Memes, tweets, digital art, digital paintings. Want to understand how people started buying and selling these digital things worth millions of dollars?
If you were to buy the Mona Lisa, you would be paying for the original painting — the one that hangs in the museum, with the certificate of authenticity, considered by experts to be the real and original Mona Lisa.
But this does not mean that there are no replicas and digital versions of this work in the digital world or even in the real world. Your neighbor may have a poster of it hanging on his wall, your mother may have a postcard with the image of the painting, a friend may have gone to the Louvre Museum and taken a picture of it. But the original Mona Lisa is unique. This is the only one you will have.
The same goes for those who bought the Nyan Cat meme. There are countless replicas of this meme. But the original, the one that originated all the copies, belongs only to the buyer.
What enables this is something called NFT?
When we talk about non-fungible tokens (NFTs), work and collectible items are never far behind. These unique tokens are stirring the waters with mediatic sales and making artists super-rich, as is the case with Mike Winkelmann, or just “Beeple,” who is a prime example: in March of this year, he sold an NFT for over $69 million through the Christie’s auction house.
Twitter CEO and founder Jack Dorsey sold his first tweet (and consequently the platform’s first) for $2.9 million as an NFT. The message, which turned 15 years old in 2021, was short: “Just setting up my Twttr.”
Another example is from artist Trevor Andrew who has had his work exhibited in various places around the world. In 2016, he created his own collection within the Gucci label, combining the brand logo with a little ghost above it — one of his trademarks. For $200, 45 NFT-powered GIFs were sold through the website Nifty Gateway, which sells this type of digital art. Today, each digital token costs at least $3,600, and the price can reach more than $13,000.
What is an NFT?
A non-fungible token (NFT) is a cryptographic asset (“crypto asset”) that represents something unique and collectible using blockchain technology and transforms these collectible items into a digital asset. An NFT might be in demand because it was created by a famous artist or composed by a world-renowned musician. The token might also be useful in a video game or in demand because it completes the buyers’ collections.
For example, NBA Top Shot are basketball trading cards. Collectible cards work like physical collectible cards but in a digital version, and their authenticity is guaranteed through blockchain. And, same as with paper tokens, some are rarer than others and each has a different value.
Simply put, a non-fungible token cannot be counterfeited or copied. If we see the definition of fungible, we can begin to understand a little better what makes an NFT special: fungible is “that which can be replaced by another of the same kind, quality or quantity.”
In this context, we should remember that a bitcoin is also equal to and tradable for another bitcoin. A digital card “#1/99 Keldon Johnson Holo Icon Top Shot”, on the other hand, is not interchangeable, as only one exists.
How does buying and selling NFTs work?
Transactions with NFTs happen through a technology called blockchain.
NFT literally means “non-fungible token” — “tokenized” and collectible items whose value stems from the fact that they are unique and rare, and are popular on the Binance Smart Chain (BSC) and Ethereum. The value of NFTs lies in their authenticity and scarcity, so it is useful to take a closer look at the token in a “blockchain explorer.”
Simply put, blockchain is a system that allows you to track the sending and receiving of certain types of information over the internet. They are pieces of code generated online that carry connected information.
It is this system that enables cryptocurrency transactions — like bitcoin, for example.
Basically, every time there is a movement of assets, it is recorded in a kind of official document that is maintained by thousands of computers around the world and can be accessed by anyone.
Why does this matter? Because the main value of NFTs is based on the premise of authenticity. This collective record is easily accessible using other tracking technologies, but the key is using blockchain technology, which makes the task of forging NFT purchase and sale information more difficult. The entire NFT ownership records remain in this computed history.
How do you know if NFTs are valuable?
The idea of determining how much an NFT is worth depends on what it represents. When it comes to digital artwork, it is quite similar to any other type of physical art. We need to think about who created it, the artistic value of the piece, and how much it might interest other collectors.
If a non-fungible token (NFT) is part of a single series or limited series, they will not all have the same value, meaning some numbers are often more valuable than others. We typically see #1 as desirable and other numbers that people consider collectible as #13 or #7. Value and rarity depend on a combination of factors, such as those mentioned above.
For NFT tokens based on in-game items, there may be financial benefits from specific NFT items or art. If they provide you with individual tokens worth $100 in prizes, then they are worth at least $100, even without regard to their artistic value.
PancakeSwaps’ NFTs are slightly different from other blockchains. Some of their tokens can be converted to CAKE — the platform’s cryptocurrency. So if, for example, your digital bunny gives you 10 CAKEs and the CAKE price is $20 USD per token, then your NFT will be worth at least $200.
Do NFTs go up in value?
A token represents the real deal, but when it comes to buying or selling NFTs, new developments and usage scenarios are constantly emerging. It’s easy to forget that the technology was only born in 2017 and is still in its early days.
Before you start buying NFTs or investing money in these non-fungible tokens, make sure you understand exactly what you are doing and how you might use them. We may think of NFTs only as art, but there is a whole world of projects yet to be explored of different ways to turn this NFT art into highly valuable digital assets.
How can we verify the authenticity of an NFT?
Proving that your NFT is legitimate can be a bit tricky, depending on what you’re looking for. No doubt there are people uploading other artists’ works as their own and selling those works on the many NFT marketplaces. In this case, you would have to contact the original artist in order to confirm that he/she is the owner of the NFTs.
The creator of an NFT will have to provide the buyer with a way to prove that it is a genuine artwork, article, or digital file of his or her authorship. Most of the work will involve verifying your NFT on a “blockchain explorer” such as Binance Smart Chain Explorer’s BscScan. As far as blockchain is concerned, the approach should be “don’t trust, verify.”
Useful information might include the “minting date” and the address of the digital wallet that minted the NFT. You can also use the transaction history ID to verify the NFT. This is a better method than just checking the image or file associated with your collectible.
If you look at the recent artist Beeple’s sale mentioned earlier, Christie’s, who auctioned the NFT, had in their possession for validation the token ID, the token contract, and the wallet address.
Sometimes there is a URL to the file or an IPFS connection for verification of the underlying content. Both, however, can be used by anyone else when creating a fake token. In most cases, it is really best to verify authenticity with the author or artist.
Where can we find NFTs?
If you want to explore the NFT space, there are several places where you can start looking. The NFT marketplaces have a variety of non-fungible tokens for sale from both famous and amateur artists. There are lots to choose from, with some of the biggest being OpenSea (for Ethereum-based NFTs) and Treasureland or BakerySwap for Binance Smart Chain.
The number of NFT marketplaces continues to grow, with some being more specialized than others. If you are interested in buying something produced by a famous artist, make sure that the marketplace that has the NFT for sale is genuine. You can also find NFTs by participating in blockchain games or DeFi (“decentralized finance”) type projects.
What can I do with an NFT? Are they tradable?
However, some NFTs have interesting use cases in video games, such as the famous CryptoKitties on the Ethereum blockchain (at a time when few had even heard of NFTs…) In this case, a collectible “cat” can “breed” in order to pass on its characteristic traits to new cats.
NFTs are also regularly used by financial platforms. There is a huge market for NFTs of artistic PancakeSwaps convertible into cryptocurrencies. This unique combination means that people can speculate on their future value.
What all these NFTs have in common is their ability to be traded and exchanged for different digital assets. In other words, we can buy or sell NFTs for Ethereum or other cryptocurrencies. However, each piece of NFT is, by definition, unique — that is, it cannot be exchanged for another.
What are the most valuable NFTs?
These are the more expensive NFTs that have become popular due to the impressive amount paid for them.
First Tweet, by Jack Dorsey
Value: $2.9 million, March 2021
Twitter’s first post was turned into an NFT and sold for approximately $2.9 million.
Twitter CEO and founder Jack Dorsey, advertised the auctioning of his first tweet on his own network since the beginning of March and conducted the offering and trading through the digital art auction site Valuables.
Crossroads, by Beeple
Value: $6.6 million, February 2021
Beeple (or Mike Winkelmann) is one of the world’s most expensive crypto artists. The artwork was sold just one month before the auction and it’s his most valuable work.
Crossroads is an illustration in which the final scene would be revealed after the results of the presidential election between Trump and Biden. The final image then shows former President Trump naked, lying in the gutter in a public park.
CryptoPunk #7804 by Larva Labs
Value: $7.5 million, February 2021
Developed by Larva Labs, CryptoPunks represent the first generation of NFTs. The digital art is 24-by-24 pixelated images of randomly generated colorful punks, zombies, and gorillas, of which only 10,000 were drawn. At first, they could be purchased by anyone with an Ethereum wallet.
Several “punks” from the collection are among the most expensive NFTs so far. The figure of the punk smoking a pipe was extremely coveted among collectors of this crypto art. Image #7804 from the CryptoPunk collection was sold in February 2021 for $7.5 million.
CryptoPunk #3100, by Larva Labs
Value: $7.6 million, March 2021
Once again, the CryptoPunk collection impresses with its popularity and valuation among crypto art collectibles. Believe it or not, the average selling price of one of these figures of a punk currently stands at over $20,000.
In March 2021, the image of Punk #3100 ranked second in the category of most valued NTFs, selling for $7.6 million.
Everydays: The First 5,000 Days, by Beeple
Value: US$ 69.3 million, March 2021
The sale of the work Everydays: The First 5,000 Days by North American Beeple has certainly made the existence of NFTs known to everyone outside of crypto art. The painting is a collage of digital drawings that Beeple has been creating since May 1, 2007.
The bids for the work, sold through a traditional auction house, eventually reached an unbelievable 69 million dollars — making Beeple not only the creator of the most valuable crypto art but also making him the third most expensive living artist ever sold.
Digital pieces have always been very easy to copy and replicate. That’s why most creators never make any money from what they have made.
NFTs are changing this scenario. It may still be easy to copy an image, music, or a video, but the NFT itself, that unique code with buying and selling history recorded in it, is unique. Beeple’s digital collage can be seen on the internet but the owner knows that this is the original.
NFTs have great enthusiasts and great critics. Some investors believe that they tend to go up in value, while others argue that at some point the speculative mania surrounding the NFTs market will no longer be able to maintain the value.