The excitement around the NFT is growing every year. People are investing real money in virtual pictures, buying pieces of digital land, visiting online galleries of cryptographic art. We tried to understand the essence of NFT technology and its prospects.

What is NFT: hype, art or technology of the future? Softline

NFT Prismatic #206 explores color, refraction and interaction. Author: Elia Stein

Explain what NFT is in simple terms

NFT is a certificate that proves that you own a unique object in the digital space.

But this certificate isn’t made of paper, it’s cryptographic. It allows, after a purchase on the exchange platform, to write in the blockchain the right to own some asset. This asset or content can be a picture, gif, animation, song, movie, tweet, post,a game character or weapon from a game that is considered to be exclusive in the digital world. The link to the original is stored in the IPFS eternal storage, and thanks to advanced cryptographic protection methods, it’s almost impossible to falsify information.

That is, if copyright for works of art and intellectual property in the real world is protected by laws, then in the virtual world, NFT technology plays a similar role. In fact, this is an electronic registry in which records of ownership are maintained. But sometimes the virtual and real worlds intersect. For example, in 2021, Banksy's material painting Morons, valued $95,000, was burned live, and its digital copy was put up for sale. During the auction, an NFT copy of the painting was sold for about $400,000.

What is NFT: hype, art or technology of the future? Softline

Burning Banksy's painting Morons, dedicated to ridiculing collectors who spend huge amounts of money on art.

Are there legal rights to the purchased NFT token?

No, under copyright law, the token does not mean anything. For example, anyone can download an NFT picture, put it on their desktop or profile picture, and there is no liability for this. That is, NFT cannot prohibit copying, it only mentions the owner of the original item of the digital file. We can say that the right to property is based only on social agreement. As Wired mentions, NFTs are just a digital souvenir.

Nevertheless, at present, Rosreestr is already beginning to interact with the population through the blockchain. For example, with its help, they began to register equity participation agreements in construction. This means that in the future, if legal systems recognize the legitimacy of NFTs, they may well become analogues of official documentation that will protect intellectual property from unauthorized use on the network, confirm ownership or person identity, etc.

What is NFT: hype, art or technology of the future? Softline

A frame from the virtual world of Decentraland

Then what's the point? Who pays a lot of money for them and why?

Does it make sense to acquire objects, the ownership of which will not be confirmed by law? Actually, there are, if you consider them in terms of art, collecting, investing or using within the digital world.

One of the most popular uses for NFTs is crypto art. Artists are auctioning off their tokenized works. NFT collectors collect sets of digital paintings as a hobby and compete for exclusive copies, offering thousands and millions of dollars for them. Gamers extract value from gaming activities by trading skins, textures, weapons. Many consider this area as favorable for investment and are engaged in the resale of objects.

In addition to the above, NFT technology develops the concept of so called Metaverse. An example of this is the Decentraland project. In such virtual spaces, you can buy digital real estate and confirm the right to it with smart contracts, communicate with other users, go to events, verifying tickets for them using NFT, and exhibit your NFT collections in virtual galleries. These are the technologies of the future that are being developed by leading IT companies: Microsoft, Nvidia, Meta.

Modern people spend online almost 50% of the time they’re awaken. Thus, the paradigm of thinking and life priorities are changing for many. Previously, connoisseurs paid millions of dollars for paintings or rare stamps, but now many have decided that artifacts of the digital world are valuable to them. At the same time, free copying of NFT objects only increases the value of the originals, just as, for example, printing Van Gogh works on T-shirts and notebooks increases the popularity and value of the originals.

NFTs in cyberspace are an important part of the blockchain economy. They make it easier to interact with any product, own, buy, sell, authenticate, etc. But they also allow people to make very real profits. According to DappRadar, NFT sales amounted to $24.9 billion in 2021. At the same time, in 2020 it was only $100 million, and, therefore, there is an increase of more than 220 times. And the pace of growth is only gaining momentum. As for the market capitalization of the 100 largest NFTs issued, it exceeds $16.7 billion.

According to the Chainalysis analytics company, the total volume of transactions on the NFT market has reached at least $26.9 billion over the entire period. Analysts also note a simultaneous increase in the total volume of transactions and their average value. What is NFT: hype, art or technology of the future? Softline

CryptoPunks is one of the first ever NFT collections. It comprises 10 thousand copies, and was sold for 4.2 thousand ethers, which was equivalent to $7.57 million.

The popularity of NFT was originally associated with the CryptoKitties game, in which you could breed virtual cats, and the amounts for which you could sell exceeded $100,000.

It turns out that anyone can post a random NFT picture and earn millions of dollars?

No, this is a dangerous delusion. For example, the Everydays: The First 5000 Days collage, which was sold for a record $69.3 million, at first glance, is just a collection of random images that anyone can collect.

What is NFT: hype, art or technology of the future? Softline

Коллаж Everydays: The First 5000 Days

However, getting into the story behind, one can understand that its creator is the already well-known artist Beeple, whose personality gave value to the collage. Or, reading the headline 14-year-old artist makes $1 million from cartoon NFT whales you might think that even kids can make a fortune on NFTs. But after studying the situation, it becomes clear that the girl was helped by her brother, a professional trader who also attracted a third-party developer.

Marketplaces are overflowing with paint drawings, selfies, primitive images, and the likelihood of their success is very small.

In order for demand to arise, at least an interesting concept of work is required, based on current newsworthy events, vivid performances, and engaging stories. Moreover, marketing and PR of NFT collections is necessary, say, mentions in the press, public outcry, well-known or prominent personalities as authors.

Basically, those who are promoted in the info field or the professional community and have large audiences manage to earn on NFT. In other words, if Elon Musk decides to sell anything through the NFT, even a song about the NFT itself, it will most likely be bought quickly for a high price, and the average person who published a talented work may never wait for it to be sold.

What needs to be done to still create an NFT and try to make money on it?

These are simple actions that everyone can do, but we must not forget that the probability of random earnings on such a transaction is very small. The NFT market is specific, and it’s necessary to understand the needs of the audience, stir up its interest, promote the author's image. For this work, there are professional teams that understand how this market works and offer promotion services.

It’s often said that blockchain and NFT technologies will change the world. What exactly do they mean?

NFT can help in multiple fiends:

be equal to documents and practically help the world to get rid of bureaucracy;
protect copyrights and intellectual property on the Internet from theft;
provide a profitable business model for artists and gamers.

Moreover, there is an even more global ideology embedded in this technology, which is decentralization. Meaning, with the help of blockchain technologies, it’s possible to eliminate such intermediaries as lawyers, politicians, banks. You can no longer depend on their working conditions, because there are smart contracts that don’t require a person to participate: machine code will do everything as accurately as possible. There is bitcoin, a currency with which all transactions are securely protected. There is NFT, which allows you to transfer any product to the blockchain and simplify all interactions with it.

Early blockchain ideas focused on limiting corruption, fraud, theft, and misuse of public resources by government and citizens. However, later cases of cryptocurrency theft became known, which showed that even the blockchain doesn’t provide one hundred percent security. Nevertheless, these are promising technologies, the implementation of which requires a lot of effort and budget. How this will develop, only time will tell.

You need to register on the marketplace, a platform for buying and selling NFTs. For example, OpenSea, Foundation, SuperRare, Rarible, Niftygateway or others.
Create a crypto wallet and purchase the cryptocurrency that the site accepts in order to pay a commission (gas) for the right to place (mint) your non-fungible token in the blockchain platform (on average, from 2.5 to 15% of the cost of NFT). On some sites, you can publish objects for free, but then you’ll have to pay a percentage of your sales .
Create an object, upload and add its description. After clicking the Create button, the payment is debited, and the token is put up for auction.