NFT is a key word that people keep coming across on the internet: sometimes as art that is supposedly counterfeit-proof, sometimes as a prestigious investment, sometimes as a controversial accessory on Twitter. But what are non-fungible tokens?
Have you ever heard of the Nyan Cat meme? The digital rainbow cat that sold for $ 580,000? That was when NFTs really caught the attention of the general public. And also like Twitter They announced special icons for NFT owners and sparked a heated discussion between supporters and opponents on the platform. But what exactly is an NFT? And why does it have anything to do with art?
What is an NFT?
Basically, a non-fungible token (NFT for short) is exactly what the name means when it is printed: a non-replaceable token. The best way to understand exactly what that means is to consider what the opposite, a replaceable token, is.
Every day we come across interchangeable tokens, for example in the form of coins. A euro coin is worth exactly one euro and you get things worth one euro in return. All one-euro coins are interchangeable and have exactly the same value.
A non-replaceable token in this example would be a unique hallmark of a euro coin. This coin exists only once and can not be exchanged for any other coin. It always has the value that collectors are willing to pay for it. This value may change depending on demand.
This is exactly how NFTs relate to cryptocurrencies, ie digital currencies that cannot be translated into the analog world in the form of banknotes in ATMs.
Just as coins are minted in a factory, NFTs and cryptocurrencies are extracted on blockchain. A unit of cryptocurrency – for example a bitcoin – is worth exactly as much as any other bitcoin and can be replaced by it. An NFT is a specific token that is worth exactly what collectors are willing to pay for it.
So-called miners are needed to ensure that new NFTs and cryptocurrencies can come at all. They check blockchain and enter new content on blockchain. More about this here.
Just as everything can be depicted on a printing error, an NFT can also contain everything. A link is literally stamped into the token and can lead to any type of file. This can be a picture, a video or a piece of music.
The NFT then acts as a digital deed. It says: The person who owns this token is the owner: of the file that the link in the token points to. What rights you actually have to the underlying work depends on the NFT.
These deeds are only available on blockchain. This has some disadvantages, as Prof. Dr. Heike Neumann, an expert in cryptography, explains. Blockchain has no security. Theft, fraud or other criminal activities will not be monitored or prosecuted by anyone.
What are NFTs good for?
Some artists see NFTs as an opportunity to better sell their art digitally. While previously it was not possible to distinguish one version of a digital image from another, an NFT now allows artists to identify the original of their files.
Welcome to the NFT Museum
There is a museum for NFTs in Hamburg – managed and filled to a large extent by the artists Roman Gilz and Ekkehart Opitz. For the two, the NFT sales platform Open Sea is a new way to sell their art. Gilz says: “It has always been difficult for me as a photographer. My photos can be stolen anywhere on the web. Anyone can just pull them down. ” To prevent this in the future, he trusts NFTs: “If I upload a large work, the identifier shows that it is mine. We have finally got a digital authorship that no one can doubt, ”says Gilz.
For artists, however, the new digital market has even more benefits: “There is now also the possibility that I can buy an NFT and on a certain date it will be another work,” says Opitz. How can you imagine that? For example, Warner Brothers sold pictures of characters on Niftys platform that changed their appearance at the release date of the movie “The Matrix Resurrections”. According to Opitz, NFT artwork has no boundaries: “Anything goes.”
Are NFTs always original?
However, it is not that simple: an artist can upload the original of the digital work and turn it into an NFT. However, not all NFTs offered are automatically original. A well-known dachshund-dog parable helps to understand this: every dachshund is a dog, but not every dog is a dachshund. Translated this means: Every original can become an NFT, but not every NFT is an original.
Any person can upload any file and use services to create an NFT with it. This leads to two problems: First, the uploaders do not have to be the artists who created the work. Anyone can do this and sell any copy of a digital work of art. This is so common that the art platform Deviantart has a service to notify artists once their images have been made into NFTs.
Not only artists but also big brands like the fashion brand Hermès are now struggling with this. The company is known for its luxury handbags – especially the Birkin model. Pictures of this purse covered in fur can be purchased on NFT platforms. However, not by Hermès, but by the artist Mason Rothschild. These so-called meta-Birkins are now the subject of a lawsuit from Hermès v Rothschild.
The second problem is that the token contains a link pointing to a file on a server. The work itself is not archived. So since the work is not part of the blockchain, it can be modified or exchanged after it has been sold as an NFT. It would be like admiring “Mona Lisa” in a picture frame one day and Donald Duck, for example, smiling at you the next.
So what an NFT actually says in the end is that the owners of the token spent money on a deed that points to a file and says it belongs to them. NFT can not guarantee whether this is an original and whether the link in the token will continue to point to this work in the future.
Why would anyone buy an NFT?
lure of possession
The reasons for buying an NFT are the same as for other art purchases. First of all, to be able to say: “I own ‘Mona Lisa'”. Although anyone can buy a good copy of the movement for a few hundred euros, no one would equate the original and the copy. NFTs enable this for digital works. While anyone who wants to can just save “Nyancat”, only the person who bought the NFT can say “I own Nyancat”.
NFTs make it possible to speculate with digital art. With classic art purchases, one probably wonders that they will be worth more money in the future. The same can be done with NFTs.
money laundering and tax evasion
Like real art, NFTs do not necessarily have to increase in value to make buying and selling worthwhile. Because art has long been a popular way to launder money and avoid taxes. NFTs reinforce this aspect by the anonymity of the platforms on which they are traded and the cryptocurrencies with which they are paid. The US IRS is also concerned about this.
Membership of Communities
Some NFTs allow their owners to become members of digital communities. For example, if you want to join the Bored Ape Yacht Club, you must own an NFT from the corresponding series. Even some traditional social clubs in New York are said to use NFTs as a means of access.
NFTs exist on a blockchain and require large amounts of electricity to mine. However, how high the CO2 pollution actually is can only be assessed. The Crypto Art website has decreed the power consumption of an NFT to be slightly less than the power consumption of an average European in two months. But the website is now offline as artists who sold their work as NFTs were subjected to online hatred and insults based on it. This is announced by the artist behind the project now on the website.
Other estimates, such as artist and programmer Kyle Mcdonald, place a NFT transaction on the high seas for about 25kg of CO2 emissions. A modern car with a petrol engine generates this amount of pollution in 204 kilometers of driving.
Are NFTs now good or not?
On the one hand, NFTs are positive news for some artists. Being able to sell an original digitally is a new revenue stream. The ability to identify an “original” at all also helps many.
On the other hand, NFTs are anything but environmentally friendly, nor are they safe. The permanent danger of finding his own images again against his will when NFT creates new work for artists: inside. They must also weigh whether they want the revenue from the NFTs if the price is a high environmental burden. Even buyers have no security and must trust that they are really buying an original and not being cheated.
In summary: The idea of giving artists the opportunity to create a digital original has potential. NFTs as a solution to this have many, too many for some, disadvantages.
Cover image: Simon Uhl