2022 the year of NFTs, here’s what you need to know to stay up to date
What is an NFT? How can a JPG be sold for millions of dollars? NFT stands for Non-Fungible-Token, they are changing the internet on the same scale as social media did back in the 2000s. NFT is a new technology based in the blockchain, they bring utility, decentralized trade, digital collectables, community royalties and much more.
What is an NFT?
To put it even in more simple terms, you can change the word FUNGIBLE for the word REPLACEABLE. There are a lot of things that are replaceable, both in the physical and digital world. For example, you can exchange 1 bar of gold for another, or you can give me $20, and I give you back two $10 in return. In the digital world, we have Bitcoin.
Something non-fungible (replaceable) in the physical world would be The Mona Lisa, it is a unique piece of art. Another example would be a house, you might have a similar house nearby, but you can’t have the exact same house in the same exact location, therefore every single house is unique. There are also some non-fungible things in the digital world like domain names, there is only one YouTube.com or even a trademark for a logo like Apple. These are non-fungible assets that also come with some form of utility.
Smart contracts and utility are a massive reason why NFTs are going to become the future. Thanks to some recent breakthroughs in technology, we also have a chance for a piece of digital art to be unique and therefore non-replaceable or non-fungible.
You can think of the token as a public certification. Let’s go back to The Mona Lisa painting example, there are many replicas out there, but only one original piece painted by da Vinci. How do we know which one it is? The only way me and you know is what the experts tell us, but if you would get a board of appraisers together they would know which pieces are from da Vinci, and they can issue a certificate for it.
Just think of the blockchain as the same thing. Somebody puts up a piece of digital art, and hundreds of millions of computers will individually create a token for this that can be looked back upon any time to certify that this is the original. It is very secure because you would need to hack hundreds of millions of computers to corrupt the evidence of the token, which is essentially impossible.
So, the NFT is a unique digital asset that can be publicly verified in the blockchain.
Let’s explore some cutting edge NFT projects and also find out through these examples what is so amazing about NFTs. There are some incredible NFT projects like the F1 Racing Tracks, which are completely digital and online, and you are paid in commission every time someone drives over the part of your racing track that you own. You can get real life tickets for basketball games if you buy some of Gary Vee’s artworks. And there is even breed-able blockchain art, these are cats that you can breed on the blockchain and so many more interesting projects.
Let’s take a look at some of the most powerful features that are fuelling a revolution.
- The first and maybe the biggest innovation of NFT is hard-coded artist commissions. Just imagine Leonardo da Vinci paints The Mona Lisa, and perhaps he sells it really cheaply for a $100 to an art collector. He then works incredibly hard for the rest of his life to become a well renowned artist, and the collector sells The Mona Lisa for 10 million dollars, and really cashes in Leonardo's hard work. And Leonardo gets absolutely nothing for that resell, the original artist, the creator the person who worked really hard to increase their brand name and their name's value is not included in any of the resellers of their own work. This is the current state of the world, and specifically the art world. One that doesn’t incentivize the artist the way NFTs will, because part of the token in an NFT can include a smart contract, where hard-coded inside this artwork is a lifetime royalty payout structure, where anytime a re-sell of your art occurs you will receive a predefined percentage, you will receive that commission for any sale in perpetuity. This will allow the artist to support itself like never before. The power is back in the creator's hands.
- The next biggest feature is One of Community, let’s say you are a huge fan of Game of Thrones. You absolutely adore the show, and you have seen it 4 or 5 times or even 10 times. You know every single scene and dragged your family and friends to the seat to try to convince them that is the best show in the world. A few of your friends may have seen it and loved it, but not quite on the same level as you did. Now imagine that Game of Thrones released a very limited 100 pieces of Game of Thrones art as an NFT project, maybe they are snippets from the show, or maybe they do an NFT for every single character there is in the Game of Thrones cast. Either way, let's say there are 100 NFTs, unique tokens and when they launch this you decide to buy one. So now you own one piece of Game of Thrones intellectual property, you are closer than ever to your passion. But guess also what happens by default, you are closer than ever to the people who share your enthusiasm for Game of Thrones on the same level. You are instantly connected to the 99 other people out there who just spent money on their part of Game of Thrones intellectual properties as well.
- On top of these two features, there is something called Aligned Incentives that are really going to push your community to the next level. Think about a creator who is small that you currently follow. Maybe you watch them on YouTube, and maybe they have less than a thousand subscribers, but their art or their creativity is incredible, and they make videos that you really love that resonates with you, and you love their message. They are one of those people who you know it’s only a matter of time until they blow up. Until the mainstream discovers them and people start to go viral and see people posting things like “Oh, I was one of your first hundred subscribers!” or “I was there before you had 10000 subs”. NFTs can fulfil the need for this early connection to your favorite artist in a way that was never been possible before. Imagine instead of saying “Oh I was one of the early subscribers” you bought the very first piece of NFT art, now you have the most aligned incentive possible. The more successful that the artist or creator that you backed by buying their NFT becomes, the more the artwork is actually going to be worth. So if you launch an early NFT and somebody buys it, they are going to be incredibly committed to your brand to your message and hoping you get as big as possible, because they know their artwork will be inflated in price because of it. As an artist, it makes you on the same team as your client. You know you are not just building an audience, but you are building a tribe, who always are going to see a piece of your upside.
- A feature of NFTs that will take them so much further into the art world is something called “Smart Contracts”. A smart contract is basically the same as a real world contract, but they are completely digital. They are actually little computer programs that are stored inside the blockchain, and they can automatically execute all their agreements. For example, in Kickstarter, people pose ideas of products or services that they want to offer, you pledge your money towards them before they created, and if they reach a certain amount they will go and actually create this product for you. With blockchain and smart contracts, you don’t need to do this. It will be no mediator of Kickstarter, but you will be able to interact one on one from backer to creator in order to have this contract executed exactly how you set them up. Take for example Gary Vee’s artwork, he is offering some of his NFTs that come with a smart contract that says he owes you tickets for a basketball game. And if he doesn’t do this, he will automatically reimburse your money.
Let's check some cool NFT projects
These are computer generated pixel art. It is one of the first ever NFTs. The project is created by Larva Labs in 2017, offered 10000 small pixel-art portraits of people, zombies, aliens and apes. Each one was algorithmically generated and features different attributes like their hairstyle, glasses or hat. Some traits are rarer than others, and those tend to make more valuable CryptoPunks.
Kygo’s NFT Project
Kygo is a Norwegian DJ, songwriter and record producer. He is one of the first artists to use NFTs. Having millions of followers on he’s social media, he released a a limited edition NFT art collection, these pieces contained unreleased tracks with really cool graphics behind it. He actually made it about the audience and giving them some form of utility because he created unreleased tracks.
The Art from Vee Friends NFTs is not super-duper sophisticated. But the utility that comes with it and the community makes it one of the best NFT projects out there. This tells us that NFT art is much more than just the art. Many of he’s pieces include smart contracts that contain lots of different utilities. For example there is a piece that comes with $10000 yearly credit that you can consume on he’s vine shops.
Mike Winkelmann the man behind this project is a living legend. He created art every single day for at least the last 13 years, and he sold all the creations in a huge JPG for a shocking 69 million dollars as a NFT unique piece. This currently holds the record as the most expensive NFT. Make sure you follow him on Instagram.
I hope this article will give you an idea why NFTs are growing so fast. Without getting too much into the technicalities. This year, 2022 is going to be the year of NFTs. Make sure you are on board.