WTF?! ... WHAT IS AN NFT? - Pt. 2
The best and most understandable overview in the world!
Do you also hear more and more about NFTs, but you haven't quite understood yet what exactly this thing can do and why it's so special? You wonder what all the fuss is about and why so many are suddenly so excited? Why people spend significant amounts of money on digital art and whether there are other areas for its useful application? Then read on now!
FIRST THINGS FIRST - THE BASICS
NFT = Non-Fungible Token
"Non-fungible" means as much as unique, one of a kind, i.e. not replaceable.
NON-FUNGABLE
= if you trade it, you have something else
= trade 1 USD/BTC with a bun/car
= trade „The Waterlilly Pond“ from Claude Monet with ”The Starry Night” from Vincent van Gogh
A coin from your pocket, or a Bitcoin (BTC), on the other hand, are "fungible", which means they are replaceable, i.e. exchangeable with exactly the same.
FUNGABLE
= if you trade it, you have exactly the same
= trade 1 USD/BTC with 1 USD/BTC
= trade a copy of „The Waterlily Pond“ from Claude Monet with a copy of the same painting
Most NFTs are part of the Ethereum (ETH) blockchain. ETH is a cryptocurrency like BTC, but additionally supports NFTs, which makes it possible to store additional information and therefore trade digital files and artworks in the first place.
You’re still wondering, what is a blockchain? What a NFT is? Go back to Part 1 ->
An NFT can be ANYTHING that is digital: graphics, drawings, photos, video, animations, GIFs, 3d objects, poems, tweets, posts, music, books, video games, virtual real estate, birth certificates, a brain downloaded and turned into an AI, ...................... EVERYTHING!
Even traditional art can become an NFT, like a sculptor digitizing his sculptures by creating a photo, rotating video, or 3D rendering of his statues, for example.
Technically, an NFT is an ERC-721 token on the ETH blockchain.
WHAT'S INSIDE AN NFT?
Minting (= creating) an NFT means that the file, in exchange for a fee (= Gas Fee), is converted into an ERC-721 token. This token contains:
(1) A unique identification number (= Token ID).
-> When sold, a new "block" is created on the blockchain with a new Token ID.
(2) The historical information of all transactions, information about the creator/artist, including his/her Public Key.
(3) The digital artwork/file itself.
(4) A Smart Contract, "signed" with your digital wallet.
-> Standard copyright laws apply, by default for private use. Additional specific terms may be added in the description. Smart Contracts can be designed freely, creatively and individually.
-> In the field of digital art for example, it is common for the creator to receive a 10% royalty on each resale.
(5) Optional additional unlockable content and privileges.
-> The only limit here is the creator's imagination.
-> Artist Rukes has added the following to the deluxe edition to his NFT "RAWK": Video (various formats) + LCD display (physical token) + Music (MP3 audio file) + Metal print (high resolution) physical token) + Stills + Wallpaper (for your devices) + World dominating secret formulas + Private message (the story behind the art) + Private meeting with the artist + Raw images for remixes and new creations + Secondary market support + Digitally signed, numbered and watermarked.
-> The Rock band The Kings of Leon has created 3 NFT artworks in support of their latest album. As an added benefit, buyers of the NFTs will receive 4 front row tickets to every tour of The Kings of Leon for a lifetime.
COPYRIGHT, BUT BETTER!
A common copyright is created, when you create something and write "copyright" on it. That is legally correct. In practice, however, it is difficult to prove that one was indeed the original creator, and although government registration is possible, it represents a significant task and investment that is often beyond the scope.
An NFT now finitely provides a simple and unambiguously verifiable process of documenting authorship and ownership, as information about creator, time of creation and content is immutably recorded on the blockchain, providing clear evidence of who copyrighted what, when, and before whom.
OWNERSHIP AND USAGE RIGHTS
In the digital world, due to the nature of the subject matter, it is not really feasible or practical to acquire the only original file. What you acquire with the purchase of an NFT are ownership and usage rights to the record of the corresponding file on the blockchain. So you own property and usage rights to the copy of an original file in the digital world.
While it is still possible to copy a file in the digital world, an NFT now gives you official and verifiable rights to files and their use. Also comparable with a certificate of authenticity or deed, proving that you are the rightful owner of this file, and have the right to store and display it (unless otherwise agreed) in your digital wallet, on your wall, as a profile picture on social media, etc., and eventually resell it. Thus, NFTs finally bring trust and rarity to the digital world, which was previously lacking and where it was difficult to prove ownership and originality.
On top of that, of course, with digital art, just as in the physical world, you also acquire an emotional value, including bragging rights, and a financial asset that may increase its value over time.
CLOSING WORD
We hope that you can now understand the current excitement, and that this article could give you a profitable insight into the world of NFTs, and the new possibilities they offer. NFTs cannot only be used for digital art trading, but their technology offers an infinite variety of new possibilities for a broad range of industries. This is now where each user's creativity comes into play.
NFTs are a new tool. How could you make it work for you?
We are excited to hear from you! Send us a message!
In the next article we will elaborate on the current challenges, especially regarding sustainability. Stay tuned! Subscribe to our newsletter! (no spam, promise)
Attention! Criminals exist in all walks of life. Just because someone has minted something does not automatically mean that this person is actually the rightful owner. The responsibility to verify this lies with the buyer. So please don't just blindly buy anything from anyone. If you buy digital art, make sure that the work actually comes from the artist, or from a gallery having the rights under contract, as we have contracts for our collaborations.
Date: 1th October 2021
Author: Miriam Elting, Heart of MANICAINBETWEN