How Non-Fungible Tokens are Revolutionizing the Art World
Ever since Satoshi Nakamoto released the Bitcoin whitepaper in August of 2008, blockchain technology has been disrupting the world of finance. However, thanks to non-fungible tokens (NFTs), tremendous disruption is also starting to occur in the world of art. This should be extremely welcome news for artists everywhere.
What is a Non-Fungible Token?
A non-fungible token, or NFT, represents a digital work of art that is completely unique and whose authenticity can be verified through blockchain technology. The word fungible means identical, interchangeable, or replaceable. So, non-fungible tokens are tokens that are non-identical to any other token in the world. In other words, they are 100 percent original and unique.
NFTs are created through token standards that allow developers to write lines of code to create unique tokens that represent underlying assets. The most commonly used token standards for creating NFTs are currently the Ethereum ERC-721 and ERC-1155 token standards. EOS, NEO, and Tron all also have their own token standards used to create NFTs. Ultimately, NFT developers will decide which token standards get used the most in the future to create NFTs. But, the Ethereum blockchain is leading the NFT charge right now.
Importance of Non-Fungible Tokens for Artists
Non-fungible tokens are so important for artists because they verify the authenticity and originality of the blockchain representation of the artwork. This means that with the help of non-fungible tokens, the representation of the digital artwork is completely resistant to forgery and countless replicas being made. The legitimacy of the NFT for the artwork will never have to be questioned.
Some non-fungible tokens have already been proven to be incredibly profitable. For example, Christie’s Auction House sold a collage of images by Beeple, a digital artist, for $69.3 million on March 11, 2021. This sale has brought a huge amount of interest into the world of NFTs and showed exactly how powerful they could be for artists.
There have also been several other high-profile NFT sales that have taken place recently. For example, Jack Dorsey, the CEO of Twitter, recently sold the first-ever tweet on the Twitter platform as an NFT for $2.9 million. This tweet was made by Dorsey himself through his Twitter handle, @jack, and was made up of just five words: “just setting up my twttr.”
In addition to the Beeple and Jack Dorsey NFT sales, a video clip of Lebron James dunking a basketball just sold for $208k. The person who bought the clip will not own any of the clip's publishing rights or even a physical copy. He only owns the NFT of the clip.
The Future of NFTs
Right now, NFTs are still in their infancy. As the NFT industry continues to develop, it is highly likely that the processes of creating, buying, selling, and storing NFTs will become increasingly frictionless. This will bring many more people into the space.
NFTs will help the digital art world to flourish, and many digital artists will follow in the footsteps of Beeple and make enormous sums of money selling digital art NFTs. Already, several platforms have emerged to trade NFTs. Some of these platforms will become extremely prominent.
NFTs have a lot of buzz right now and prove to be a powerful trend in the crypto space. It appears that people are starting to view them as a way to diversify crypto holdings, just as how many people view original artworks like Picasso’s as a way to diversify cash holdings.
However, non-fungible tokens are exciting not only because they have the potential to help preserve wealth and diversify risk, but also because they are connected to art. In other words, NFTs are helping to bring more beauty and humanity into the world of decentralized finance. This marriage of cryptography, art, finance, is proving to be very popular.
Many NFT collectors are taking NFTs one step further by turning their NFTs into DAO’s. This is just another example of the potential of the NFT industry.
It is unclear whether or not NFTs will develop into a trillion-dollar-plus market as traditional cryptocurrencies have. However, it might just be a matter of time before this happens at their current rate of progress.
About the author:
Yonatan Ben Shimon is a serial entrepreneur with a passion for discovering how digital assets can unlock new avenues of wealth creation. He started his career as a securities analyst, but in 2013 he became interested in cryptocurrencies as an emerging asset class and never looked back.
Yonatan has been involved with projects including privacy coin Beam, art marketplace Collectorshub, virtual accelerator Celocamp, and Unipool, a union for Uniswap liquidity providers. In 2020, he decided to launch YBS Capital as a firm dedicated to furthering the idea of community-based business models, with a focus on Exit to Community strategies.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.