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Blockchain in the art industry – Non-Fungible Tokens (NFTs) and some use-cases explained

By author: Jeffrey Gantner
Email: Jeffrey.gantner@swisscom.com 

NFTs – The next big thing?

You have probably heard of NFTs in the media lately. Given all the media attention they’re getting, we thought it would be helpful to dig into some of the basic questions. Questions such as what they are, how they work, and how you can make millions of dollars (don’t take this as investment advice).

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When people hear of blockchain, they usually think of cryptocurrencies, institutional adoption of Bitcoin or supply chain management. Blockchain technology has arguably made it into the mainstream: The banking sector welcomed blockchain technology with open arms, the logistics sector and even the administrative industry are starting to follow. Those who are keeping up with blockchain projects are aware that recently many artists have started using blockchain, to their great personal success.

The NFT technology itself is not new, however, what’s new is the mainstream traction it is getting. So let’s start at the beginning.

NFTs for Beginners

Let’s start with the word: non-fungi-what? Mostly used in the world of digital art, non-fungible tokens, or NFTs, are tokens on a blockchain (making them similar to Bitcoin) used to certify the ownership of individual digital assets (not similar to Bitcoin). If you buy a Bitcoin, you don’t care which Bitcoin you are buying. All you care about is that you have a Bitcoin that you can use to buy your Tesla (or HODL forever). But if you buy an NFT, you are essentially buying this exact copy, similar to a serial number in the real world.

This means that, in the digital world, where copies of anything can be made for free, each digital asset is now guaranteed unique.

Each NFT has its own unique data identity tied to it, which makes them useable for licenses, certifications or even limited-edition tools within a game. NFTs are particularly popular in the fields of sports, gaming, digital art, music and even virtual real estate.

To sum it up, NFTs are digital assets that can be created, bought, exchanged and sold on the blockchain and can represent a variety of unique items.

How it works:

  • An artist creates a digital piece of art, let’s say a picture. Instead of offering it for download on a website, it can be tokenized and represented through an NFT.
  • The artist sells the NFT (usually for Ether, the cryptocurrency of the Ethereum blockchain) on a public marketplace. The buyer now owns the NFT and the piece of art. The NFT acts as the “certificate of authenticity” and certificate of ownership.
  • The NFT can be resold, but it cannot be copied and usually can’t be split (you can’t own a part of the art).
  • While the NFT cannot be copied, the art that is represented by the NFT usually can be copied. Imagine taking a picture of the physical artwork of Mona Lisa while you’re in the Louvre – you can take it home, but you certainly won’t own the painting. With digital art, you are able to take a screenshot that is almost indistinguishable.

An obvious downside of NFTs is that the digital art included with it can be easily copied – with the copy being literally as good as the original. One benefit of buying art is supporting your favorite artists financially – and that’s also true with NFTs.

So What Exactly Do You Own?

Well, that very much depends (I’m no legal expert, so please bear with me). Next to bragging rights, in most cases, you own the “right to consume” and the “right to resell” your NFT. If you own an NFT of an image, you CAN look at it, show it to others, or resell your NFT to someone else. Usually, you DO NOT OWN the copyright, the right to redistribution, or the right to commercialization in any way. You also can’t modify the image. These rights usually all stay with the artist.

You might think it’s more of a gimmick, but for some, it’s big business…

  • Christie’s auctioned an art piece by “Beeple”. You can see it in the slideshow. It sold for almost USD 70 million.
  • “Nyan Cat”, the rainbow cat meme, recently sold for USD 580’000.
  • A video of LeBron James dunking brought in USD 208’000.
  • Grimes sold 6 million worth of digital art incl. images and short videos set to music.
  • Controversial YouTuber Logan Paul made over USD 3.5 million by selling NFTs.
  • Kings of Leon are selling $50 music album tokens that include special perks. After the two-week sale of the tokens, no more will be made and the NFT becomes a tradeable collectible.

How can you be part of the game?

If you want to create, invest or profit from NFTs, the first thing you need to buy or own is Ether – the most popular currency to deal with NFTs at the moment.

Now you are ready to trade. Popular platforms to do so are SuperRareRaribleOpenSea or Nifty Gateway. You can also sell it exclusively on Swisscom blue TV via Elementum.art, a product of Swisscom (Kickbox) spin-off dloop Ltd.

After you connect your Ethereum wallet with your NFT platform of preference, you are ready to become part of the game (seriously – please consult your financial advisor before investing).

As a buyer, you can see what NFTs are currently being auctioned in the marketplace. If you’ve found something you like, go ahead and raise a bid and wait to see if you are the highest bidder.

As a seller, you can choose a digital asset to create or upload (e.g. from your computer), define its details such as the title, description and price tag, lean back and hope for a profit (note: there is a small admin fee that you’ll have to pay to create an NFT).

What are your thoughts on NFTs? Is this digital art ownership facing a sustainable future or is it more likely to die out like crypto kitties? Let us know down below in the comments!

The very first tweet, sold for almost 3 million US dollars

Beeple’s digital picture – this is what 70 million US dollars look like

The nyan cat – sold for 300 Ether

NBA Top Shot

 

 

 

About the author

Swisscom Outpost

As a leading technology provider in Switzerland Swisscom established Outposts in innovation hubs around the world. We identify and develop new solutions for our internal and external customers in Switzerland.

We identify technology development and new business opportunities. We do this by fostering the exchange and cooperation with existing major technology firms and ambitious young startups to satisfy rapidly developing customer needs and market requirements.