N - F - What? NFT is short for Non Fungible Token, which means a non-exchangeable item. An NFT can be almost anything: a meme, a song, a piece of art, a video game accessory, a tweet, a virtual house or property, a domain, a video of a legendary moment... The list can go on and on. Because ultimately, anything (well, really anything) can become an NFT. The key thing here is that ownership of these items or digital assets is firmly recorded on the blockchain when they are purchased, making them impossible to forge.
Well, the process is actually quite simple:
Fill the wallet: Once created, the wallet can be filled with cryptocurrencies. NFTs are traded almost exclusively with the cryptocurrency Ethereum, so the wallet should also be filled with Ethereum. Ethereum can be bought at Coinbase, for example.
Minting: The actual creation process takes place on platforms like SolSea and OpenSea. Here, you first connect your wallet to the platform and can then upload the files (whether image, video, sound, ...), describe them and set the value. Once one has done that, the "proof of work" is noted on the blockchain and all related information is stored. For minting, one pays a small fee depending on the platform.
Ready: Now you can sell and auction the NFT through different platforms like Rarible, OpenSea, and Nifty Gateway.
Mike Winkelmann aka Beeple is an artist from the USA and last year sold one of his artworks as NFT at the traditional auction house Christie's - for 69.3 million US dollars. "Everydays: The First 5000 Days" is a collage of 5000 digital images that Beeple created daily over 14 years. At first glance, not too spectacular a work of art. It was sold as a large JPEG file with the accompanying Ethereum blockchain code. However, the copyright does not come free with the purchase. This means that everyone can still use this image, but only the:the buyer:in owns the original file. Fun fact: Since the copyright still belongs to Beeple, he can resell the individual 5000 images - and thus promptly auctioned off the Day 4344 image for another 6 million US dollars after the auction.
The idea of paying for symbolic ownership of a digital image that lives somewhere on the Internet and can be downloaded in seconds with a screenshot or a right-click is so foreign that it seems incomprehensible or ironic to many. Yet proponents of NFTs claim that they solve this very problem: the near-impossibility of monetizing digital artworks. "As a mechanism, NFTs make it possible to assign value to digital art, opening the door to a sea of possibilities for a medium that is not constrained by physical boundaries."-Noah Davis, contemporary art expert at Christie's.
There are definitely some advantages in this seemingly bizarre art world.
One of the main points is that the digital ownership certificate on the blockchain makes file forgery useless. While images, videos and music files can still be downloaded by anyone, no one can claim ownership or creation of these files anymore. Originals can be distinguished from copies by NFTs. For small artists, this is a great way to protect themselves from exploitation by large artists, labels and organizations, or trolls.
Also the possibility of smart contracts is a sustainable way for many NFT creators to make money. As an original owner, you can specify in advance that you will receive x% of the sales value for each resale. Especially for new artists this can be a good opportunity. Many are not aware of the potential of their art in the early stages and get involved too quickly in deals that could have made them millions a few years later. To save yourself all the "would've, could've, should've", you can hedge your bets with these smart contracts.
People who don't have a particular talent with which to create art still hypothetically have the opportunity to profit from NFTs. I'm sure we're all familiar with the situation where we once had to include a notarized degree certificate or other notarized document with a job application or other big event. NFT use could soon make such certifications overdue as well. Researchers at the Fraunhofer Institute, for example, developed a technology to convert documents into NFTs, thus eliminating their forgery. Even though many Germans love their bureaucracy, I'm sure at least as many are happy to have some paperwork made easier for them. NFTs also make cross-border trade much more accessible, opening new doors for many companies. The question of regulation of this borderless trade is of course another issue...
Another key benefit of NFTs is the opportunity to strengthen identity in virtual worlds. "You are what you wear" is more than just an empty phrase for a large part of our society. It goes without saying that clothing and appearance therefore already play a central role in videogames. As soon as the metaverse finds its way into our everyday lives, virtual appearances will also be more strongly developed. NFTs are a great way to emphasize your own style and give "empty" avatars more personality. If you're going to live virtually, then at least do so with style - right?
It's human nature for many people to distinguish themselves through status symbols. And it's actually quite nice to treat yourself to a small or large reward for the work you've done. For some, it might be a new bag, a weekend trip or a new iPhone. For others, however, it could just as well be a new NFT. It's logical - we're all happy when we can brag about something that's just ours. And if it's something that everyone can admire on the Internet and that was created by a well-known artist, that's the cherry on top. Works of art in particular have always been highly coveted collector's items - so it's actually no wonder that this tradition is increasingly making its way into the digital world as well.
In a few years, the metaverse will probably be a familiar place for most people. It's clear that people want to make their home in the Metaverse look nice, too. Through NFT art, we will then have the opportunity to hang our artwork on the wall or display it in public places, showing everyone our possessions. Even today, it sounds pretty cool to be able to say you own one of the rare Bored Apes and thus have access to the Bored Apes community. The new high society is possibly defined by exactly these exclusive accesses. In the infinity of the metaverse, these exclusive accesses can be used to create separate spaces for specific groups of people.
Also compelling for the significance of NFTs is the ownership of NFTs across generations. Today, only a few truly significant heirlooms are usually passed on to subsequent generations or then quickly become dust catchers in the living room. But if digital objects and NFTs also have a high emotional and monetary value, the importance of passing them on to the children or grandchildren will suddenly have another value. And somehow it is also a nice thought that the abundance of the Internet gets a value through NFTs and so even small things can become more significant again.
At the same time, of course, there is a growing danger that the once so open and neutral digital life, in which everyone basically has the same value and the same opportunities, will be divided into similar social strata as our society today. The Internet, which is actually so large with an endless supply of freely accessible content, is being subjected to artificial scarcity by NFTs.
On the other hand, however, this is possibly just the natural course of humanity, which has always tried to satisfy its urge for recognition - there have always been hunters and gatherers. The pharaohs fought over who had the most beautiful and highest pyramids. The ancient Romans immortalized themselves in marble statues. The nobles in the Middle Ages had their portraits painted. In the Baroque era, whoever wore the highest wigs was cool. Today, people look up to guys with big cars and lots of followers. And maybe tomorrow the cool people will be those who own rare NFTs and can impress with them in the metaverse.
More and more companies are recognizing the importance of NFTs in the transition to the metaverse.
Nike, for example, has already patented a technology in 2019 that allows buyers to add an NFT to their shoe. With the "Cryptokicks", the value of the shoes remains at least digitally and even increases over time. As you can see, it's not only digital objects that can be protected against counterfeiting with NFTs. Dolce & Gabbana is also a pioneer in the fashion world when it comes to NFTs. At Fashionweek in Milan in fall 2021, a digital glass suit sold for more than US$1 million. To date, this is the most expensive suit the luxury label has ever sold. In addition, the buyer also gets a "real" tailor-made suit. Furthermore, purely digital items were also auctioned off for thousands of US dollars during the fashion week. The NBA sells video clips of legendary throws as NFT and also earns money on every resale through smart contracts.
And NFTs are also slowly but surely making their way into the entertainment industry. In the fall of 2021, a feature film was released for the first time that was only accessible as an NFT. Fans, speculators and collectors were able to watch Anthony Hopkins' film "Zero Contact" via the vuele.io platform using various NFT drops. Marvel is also already planning to use NFTs by creating exclusive collectible images of Spider-Man and Captain America. And it's paying off: at the start of 2020, the average value of an NFT was just under $25 US. On November 30, 2021, that average value was $913.48 US. That represents an increase of approximately 3,554% (source: nonfungible.com).
Does this mean that every company should be looking to NFTs now to keep up? No, because currently the whole market is still veeeery speculative. Of course, early adopters always have certain advantages, but aligning your entire business strategy with a trend is probably not the smartest idea. But: Never say never & you do you - we are happy about success stories.
For now, the big players in the NFT game are still experienced speculators and investors - because access to the much sought-after NFTs is usually only available via whitelists. And you usually only make it onto this whitelist if you have good connections to the artists and have been around for a while.
However, it is conceivable that with the increasing spread of NFTs, access will also become easier. As the examples show, the NFT market is currently still very much geared towards luxury and exclusivity. However, if the market also opens up more to the mainstream and it eventually becomes normal to receive "real" objects as NFTs when you buy them, and everything gets a true owner, we can probably talk about NFTs becoming part of reality and not just another absurd utopia.
We see: The topic of NFTs encompasses much more than just digital ownership certificates. On the one hand, the chances of success for small artists and creators of all kinds are growing. Companies have the opportunity to adapt their offerings for the metaverse. New horizons open up for borderless trade and international participation. NFTs are not endangered by transience and can transport value over generations. At the same time, however, the possibility of setting oneself apart from others through money increases and the illusion of an equal digital society is taken away. One's own drive for recognition dominates. Whereas in the metaverse everyone actually has the same opportunities regardless of their background, social status and education, money comes along again and builds borders where there are actually no borders.
Do people with NFTs block the possibility of equality through their own desire for recognition, or are NFTs really the ultimate solution for defining ownership in the digital age?