What Exactly Is an NFT?
A non-fungible token is the unique, 'digital ownership' certificate of an original digital asset and is non-interchangeable. I.e., not a currency, or rather cryptocurrency itself, but an individual digital asset, stored however on a cryptocurrency’s digital database: that is to say, upon its blockchain.
The mystery surrounding the understanding of NFTs largely arises from the definition of the term itself. "Non-fungible token" aims to differentiate between an asset token and a cryptocurrency token, particularly in the way they function differently, though both use the very same technology. To draw a simple analogy:
an NFT is essentially the digital equivalent of an original artwork or rare collectible, existing on a cryptocurrency blockchain.
An NFT is purchased, sold, or created using cryptocurrency, which in contrast is defined as fungible in that one unit of currency is interchangeable and equal to one other unit of that same currency, that is: one bitcoin token is always equal to and the same as — and therefore interchangeable with — one other bitcoin token.
How Does an NFT Work?
Just as with decentralised open-source digital cryptocurrencies such as Bitcoin and Ether, principally operating without a central bank or singular administrative control, an NFT uses that same distributed public ledger, or transaction record technology known as Blockchain. This records and documents transaction history, and hence ensures an NFT's continued digital existence is secure. By the way:
“In 2020, the total NFT sales value was $250 million, while the first quarter of 2021 has a total sales value of $2 billion.”
Thus, creating an NFT can include the ‘minting’ of a digital artwork with a non-fungible token, using the cryptocurrency-purposed technology, Blockchain. Which means an extensive network of interlinked computers is able to authenticate and document its transactions, allowing it to become an investible digital asset whose certified ownership is bound to an NFT in its creation and purchase.
NFT animation Image Still: Jeremy Deller
How Much Does It Cost to Mint an NFT?
Who can create one?
The exciting thing about creating an NFT is that given the means, technically anyone can make one. To mint a work into an NFT one does need the funds to do so; or more accurately, a cryptocurrency wallet in which to store the NFT and enough of the currency needed to purchase or create it. Presently the major, and original blockchain supporting NFTs is the Ethereum blockchain for Ether coins (ETH), although numerous other platforms now support them as well.
There are many popular platforms out there that avoid charging a minting fee altogether, though the process can be slower or may incorporate a sales percentage fee. OpenSea for example charges a fee of 2.5% of the final sales price of your NFT whilst the actual minting remains free.
Some other established marketplace platforms include:
· Rarible Stylish design with a focus on artists with an authenticity badge function.
· Foundation Social media platform design using invite access to maintain a community-level quality.
· SuperRare Exclusive platform specifically for NFT artists.
· Hic et Nunc Newer, ‘proof of stakes’ system: CO2 emission clean platform.
· NFTKEY Recent invite-only platform with a specific focus on artist originality.
Conversion fees between different currencies and the so-called ‘gas fees’ involved, which are the large-computing energy costs of processing sales, purchases, and minting on the blockchain, should be observed carefully for their considerable fluctuation and effect on the end price.
Recently, the NFT industry has seen an explosion in growth with digital artwork at the forefront of this. As with the now infamous instance of Mike Winkelman — the digital artist known as Beeple — whose biggest sale of an NFT of a digital artwork of his to date went for an astonishing $69 Million in March this year, through Christie's Auction House. You can see the work EVERYDAYS: THE FIRST 5000 DAYS here. Oh and the co-creator of Twitter, just so you know, went ahead and did this:
“Jack Dorsey sells his first tweet as an NFT for $2.9 million”
NFTs are created not only for illustration, but for images and online media in general, and popular examples currently include photography, songs, videos, digitised collectibles such as trading cards, virtual avatars, or video game "skins," and even GIFs.
Strike.me, Kelly Slater, &
The Dynamics of NFTs Right Now
The investment prospects of NFTs are alluring, still evolving, and expanding. As I recently learned tuning in to an intriguing Instagram Live with Kelly Slater in which was discussed among other things, a new money transfer app called Strike, with creator Jack Mallers. Strike can provide instantaneous and costless international money transfers through its integration with Bitcoin and the Lightning Network, as well as superior bitcoin purchase rates.
A friend of Slater's who later joined the live, proposed NFTs as foreseeable financial support for funding an endangered whales project Kelly aims to pursue, through the suggested minting of whale illustrations created by children and the incorporation of a creator royalties’ percentage within the NFTs to provide income via their resale. It’s easy to see that the meaning assigned to a specific NFT has been an important value factor for creators and investors so far.
The Creator's Perspective
The existence of a digital certificate of ownership means artists, musicians, influencers, and franchises are presented with a new means of monetising their creations to a readily available global market.
Moreover, in a world of increasing digital reverence which currently involves the free availability of artists’ works once uploaded to the www, an NFT can provide the digitally permanent identification of an artwork with the artist who created it.
Another thing is that aside from the NFT marketplace you choose to use, there is not necessarily any traditional intermediary, nor auction house or agent, bringing forth a more direct financial freedom for the artist: meaning more potential sales gain.
Yet another interesting aspect of this new model from the creator’s perspective, in comparison to physical artworks, is that NFTs allow the possibility of a commission written within the creation's certificate which means the creator can receive royalties from their work every time this certificate of ownership is resold. And if you’re a meme creator, you will even see revenue upon circulation.
The NFT movement is already well underway and showing potential for growth right now. Nonetheless, cryptocurrency is also long in dispute for its dangerous energy consumption. Something that one must seriously consider before entering the world of NFT creation or collection is the effects that larger blockchains currently have on global warming.
The Ethereum blockchain with which most platforms are currently operating uses a minting process based on the “Proof of Work (PoW)” system in which transactions are verified via ‘mining’.
This system works in that when your NFT is sold or created it is open to the competition of miners to solve the next block for which it can then exist uniquely upon on the chain. All those who compete to create this solution consume a huge amount of energy and only the first to solve this creates it and receives a commission for their work.
Ethereum Inventor Vitalik Buterin
It is often cited that one single transaction on the Ethereum blockchain consumes more electricity (as a fossil fuel) than the average US household does within a day. The present competition-based mining process uses enormous amounts of energy as numerous miners compete to solve complex algorithms using high-end processors.
Twenty-seven-year-old Russian Canadian computer scientist Vitalik Buterin, inventor of the Ethereum blockchain at age 18, is currently working on a new code overhaul dating back to 2019 that plans to reduce Ethereum’s energy consumption by 99%.
Ethereum 2.0 is already implemented in the first of three phases set to transfer it from the original technology to a new and redesigned green-efficient model, which aims to be in place by 2022.
This design could replace the need for the numerous individual high-end energy consuming processors of competing ‘miners’ with the node of a server on the internet, which comparatively requires a bare minimum energy consumption.
Furthermore, the “Proof of Stake (PoS)" model is to be integrated in such a way that a single ‘validator’ is randomly assigned to complete the cryptographic algorithm work, as opposed to the current competition based set up.
If you are looking to enter the NFT world as either creator or collector, be sure to go about some ethical and careful further research with energy consumption options in mind.
Happy NFT ventures,
and remember to support your Individual Artists and Illustrators.