We are on the cusp of a paradigm shift. The rise of Non-Fungible Tokens (NFTs) is beginning to revolutionize many industries, pulling in assets of the real world into the digital world. By leveraging NFTs as a tool, it is now possible to represent what we see in our physical world in its own digital form which until now, was not deemed possible. But before we dive deeper into the rise and impact of NFTs, let us first define them.
A Non-Fungible Asset is an asset that contains unique qualities. These unique qualities add or subtract value to the asset itself and all assets are different from one another. Examples of Non-Fungible Assets are diamonds, snowflakes, and artwork.
On the other hand, a Fungible Asset is an asset that can be interchanged with other individual goods or assets of the same type. Assets within the same category are identical to one another. Examples of Fungible Assets are money, oil, and gold.
Therefore, Non-Fungible Tokens (NFTs) are tokens with unique unit characteristics that make them completely different from one another. They have a unique identity attached to the blockchain inclusive of limited permission and access making it impossible to copy or recreate.
Now that we understand what a Non-Fungible Token is, let’s dive into their emergence within the art world. The rise of NFTs can be seen in many categories, most prominently within the creative and art industries. Over the past year, digital art has exploded with the emergence of “Cryptoart.” While still in its infancy, “Cryptoart” is on track to become a mainstream art trend as there is no limit other than the artists’ creativity when creating an NFT.
NFTs and the arts
For example, artists have the ability to customize the NFTs to change based on external factors. “EthBoy’’ by Trevor Jones depicts Ethereum’s creator Vitalik Buterin. The NFT is dependent on external factors and undergoes modifications resulting from sporadic events such as price fluctuations and gas prices, but also annual changes triggered by Vitalik’s birthday. Another example can be seen in Beeple’s mutating portrait of Donald Trump, which was customized to change based on the 2021 US election. Originally acquired by art collector Pablo Rodriguez-Fraile for $67,000 in October 2020, the NFT was sold months later for $6.6 million on the secondary market.
Also within the industry, a hybrid art medium is rapidly emerging, bringing together visual art and music. The first ever full-length tokenized song was sold on Nifty Gateway by DJ 3LAU along with a tokenized music album sold on Origin Protocol, an Eterna Capital portfolio company. 3LAU, who sold off 33 NFTs at $11.7 million, set several new records, including the largest-ever NFT sale.
Unique and authentic
When thinking about the art industry as a whole, NFTs are also applicable to the physical art space and can streamline the process of physical art authentication. The traditional art industry relies on manual authentication processes, which can be very weak against forgeries. According to an AFP report, Geneva-based FAEI’s chief Yann Walther contends that 50% of works of art circulating on the market are counterfeit or misattributed. NFTs can help with authentication and curb the circulation of fakes by guaranteeing the origin and authenticity of the artwork by storing the information on the blockchain.
Every time the artwork changes hands, there will be a virtual trail. Furthermore, NFTs also serve as a medium for the collection of an artist’s royalties. An NFT can be customized so that, for instance, 10% of the artwork sale price will automatically accrue to the creator every time the artwork is sold on the secondary market.
Another renaissance is possible if we fully embrace NFTs as more than a technological innovation. They’re a paradigm shift to a world that values creativity, authenticity and self-expression as its most important values. New generations – Generation Z – have already started to do so, and now have the technological means to put this into action. The future ahead is bright, and we should all feel fortunate to witness this historical chance to be part of this new paradigm.
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