NFTs: Creating Value, Digital Scarcity and a New Realm of Collectables
By: Tess Buckley
NFTS are taking the gaming and art worlds by storm but what are they? This piece hopes to explore and explain what you need to know about NFTs.
NFT stands for Non-fungible token, put simply, it is a collectible digital asset and holds value as a form of cryptocurrency and culture/art. NFTs are now seen as value-holding investments that are unique and cannot be exchanged like-for-like (non-fungible). NFTs differ from crypto coins as the file stores more information (a JPG, MP3, MOV or GIF) above pure currency. NFTs value, like art, is limitless and yet dependent on market, rarity, demand, and branding. They can be bought and sold like any other collectable oil painting on canvas but instead they come in the form of a JPG file.
'Beeple's Everydays' by Mike Winkelmann.
NFTs are definitely raising eyebrows and taking the lead role in news segments. Everyday there are new players joining the marketplace and for creators, this is both accessible and daunting. Digital artist Mike Winkelmann, also referred to as Beeple, is a very well-known NFT artist. Beeple just sold a series at Christie’s entitled ‘Beeple’s Everydays’ to Vignesh Sundaresan for $69.3 million on March 11th - this auction brought the third-highest price ever paid for a living artist. This NFT was a jpeg file of a digital collage with 5000 daily futuristic images he made each day from May 1, 2007 through Jan. 7, 2021 . Stepping into the NFT realm to create and share art offers artists admirers more ways to support their work.
How does an NFT work? What are they used for?
Blockchain allows for ownership and validity of each NFT to be tracked. Similar to art prints, copies of an NFT are still valid parts of the blockchain, but do not hold the same value as the original NFT that contains built-in authentication. Essentially, NFTs create digital scarcity and by cutting off the supply of an item in demand, the value of the asset rises. An NFT is created, or ‘minted’ from digital objects and then added to a blockchain which is a distributed public ledger that records transactions.
Taco Bell's NFT.
So, as we’ve just learned, there is a lot of money to be made in the NFT market. Since November 2017 a staggering $174 million has been spent on NFTs. Blockchain technology and NFTs afford artists and content creators a unique opportunity to monetize their wares. Artists no longer have to rely on galleries or auction houses to sell their art, artists can also program in royalties so that they receive a percentage of sales whenever their art is sold to a new owner. Brands are also making money and interesting marketing campaigns thanks to NFTs. Charmin and Taco Bell have auctioned off themed NFT art to raise funds for charity. Charmin dubbed its offering “NFTP” (non-fungible toilet paper), and Taco Bell’s NFT art sold out in minutes.
Interview with a NFT Creator: Jake Vito ‘Digital DaVinci’
Q: Where did NFTs originate?
A: The first NFTs were created by Larvalabs and they were called Cryptopunks, which are 8bit artworks, pixel by pixel, very retro looking artworks. There was a collection of 10,000 collectables generated by artificial intelligence. The Team at Larva Labs worked together to create a program that would generate them. They created potential attributes for a 2D head and defined them as variables. They created a set number of outputs from these variables (10 000) and then the code randomly generated one-of-one non-alike Cryptopunks. These pieces already held unique value because they were generated by a computer not a person. Eventually the company that made them, Larvalabs, sold out and they went to the secondary market. In recent years the interest in cryptocurrency has grown and in return NFTs have because they are intertwined. NFTs are a way to invest in cryptocurrency and see returns.
Originally you couldn’t buy Cryptopunks, instead you had to ‘mint’ them – your laptop had to process mathematical equations and in return you would receive a piece of digital art. Mining was another way to receive Cryptopunks or Cryptocurrency as a reward for allowing your laptop to process mathematical equations for hours on end.
Cryptopunks by Larvalabs.
Top Selling Cryptopunks.
Q: What creates NFTs' value?
A: Branding is very important, you must emphasize the specific types of rarities;how many pieces there are in a series and more. Proof of stakes allows for value to be confirmed, this is when something is purchased it goes through blocks and it goes from computer to computer getting verified through a round of calculations.
A lot of people can’t get over the fact that people are paying so much money for these digital tokens. When you buy a NFT, you don’t receive it in person, it’s not physical and you do not get copyright ownership of it, so you are unable to license it out. Instead, NFTs act almost like a receipt.
Q: Can you expand on how the value is heightened?
How are NFTs similar to luxury fashion brands and collectable gallery pieces?
A: With technology advancing, more people are online and highly connected. I can reach out to someone in Mongolia and they can purchase my piece and have it the same day. Cryptocurrency and social media have created this whole new realm of collectables.
Let’s go back in time. You live in Paris and I live here in Canada and we both are very into baseball cards and so we have collections. If we had met in person maybe we would have traded them, you would sell me some and I would sell you some, but since we are so far apart it is hard for us to see each other’s baseball cards and trade them. Now, we are so interconnected, and it is so easy to contact other people no matter where they are. Online collectibles are so popular and have high value because so many more people can say they have value and create the value by actively buying and selling a lot more frequently than we once could. The target market is so much bigger, this is now global – the only limit is how many people have access to a computer. In conclusion, what allows for such a high value is the increased ability to trade, connect and resell.
Q: What would you say to someone who wants to get involved but is overwhelmed by the idea and process of joining the community?
A: This is a fair point – people hate what is unfamiliar to them. The fact that in order to become a NFT creator or collector you have to log into this new site and buy cryptocurrency turns off a lot of people. It is only with increased ‘fear of missing out’ and hype that people will be more motivated to join this realm. Bitcoin has become more mainstream and trusted and this has increased the amount of community members.
Q: What is a NFT ‘Whale’?
A: In the NFT community the ‘whales’ are the people that got into the cryptocurrency market early on when the rate was cheap, and you could get many tokens for cents at a time. These ‘whales’ are the people that own the majority of cryptocurrency or have large holdings of it. One whale is able to drop the market by trillions of dollars by pulling out or moving their bitcoin around. Because every transaction and movement is visible on the blockchain you can see the receipts of any big addresses. By the simple movement of whale’s bitcoin, others will become scared and move their funds or sell their bitcoin, this acts like a domino effect. It is all driven by fear and greed.
There is something called the ‘composite man’ which was coined by Wyckoff. He described the ‘composite man’ as this one figure made up of many figures. So, this ‘man’ controls the markets and cryptocurrency, and this collective of people work collaboratively to control the market and influence it in their favor. They are the puppeteers and everyone else are their puppets.
Q: How did you get into NFTs and decide to become a creator? What is your next step?
A: One night I went on to Opensea and I was looking at some of the art on it and I just could not wrap my head around it. I couldn’t comprehend how the pieces were selling for so much money. unbelievable! There are just so many wonderful artists out there who are very talented and spend their whole lives making art that doesn’t get the recognition it deserves. Why can someone come on to this site, upload blank colors and they sell?
A couple weeks pass and NFTs are in the side lines of my focus. Instead, I am insistent on getting the new pair of Nikes which drop at 9:00am and cost around $200. I set my alarm and race to my computer only to have them sell out by 9:02am. The resale was sitting around $600 and I could not make myself pay that amount of money, so I decided to find a separate way to make money – I turned to NFTs and started to make and successfully sell my own. I didn’t end up getting the Nikes, but I am happy I found NFTs because they sold out.
I used to sell my photographs but by associating my art with cryptocurrency and creating NFTs, I have been a lot more successful. When I first started out, I didn’t fully understand how strategic your branding and drops have to be, I like that I can be creative and analytic at once in this community. Every day you have to engage and advertise with people. I would say my brand ‘Digital DaVinci’ sits in the Alt-punk Market. This summer I plan to expand my brand and continue creating and adding to the community.
Check out Jake Vito ‘Digital DaVinci’s' work at the following link: https://itsdigitaldavinci.com
How to Get involved: A Collector or Creator?
Whether you want to sell or buy NFTs you can enter the world by choosing a platform and loading your digital wallet with cryptocurrency.
Here is a list of platforms for NFTs:
For further knowledge on NFTs, here is a VERY helpful article I would highly recommend. It is long but worth the read: https://jisuartist.medium.com/debunking-everything-about-the-technology-ecological-impact-of-nfts-cryptoart-60ee09bd00ed