In brief, NFTs (Non-Fungible Tokens) are digital assets that are one of a kind. NFTs became popular all of a sudden and the digital artworks that are being sold for extremely high prices have shocked everyone. Today, one of the most intriguing questions is how to sell million-dollar worth of digital artworks which can be downloaded easily through the Internet.
A Non-Fungible Token (NFT) is a data unit in a digital book called block chain in which each NFT represents a unique digital item and thus individual NFTs cannot be used interchangeably. NFTs may represent digital files such as artworks, audio files, video files and other creative work formats.
People eager to own digital products as a result of the technological innovations of our age. It is reported that more than 174 million dollars’ worth of NFTs have been sold since 2017. Prices of NFTs are determined as per the supply demand equilibrium as in other valuable assets. Since the NFTs are unique, the items sold are considered as collectibles and they are worth a fortune.
What Is the Difference Between NFTs and Other Cryptocurrencies?
Non-Fungible Token refers to a token which cannot be divided into sub-units or duplicated. Contrary to cryptocurrencies such as Bitcoin and Ether, NFTs are unique digital assets. Today, you can buy Bitcoin or Ether by dividing them into shares and exchange your cryptocurrencies with any cryptocurrency in the same unit. On the other hand, as NFTs are unique digital assets, they cannot be exchanged with other tokens.
How Are NFTs Created?
NFTs are created using the block chain technology, mostly in line with the Ethereum token standards. However, unlike cryptocurrencies, they are traded based on Ethereum’s ERC-721 and ERC-1155 standards rather than the ERC-20 standard. There are several platforms that facilitate the transactions for users to save them the hassles of the technical world of block chain. To create an NFT, all you need is a digital cryptocurrency wallet. You should upload the file to be transformed into an NFT on the IPFS system through these platforms and determine the inconvertible NFT parameters. NFTs are created when the number of NFTs to be created, their price and your proceeds from the next sale etc., and the payment of the transaction fee of the block chain network are determined. With the completion of the transaction, the NFTs will be transferred to your wallet and recorded in the whole block chain network where they are created.
How Can I Buy an NFT?
There are certain platforms through which you can view and buy NFTs. In these platforms, you can buy the NFTs you want with auction or direct sales options as specified by their owners. When you complete the sales transaction, the NFT will be transferred from the wallet of the owner to yours. If you wish you can resell the NFTs bought through marketplace applications.
Is NFT an Investment Tool?
By their nature, NFTs are different from other cryptocurrencies and their values are determined by the owner of the artwork or the investor rather than the order book. If we approach the investment issue from the digital artwork perspective, the whole process is no different from investing in a physical artwork. As a similar procedure, the value of an asset you bought as part of a collection is determined by the parameters such as the uniqueness, age and quality of the asset.
What Will Be the Impact of the NFTs?
Considering the current usage areas of NFTs, we can say that they eliminate the intellectual property issues in the first place. While it is easy to duplicate an artwork in the digital environment, NFT solves this problem by presenting the owner of the intellectual property rights. As NFTs are programmable digital assets, the proceeds of the artists from their sales can be coded into the NFTs. Therefore, if they are sold, the relevant amount is automatically transferred to the wallet of the artist. Artworks exhibited on digital platforms attract all kinds of buyers across the world. As the consumer group expands thanks to the digitalization, the number of people who can access and invest in the artwork increases and as a result, demand and prices rise. As demand increases, supply also increases. This results in the introduction of more artworks to the market at difference price points. Therefore, investors and lovers of art can easily access the artworks and more artworks can be sold. The ecosystem expands.
How Can I Be Sure That an NFT is Original?
The reputations of persons are of utmost importance in the cryptocurrency ecosystem. Artists who create and sell NFTs pass through a profile authentication process used by the NFT marketplace applications to prove that their works are original. If you know the wallet address details of the relevant artist which are shared publicly for the collection of payments, you can verify the originality of the artwork. Moreover, you can be sure that both the artist and the artworks are original by tracking the NFT movements through a block chain tracking application.
Where Are the Files Within NFTs Stored?
NFTs include the proof of several file formats such as image, audio, short video and document files. As it is not practical and cost-effective to store these files on block chain, they are stored on a distributed file storage protocol called “IPFS”. Uploaded files are encrypted, divided into small parts and allocated among projections on IPFS. The proof regarding the upload of the relevant file to IPFS is recorded in the NFT and block chain.
In Which Areas Will NFTs Be Used in the Future?
We can see that new creative work models are designed as people become more experienced about NFTs. Firstly, digitalization, i.e. tokenization of physical assets can be adapted to a wide range of sectors. For example, last week, a house designed in the 3D digital world was sold for 500,000 dollars in the USA. Moreover, we know about land sales as NFTs in several games.
Another area that will be affected by the NFTs is the social media. Especially the metrics such as the number of followers, views, likes etc. which are converted into actual money by content producers cannot be manipulated by the central social media companies, all thanks to NFTs. Also, it seems that the digitalization of physical assets will lead to the redesigning of many processes that we are used to. A scenario where the governments produce sovereign bonds as NFTs and trade them globally is not impossible anymore. In short, the only limit regarding the work models in the NFT world is your imagination.
What Are the Most Striking NFT Sales?
As regards the most striking sales performances for the recent period, an artist from the USA, Beeple (Mike Winkelmann) sold a collage of his works for 69.4 million dollars at an auction organized by the auction house Christie’s. The NFT of a LeBron James slam dunk video clip was sold for 77,000 dollars through the NBA Top Shot application. A tweet of Jack Dorsey, the CEO of Twitter, was sold to a Turkish buyer for 2.9 million dollars, and Elon Musk put up his tweet including a GIF and a music track for auction as NFT. In Turkey, two of the most striking sales performances were the sales of a tweet of Cuneyt Ozdemir for 10,000 dollars and the tweet of Saba Tumer through which she shared her laughter for 10,000 euros.
GÜRSOY İlke, Gazete Oksijen, syf.3, 9-15 Nisan 2021