A catty beginning
Alison Parker, a television reporter was shot dead in 2015 by her former colleague. There exists a 17 seconds clip of her and her videographer being shot. This video quickly became viral in social media, much to the chagrin of her father. He tried to get it removed for several years and in 2020 he finally filed a complaint with the Federal Trade Commission. When everything else failed, he created an NFT (Non-Fungible Token) of the video, to become a sole owner of this video. Did this gruesome story help you understand what an NFT is? No? Fine, I shall try better this time.
Non fungible loosely means something that is unique, for example, a human fingerprint. Each human fingerprint is unique, right? And well, ‘tokens’ mean tokens. When you buy something from a store, you get a receipt (hopefully). The receipt proves you are the owner of that product. Similarly, if you were to buy a digital asset, for example a digital piece of art, you would be the owner of an NFT. This NFT would be uniquely linked to that particular digital asset. Think about it, without the NFT the digital asset can be duplicated and the original asset has no special value. However, the moment an NFT is created, it lends its uniqueness to the asset itself. So by creating an NFT of the viral video, the father hoped he could make it illegal for the video to be shared in social media. Did it work? Unfortunately, no.
NFTs are not as new as you might expect them to be. Believe it or not, the first NFTs were those of virtual cats (finally explains the heading!). Yes, people sold, bought, and bred virtual cats in a digital trading game called CryptoKitties. This trading game was launched in 2017. However it is only recently that the NFT buzz has hit its all-time high — why is that? According to Artsy CEO Mike Steib, “Some of that interest is from people who enjoy supporting the work of independent creators by purchasing their works. Others are intrigued by the idea of taking a digital asset that anyone can copy and claiming ownership of it. The recent headline price records for NFTs seem to have been largely driven by newly minted crypto millionaires and billionaires looking to diversify their bitcoin holdings and more interest in the crypto ecosystem.”
Let’s get techy… only a bit
Transactions with physical money are simple to understand. If you are a seller of art, you sell your art and get paid either in cash or by card. The buyer gets a receipt as proof of ownership of the item. Your bank keeps track of how much money you own and your transactions. Now, let us assume that we want to get rid of the bank (because they have too long queues). Instead of banks keeping track of your finances, your ‘money’ will be recorded in a series of digital ledgers ( a book or other collection of financial accounts of a particular type). Just imagine a scene from an old black and white movie where a person is sitting with a notebook and keeping records of the finances of the employer. It’s almost the same thing. Except for one person with a notebook, just imagine several employees with a notebook each. That’s basically blockchain for you.
This is the basic concept of a blockchain — a chain of decentralized digital ledgers where the chain is divided into blocks. A blockchain is fundamental to cryptocurrencies (digital currencies). It is the technology behind its existence. It maintains a secure and decentralized record of transactions of the cryptocurrencies. It is with cryptocurrencies(most commonly Ethereum is used) that an NFT can be purchased. In our example of selling art, the buyer of a digital art would be the owner of the NFT corresponding to that art.
Before going any further, here is a small quiz for you. Are physical money and cryptocurrencies fungible or non-fungible? If you guessed fungible, pat yourself on the back. Of course, a ten-dollar note is replaceable by another ten dollar note. Or, one hundred dollars can be exchanged with equivalent euros. NFTs can not be exchanged for one another. It is as if each ten-dollar bill was unique and could not be traded for another. Think of the Mona Lisa. There are hundreds of copies, but people queue up to see only the original piece. Also, you can’t trade the Mona Lisa for a Van Gogh painting.
Let’s go shopping!
Ok. Let us assume you are in the mood for some digital shopping. How do you go about it? Like any shopping, you have to visit a marketplace. In the crypto world, there are several digital marketplaces for you — OpenSea, Rarible, Mintable, Axie Marketplace, or NBA Top Shot (specifically for basketball video highlights) Marketplace. These marketplaces sell digital music, art, collectibles, virtual assets, virtual lands, memes, gifs, and much more. You are going through the different marketplaces and trying to make a selection when you come across a ‘gas price’. Obviously, you wonder why the heck you need to pay for gas! A ‘gas price’ is basically the fee for the energy required for the completion of the transaction (in the blockchain). Some marketplaces might also charge you for converting your dollar (or pound or euros or whatever) to Ethereum.
So now let’s say you have visited a marketplace and have chosen a piece of digital music and you wish to buy it. Your bank or physical money is useless. You will need to purchase some cryptocurrency and set up your crypto wallet. Next, you will have to connect your crypto wallet to this marketplace. Sounds simple till now? In these marketplaces, you can either make a bid for the NFT (the digital music you have chosen) or directly meet the asking price. Once the auction is over and if you win the bid, the marketplace will automatically complete the transaction, and voila! You now own an NFT (a unique token that is linked to the piece of music).
So maybe you are very happy with your NFT and then you hear the same music playing on your friend’s phone. This makes you start questioning the purpose of owning the NFT when with any digital asset, it is simple to have a copy. The difference between your NFT and the music in your friend’s phone is that you have the original version of the art and they just have a copy of it. It is the difference between owning anything original as opposed to a fake version. It is almost like comparing listening to your favorite singer on youtube and attending his or her concert live.
However, NFTs are more than art or music or videos or virtual land. There is a myriad of NFTs, some of them will make you go ‘whaaaaaaaaaaaaat’. For example, Twitter co-founder Jack Dorsey made an NFT of his first ever tweet and it sold for 2.9 million dollars. Buckle up for this next one. A Russian tennis player monetized her arm, yes, her arm. You read it right. That NFT is now worth over 1200 dollars. Is your dog feeling left out in all this buzz? Why don’t you purchase a digital NFT stick for him? I am not kidding, for 1200 dollars you can get a digital ‘twig’. Dogs can sense all sorts of things, I am sure he will sense this NFT as well! This list of shocking NFTs does not end here, click here to read about more mind blowing NFTs.
I want in!
You want to sell your own piece of digital art, let’s make some money with NFT, shall we? Before you go all gaga, you should know that while the marketplaces will allow you to create an NFT for free, there is again that unpleasant ‘gas’ fee involved if you are looking to sell it in most of the marketplaces (and obviously you want to sell it because why else will you want to make it). Unfortunately for you, even paying this fee does not give one hundred percent guarantee that your transfer will be successful. I know, what a shame. Do you at least get your money back if it doesn’t go through? No. Oops.
However, I do have two words that will make you happy — ‘lazy minting’. This basically means that the NFT is not actually saved in the blockchain as long as it has not been bought. At the time of purchase the fee is deducted from the transaction. Isn’t that a relief! Marketplaces OpenSea and Rarible both use this ‘lazy minting’ technique.
Next step is to select a marketplace to create and sell your NFT. You are risk averse and don’t want your money lost in transactions (obviously!). You also do not want to end up in a situation where you have spent money to set up your NFT that no one eventually buys! So now your choices are down to OpenSea and Rarible. However, OpenSea has a one time fee (between 200 and 300 dollars) to set up your account and Rarible does not. Rarible has a fee (between 20 and 30 dollars) if you try to remove your NFT from sale. Rarible seems like the safest and cheapest option to you. But wait — there is no free lunch in life. Both these marketplaces will take a certain percentage of the money you make (which is only fair, right?)
Let’s say you have chosen Rarible. Next you will have to create your crypto wallet to this marketplace. If you don’t already have one, hurry! Once your crypto wallet is created you simply need to upload your file (that you want to make an NFT of) and basically wait for someone to fall in love with your art. I wish you all the very best.
That’s it! Was nice meeting you! See you later!
The Washington Post published an article titled, ‘Will NFTs transform the art world? Are they even art?’. Among many things, NFTs have provided an even playing field for artists. Anyone with talent can put up their art and profit from it. So to The Post, I say ‘yes, and yes’. What a bunch of snooty people. There is no reason why art can’t be digital. Some might argue ‘you can’t touch it’. Well, you can’t touch the Mona Lisa either, yet here we are. In case I haven’t been successful in answering all your questions about NFT, worry not. Even NFT experts don’t have it all figured out. It is a budding concept at its nascent stages. You will get there!