7 NFT- The Dawn of Digital-Art Revolution

NFT- The Dawn of Digital-Art Revolution

By Mukund Khemka (St. Xavier's College, Kolkata)

The world was only comprehending the cryptocurrency universe when a new cryptographic asset

class piqued everyone’s curiosity. This class is known as Non-fungible Tokens (NFTs) which is

recognized to open gates for validating and gratifying the world of digital art. NFTs seek to provide

artists with a decentralized platform where they can create and generate their ownership of any art

and further sell or buy them respectively across the community. This concept uses cryptocurrency

as a mode of transaction with a blockchain working at its core. This is undeniably an inception of

a revolution in the world of art and creativity and only time will notify it to be either the most

significant thing to happen in “modern technology” or will it be the inception of an impending

nosedive.

Keywords: Cryptocurrency, Non-fungible Tokens, blockchain, technology, digital art.

A startling upswing in the value of Bitcoin has brought cryptocurrency and an unprecedented

revolutionary world of crypto-economy in cynosure but the entire globe has gone berserk in the

recent past over a concept that seems to be hotter than a volcanic eruption. This new class of

cryptocurrency is notably known as NFTs or Non-fungible Tokens.

The world was only getting to discern what cryptocurrency is all about? How is it different from

the traditional forms of currency we use in our modus operandi? How is this currency traded?

What is its future and the interrogations were infinite but the introduction of NFTs has left us all

into a pool of unanswered questions. This article aims to bring forward the world of NFTs to the

uninitiated and elucidate what it is all about that makes Gary Vaynerchuk remark NFTs as a

“revolution” that will go down in history to mark one of the most remarkable things to happen in

“modern technology and culture” at large.

Decoding Blockchain

To decipher the mechanism behind NFTs, we need to have an idea about blockchain.

In the simplest sense, a blockchain is a generalized digital ledger of transactions where each block

contains a plethora of entries, and every time a new transaction occurs on the system, respective

records are added to a participant’s ledger. Blockchain works on a decentralized Distributed

Ledger Technology (DLT) where each block is interconnected (forming a chain). This means that

to corrupt the system, a hacker would have to deal with every block in the chain, across all of its

distributed versions which makes it almost infeasible to hack the system. All of the

cryptocurrencies, such as Bitcoin and Ethereum have blockchain as their foundation.

The following characteristics make Distributed Ledger Technology distinctive:

• Each blockchain is a ‘Smart Contract’ that is programmable.

• All the transactions are individually encrypted and secured.

• The identity of participants is either anonymous or pseudonymous.

• The network participants unanimously agree to the validity of each of the records.

• A copy of the ledger is distributed to each network participant for complete transparency.

• Every single transaction is irreversible, immutable and cannot be changed.

• The time-stamp is recorded for each transaction on the system.

Transaction Process through a Blockchain. (Source- Investopedia)

Explicating NFTs

NFTs put in an uncomplicated way, are unique digital assets that exist in multifarious industries

ranging from virtual real estate and digital arts to gaming, collectibles and many such things. One

can consider any form of media- memes, gifs, tweets, articles and anything across the board as an

NFT.

NFTs are non-fungible tokens. Fungibility essentially means interchangeable. For example, a Rs.

2000 note is a fungible currency where two separate Rs. 2000 notes will have the same value. On

the other hand, let’s think about two different paintings. Both of them are different and holds a sui

generis characteristic. This idea makes NFTs futile as a currency, but a great sense for other things

such as digital arts and creativity.

NFTs bring with them the following attributes:

• Authenticity - Blockchain technology will ensure a certificate of legitimacy to each item

on the marketplace.

• Scarcity - NFTs get their value through scarcity. The artists often try to limit their

distributions to augment rarity.

• Non-Divisible - Tokens tied to one’s identity are indivisible, meaning that an NFT can be

transacted as a whole without any fractionalized ownership.

How do NFTs play their part?

The entire process, in and around

NFT, begins with a piece of

content. The content is turned into

an NFT, i.e. “minted” on the

Ethereum blockchain which

houses maximum NFTs as it

stores extra information, thereby

supporting them. This NFT now

stays in a digital wallet at an NFT

marketplace and the entire

transaction lives on Ethereum as a

form of currency.

Credit: Beeple/Christies

Now, there may be chances that someone might replicate an NFT and take away all the credit. The

probability of such an event taking place is impossible because the blockchain validates and proves

one’s ownership of the bona fide NFT by recording it in its system. This makes them a ‘one-of-a-

kind asset.’

Next, one can choose to place an NFT for sale at the marketplace where potential buyers portray

their interest either by placing bids or purchasing the NFT at a listed price and artists will be

entitled to royalties every time their work goes for a resale. Otherwise, one can also wish to buy

and collect NFTs that entails perceivable value.

NFT, A Big Deal?

One might end up thinking why NFTs are gaining the spotlight. The reason why people end up

buying one is the same when they shop for clothes with designer logos or drive luxury cars. The

psychology behind creating utility and exclusivity adds a perceived value to their social identity

and this is the rationale behind people extending this digitally.

The first virtual NFT artwork, “Everydays: The First 5000 Days,” was sold at a staggering $69.3

million at Christie’s auction house thereby positioning Mike Winkelmann (otherwise known as

Beeple) among the top three most valuable living artists to date. This sale evoked a digital art

boom and opened gates to what is known as the ‘Internet of Assets.’

Credit: Jack Dorsey, Twitter

According to many artists, NFTs help them provide a democratized art market through which they

can sell their arts straightaway to the buyers hassle-free. For quite many years, artists from all over

the world have been using software and hardware mechanisms to create and distribute artworks on

the internet without having any system to collect and own them. But as Beeple states, “With NFTs

that has now changed.”

Beeple’s success and some magnificent bids, including the likes of Jack Dorsey’s first-ever tweet

sold for over $2.9 million, bears testimony that every work has a hidden value and this will

undoubtedly bring stimulating possibilities for this incipient marketplace whose market

capitalization displayed a raging development, thriving approximately ten-fold between 2018 and

2020.

Market Capitalization of global transactions

involving an NFT from 2018 to 2020.

(Source- Statista)

NFTs hold tremendous potential in the art industry as it has brought with it a dawn of major cultural

change. This industry will provide avenues to people with imaginative inclinations and will open

a healthy career path to many professions and businesses alike. The only important factor that

draws notice is the adverse environmental impact it generates. NFTs use Ethereum as its

cryptocurrency and cryptocurrencies work on a system that demands incredible energy. It is

reasonably striking to notice that Ethereum consumes as much electricity as the entire country of

Libya.

Will NFT repeat the events of the dot-com bubble or will bring an advent of the revolutionized

marketplace? This question is debatable because, on a micro-level, the payoffs are huge, but when

viewed through a larger lens, a revolution is impending. Non-fungible Tokens are sure to change

the way art is perceived and it will be enthralling to witness how and where this nascent concept

will take human behavior and creativity

References

 https://www.garyvaynerchuk.com/what-is-nft-non-fungible-token-guide/  https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq  https://economictimes.indiatimes.com/tech/trendspotting/what-is-nft-and-why-it-mattersin-the-crypto-world/articleshow/81410583.cms  https://economictimes.indiatimes.com/markets/stocks/news/moving-beyond-bitcoin-tothe-next-crypto-revolution-in-2021/articleshow/81773999.cms?from=mdr  https://www.nasdaq.com/articles/what-are-nft-stocks-your-guide-to-non-fungible-tokens2021-03-27  https://edition.cnn.com/2021/03/17/business/what-is-nft-meaning-fe-series/index.html  https://edition.cnn.com/style/article/beeple-first-nft-artwork-at-auction-saleresult/index.html  https://www.bbc.com/news/technology56371912#:~:text=NFT%20stands%20for%20non%2Dfungible,be%20readily%20interc hanged%20%2D%20like%20money.&text=NFTs%20are%20%22one%2Dof%2D,tangib le%20form%20of%20their%20own.  https://www.euromoney.com/learning/blockchain-explained/what-isblockchain#:~:text=Blockchain%20is%20a%20system%20of,computer%20systems%20 on%20the%20blockchain  https://appliedblockchain.com/growing-ecosystem-non-fungible-tokens  https://blockchainhub.net/blog/blog/nfts-fungible-tokens-vs-non-fungible-tokens/  https://www.investopedia.com/terms/b/blockchain.asp  https://www.statista.com/statistics/1221742/nft-market-capitalization-worldwide/  https://blockchainhub.net/blog/blog/nfts-fungible-tokens-vs-non-fungible-tokens/