NFTs Craze on the Digital Art market- Explained
A remastered digital version of the Nyan Cat meme from 2011 got sold for about $600,000 USD in an online auction last Friday, February 19.
What is NFT?
NFT stands for Non-Fungible Token, and Fungibility is the ability of a good or asset to be exchanged or to be interchangeable with another unit of the same thing so things like rupees, dollars, gold or bitcoin and then non-fungible is the exact opposite so they are goods or assets that are unique irreplaceable and one-of-a-kind things like real estate and art and then we have tokens which just means the blockchain which is basically a digital certificate of authenticity proof that you own something and it’s a permanent record of that thing’s transaction history.
Blockchain?
It is just a digital record of transactions like a list. Someone spends some amount of money on something, a transaction is made and then a record is made of that transaction.
These records are called blocks and are chained together to form a big list and each record is verified by multiple computers and this is basically how cryptocurrencies like Bitcoins work.
And most of the NFTs are part of the Ethereum Blockchain. Ethereum is a cryptocurrency, like bitcoin or dogecoin, but its blockchain supports NFTs, that stores additional information which makes them function differently from an ETH coin.
So to clarify, NFT is a non-fungible token which that just means that the art is original, unique and the token cannot be duplicated because it lives on the blockchain.
The NFTs Hype
Over the last few weeks, sales of NFTs have escalated, just like cryptocurrencies such as bitcoin.
- A group of 34 digital collectibles known as CryptoPunks which was sold for around 1 Million USD (in ETH) in just minutes to an unknown investor.
- Logan Paul, an internet personality made $3,540,456 in 1 day by selling 3000+ unique digital copies of a pokemon card with a holographic image of him and then later made $5M.
- And to cross them all, “Everydays — The First 5000 Days” — an NFT-based artwork by Mike Winkelmann known as Beeple was sold on Christie’s auction for 69 Million USD, making the author the third most expensive living artist at auction whereas the opening bid was 100 USD only.
How to enter into NFTs world?
So there are Creators and Collectors. Creators create and mint their art and collectors can bid or purchase their art and they become the owner of that art in this case both of them are winning. Because Collectors can sell the arts they bought from the creators for profit which can be called as a Secondary Sale. Lots of collectors are already making millions from these arts. Another great thing about this for a creator is that, no matter who owns your art and how much the collector will sell your art in the future, the creator will always get some sort of commission from 10% to 30%, depending on how much creators put their commission when they mint their art.
So for example, if you sell an art today for one Ethereum and after one year it would sell for 100 Ethereum which is basically equal to $211,541 as of now. And you will be getting $21,154 only from a 10% commission or depending on how much commission you put.
Can anyone make an NFT?
Yes, anyone can sell an NFT. Anyone can create art, transform it into an NFT on the Blockchain and put it up for sale on several websites like OpenSea, SuperRare, Rarible, Nifty Gateway etc. And as mentioned above, One can even add a commission to the piece of art, which will pay every time someone buys it. Much like when buying NFTs, you need to have a wallet, and it needs to be filled with cryptocurrency.
This is the requirement that has lots of complications to look out for, like the hidden fees involved in transactions called as Gas fees, which is a fee or pricing value, required to successfully conduct a transaction on the Ethereum blockchain platform. There also exist different fees for buying or selling or for conversions which changes from time to time.
So all these fees can add up to a lot more than the price you get for selling the NFT. And since various sites have different fees associated, little research is needed before selling the NFT.
Conclusion
In a world where everything digital has a sustainability issue, NFTs may face problems sustaining since they work on Blockchain that involves an energy-intensive computer function called mining. NFTs give new purpose to digital art and the prices observed at sale show it is a substantial part of the fate of art and collectibles.
