With a hefty $91.8 million price tag, The Merge (collection of art series) is the most expensive NFT sold so far. This series was created by renowned digital artist Pak making him arguably the most valued living digital artist.
NFT culture survives at the intersection of art, culture, and the blockchain. Investors and collectors seem to be pouring money into non-fungible tokens, tokenizing anything unique as an Ethereum-based asset. In fact, sales are believed to surpass last year’s total by going up to $90 billion by the end of 2022 despite NFT prices seeing a downturn of late.
But what’s really manoeuvring the market and what makes people want to invest millions of dollars in NFTs?
Getting to know NFT
According to Wikipedia, “A non-fungible token (NFT) is a record on a blockchain which is associated with a particular digital or physical asset. The ownership of an NFT is recorded in the blockchain, and can be transferred by the owner, allowing NFTs to be sold and traded”.
NFT is simply any form of digital asset that symbolizes real-world objects like art (any form), music, in-game items, and videos. They are traded online using mostly cryptocurrencies and they are encoded with blockchain.
Cash (physical money) and cryptocurrencies are “fungible,” meaning they can be exchanged or traded for one another (which defines specific value for specific items). They’re also equal in value: one rupee is always worth another rupee; one Bitcoin is always equal to another Bitcoin. The nature of Crypto’s fungibility makes it a trusted means for carrying out business transactions and administering them on the blockchain.
Even though cryptocurrency and NFT have almost the same encoding software the similarity ends there. Every NFT has a unique digital signature that makes it rather impossible to be exchanged or considered equal (hence, the “non-fungible” moniker). For example, an NBA Top Shot gif is not equal to a cat gif just because they’re both NFTs. For that matter, even two seemingly similar NBA Top Shot clips aren’t necessarily equal to each other.
But, anyone can view the individual images or even the entire collage of images online for free. So why are people crazily spending millions on something they could easily download, screenshot or just access online?
Because an NFT allows the buyer to own the original item (OG is the new trend!). But that’s not the only reason, NFTs contain built-in authentication, which offers proof of ownership. Collectors and investors value the “digital bragging rights” more than the piece itself (most of the time).
Essentially, NFTs are like physical collector’s items, but only in digital form; i.e., when a collector auctions a painting, instead of getting an actual painting to hang on the wall, the buyer gets a digital file instead. They also get exclusive ownership rights. NFTs work with the concept of ‘one owner at a time’, and their adoption of blockchain technology makes it easy to verify ownership and transfer tokens between the owners. The creator of the art piece can store specific information in an NFT’s metadata in the file, like their signature.
NFTs are offering more power and control to content creators than ever before…
Looking beyond the hype and the price tags; NFTs could represent a huge opportunity in content marketing. Each token has an exclusive and transparent ID which can be used to track and control them. This paves the way for fundamental changes in the relationship between content creator, consumer and brand.
Traditionally after the first sale goes through, the artist or the creator’s journey ends there with their item. Once the art has been sold, the transactions usually end there. The buyers, however, could sell the same work of art again at higher prices if there is demand and if the buyer is willing to sell. However, there is one more way that the non-fungible tokens help the creator and is called ‘NFT Royalties’. NFT royalties give a certain (usually specified) percentage on the sale price every time the NFT creation is sold on a marketplace. These are automatic pay-outs to the author made on repeated sales. The percentage of the royalties are coded into the smart contract on the blockchain of the NFT. Each time a secondary transaction takes place, the encoded smart contract ensures that the terms of the NFT are fulfilled to the dot and the specified cut of the royalty percentage on the sale price goes to the artist who created them.
This works equally well for digital content, gaming accessories, physical items, real estate etc. NFT royalties are a never-before-opportunity to maximize the earnings of artists and content creators and to give them what is their fair share of profit.
NFT has the power to triangulate the relationship between artists, collectors, and the brand to create a strong community that benefits all.