art, and an in-game marketplace to buy all of it. Users can build 3D games for free using all these assets.
Cryptovoxels is a user-created and owned virtual world powered by the Ethereum blockchain. Players can create anything they want on land which they purchase, from stores to sell things or art galleries. The game contains all the necessities, from building tools to chat boxes to in-game avatars.
A virtual world wholly owned by its users, Decentraland is a place to create, explore, and trade across an expansive, user-created world. Many users have developed amazing scenery and buildings on land they have purchased. From villages to dungeons to space, there is something for everyone.
All assets on the in-game marketplace are backed by the Ethereum blockchain, where you can find real estate, wearables, and even names.
There are many ways that humans can utilize NFTs in everyday life. From marketplaces and finance to gaming and virtual reality worlds, NFTs are truly unique in their application and provide a significant utility across genres.
As technology progresses into the future and as we get more and more excellent ideas on how to utilize this incredible technology, there is no doubt that the possibilities for NFT use will multiply. The developments that we have today will have even more applications tomorrow, and the future ahead of us with blockchain technologies is exciting.
It’s clear that NFTs are in the limelight during this time, and the creators of NFT artworks, such as artists, gamers, and big business brands across the world, are certainly cashing in on big money.
A new player seems to enter the NFT marketplace daily, bringing with them new NFTs to be sold in a desire to earn big.
What is NFT art? Whether they are here to stay or soon to go, in the here and now, they are mostly the toy for the rich and powerful, the ones with money that can make it all happen.
The non-fungible token phase of the 21st century gives a new meaning and purpose to digital artwork and its artists, and the huge costs of these works online suggest that the digital works produced by artists of our day and age have a future in the art world as we know it.
Originally published on https://www.theartist.me/tech/what-is-nft-art/