What are NFTs and how they are changing the state of the art
Duplication of objects is one of the problems that in the age of digital computing plague all those contexts in which objects in the digitized real world have their own inherent “uniqueness.” Notoriously, Satoshi Nakamoto’s white paper solves, with Bitcoin and the blockchain concept, the problem of “double spending,” or the duplication of digital money, by leveraging a decentralized solution.
The issue of duplication in the digital world also applies to any object that is non-fungible, that is, endowed with its own specific individuality and therefore not replaceable or exchangeable. Think of works of art or collectibles. Any video and image in digital format can be duplicated and exchanged as files without the creator having any control over them. The blockchain also comes to the rescue here thanks to NFTs, which are currently one of the major trends in the cryptocurrency market.
What are NFTs and how they are changing the state of the art
The acronym NFT stands for NonFungibleToken. This is nothing new: non-fungible tokens imprinted on the blockchain appeared on the Ethereum network back in December 2017 with Cryptokitties. The ERC-721 standard allowed tokenization of virtual collectibles. A few weeks after the launch, fans of the virtual kittens reached an Ether spending of $20 million. In 2018, the ERC-1155 standard was proposed to the Ethereum community to become an official standard a year later. With a reduction in the amount of code required to produce a single token, gas fees were substantially reduced. The advantage was to interact with a large number of Ethereum smart contracts due to backward compatibility with ERC-721 and ERC-20 standards.
Basically what are NTFs? In essence, an NFT consists of digital information recorded on the blockchain that associates a subject with a particular right, such as ownership or authorship, due to the non-interchangeability that enables it to provide a unique representation of an asset.
The history of the token, and thus of the non-fungible object, is immutably imprinted on the blockchain, from its creation to all transactions involving it. This ensures verification of authenticity and the possibility of tracing it back to an owner. The use of an NFT thus makes it possible to prove and certify the intellectual property of any intellectual work. In fact, its attribution, even following transactions attesting to the transfer of ownership, will always remain associated with its creator.
It would be limiting to trace NFTs to the areas of digital art or collecting alone
The nonfungible.com website categorizes NFTs in detail according to the relevant field (think of metaverse and gaming, for example). Without going into too much detail, we can say that NFTs provide the opportunity to create new forms of investment. A typical example of this is the division of a real estate property into several units, each of which corresponds to different characteristics that make it non-fungible. The virtual reality platform DecentraLand has implemented such a concept on the Ethereum blockchain, and as NFTs become more complex and approach the world of “established” finance, the way may open for tokenization of portions of property in the physical world.
It is the digital art market that has been making waves in recent weeks, bringing NFTs to the forefront
Christie’s, the world’s leading auction house, has sold for $69.3 million in an online auction the work “Everydays: The First 5000 Days,” created from 2007 by American Mike Winkelmann, aka Beeple. Recently, the sale for 300 Ether (equivalent to nearly $480,000 at the time of purchase) of the Nyan Cat gif, an animated meme of the cherry cookie cat flying with a rainbow trail behind it, had caused a stir. Youtuber Logan Paul made $5 million selling his NFTs. And a caricature video of Donald Trump was sold at auction for $6.5 million, one hundred times the original purchase price.
With NTFs changing the state of the art, the profit margins in the digital art market have clearly attracted the attention of speculators with massive investments, thus making that of NFTs a significant trend that needs to be followed closely. However, it is recommended not to indulge in classic FOMO (“Fear Of Missing Out”) in regards to a phenomenon that is likely to go through the characteristic stages of a financial bubble.
Gianluigi Cosi
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