History of NFT
The concept of NFTs traces back to the origins of blockchain technology, with the decentralized nature of cryptocurrencies appealing to those seeking transparency and trust in the aftermath of the 2008 financial crisis. NFTs emerged as a way to buy, sell, and track digital assets securely and transparently.
The $69 million sale of Beeple’s NFT artwork, titled “Everydays: The First 5000 Days,” at Christie’s auction house made headlines and established NFTs as a significant player in the art world. This record-breaking sale not only showcased the potential value of virtual art but also sparked a broader conversation about the worth of NFTs compared to traditional masterpieces.
Key takeaways
- Non-fungible tokens are exclusive virtual assets stored on the blockchain that cannot be exchanged on a like-for-like basis like cryptocurrencies.
- NFTs are created through minting, associating digital assets with a special identification code and metadata, and stored on a blockchain using smart contracts.
- NFTs provide creators with a new way to monetize their digital creations directly, retain ownership, and receive royalties from resales but the creation and dealing of NFTs consume a significant amount of energy, contributing to environmental concerns.
- Donald Trump released two NFT collections: “Trump Trading Cards” and Melania Trump’s “The 1776 Collection,” both sold out quickly and generated significant income.
What is an NFT?
NFTs are virtual assets that use blockchain technology to verify ownership and establish uniqueness. NFTs, in contrast to cryptocurrencies like Bitcoin or Ethereum, possess uniqueness and cannot be traded on a like-for-like basis due to their non-fungible nature. Each NFT represents a specific item, be it a piece of artwork, a song, or even a virtual item in a game.
How do NFTs work?
Non-fungible tokens are digital assets that are created using blockchain technology, commonly on the Ethereum blockchain. While cryptocurrencies like Bitcoin are fungible and can be exchanged on a one-to-one basis, NFTs are unique and cannot be traded in an equivalent manner.
Here’s a step-by-step explanation of how it works:
1. Creation
The act of minting refers to the process of creating an NFT. Artists, content creators, or individuals can use various platforms and tools to tokenize their creative works, such as art, music, videos, in-game items, and more. This involves associating the digital asset with a unique identification code and metadata, which describes the asset’s characteristics and ownership information.
2. Blockchain and Smart Contracts
NFTs are stored on a blockchain, such as Ethereum, which acts as a decentralized and secure digital ledger. Smart contracts, self-executing agreements encoded on the blockchain, govern the ownership and transfer of NFTs. These smart contracts ensure the authenticity, provenance, and ownership rights of the asset.
3. Buying and Selling
NFTs are available for purchase and sale on a variety of online platforms known as NFT marketplaces. These marketplaces serve as intermediaries, linking buyers and sellers together. Transactions within NFT marketplaces are typically conducted using cryptocurrencies, such as Ethereum (ETH). Buyers can browse through different NFTs listed for sale, place bids, or directly purchase the desired asset at a specified price.
4. Wallets
In order to engage in the NFT ecosystem, users require a digital wallet. These wallets, often called NFT wallets or crypto wallets, allow users to store, manage, and interact with their NFTs. Each NFT is associated with a specific wallet address, which represents the owner.
5. Ownership and Authenticity
Owning an NFT means you hold a unique cryptographic token that represents ownership of a specific virtual asset. The blockchain ensures the authenticity and provenance of the asset, making it difficult to forge or tamper with. The ownership information and transaction history of the NFT are transparent and publicly accessible on the blockchain.
6. Fungibility and Interoperability
While NFTs are non-fungible and unique, they can still be traded or exchanged on various platforms or within specific ecosystems. Interoperability standards, such as ERC-721(focusing on the creation, ownership, and transfer of unique digital assets) and ERC-1155, enable NFTs to be used across different applications, games, or platforms. This means that virtual assets can have utility beyond a single marketplace or ecosystem.
Why Non-Fungible Tokens (NFT)?
Artists
For artists, it offers a fresh opportunity to generate income from their digital creations. They can sell their artwork directly to buyers without the need for intermediaries like galleries or agents. NFTs allow artists to retain ownership and control over their work, as the ownership is recorded on the blockchain. Artists can also receive royalties every time their NFT is resold, ensuring ongoing financial benefits from their creations.
Buyers
Buyers have the opportunity to own unique and original virtual assets. These assets provide proof of ownership and authenticity, ensuring that the buyer owns the original work rather than a copy. This exclusivity and authenticity make NFTs valuable to collectors. The tokens can also be seen as a form of investment, as their value can appreciate over time.
Collectors
Collectors are interested because they offer a new way to build and showcase their collections. Non fungible token allow collectors to own virtual assets that are part of limited editions or rare releases, adding to the exclusivity and value of their collections. NFTs also provide a way for collectors to engage with the artists directly, fostering a sense of connection and community.
Tokens are bought and exchanged in online marketplaces, with transactions conducted using cryptocurrency. The sale can generate significant sums of money for both artists and collectors.
For artists, it provides an opportunity to earn income from their creative endeavors. For collectors, if the value appreciates, it allows them to make profits if they decide to sell their assets in the future.
Types of NFTs
Sports
In the world of sports, Non-fungible tokens allow fans to purchase virtual collectibles such as game highlights, player cards, and exclusive access to events.
For instance, NBA Top Shot offers basketball fans the opportunity to buy NFT-based video highlights of their favorite players, creating a new market for sports enthusiasts.
Photography
NFTs have revolutionized the photography industry by enabling photographers to sell their virtual works with proof of authenticity and ownership. Creators can tokenize their photographs as NFTs, ensuring their uniqueness and value.
For example, Kevin Abosch’s “Forever Rose” photograph was sold as an NFT for a significant sum, showcasing the potential for photographers to monetize their art through NFTs.
Utility
Utility tokens provide holders with access to specific services or benefits within a platform or ecosystem. These Non-fungible assets can represent membership, special privileges, or even virtual land ownership.
Decentraland, a virtual world built on blockchain, allows people to buy and own virtual land as tokens, giving them the power to create and monetize their digital experiences.
Virtual World
Non-fungible tokens have extended into virtual worlds, where users can buy and sell digital assets such as avatars, wearables, and virtual real estate.
CryptoKitties is a prime example, where users can collect, breed, and trade exclusive virtual cats, each represented by an NFT. These virtual assets hold value within the virtual world and can be bought, exchanged, and traded.
Art
NFTs have disrupted the art world, offering creators a new way to monetize and protect their digital items. Artists can tokenize their creations and sell them directly to collectors, ensuring provenance and authenticity.
Beeple’s artwork “Everydays: The First 5000 Days” sold as an NFT for millions of dollars, solidifying the potential for digital art in the NFT market.
Trading Cards
NFTs have revived the concept of exchanging cards in the digital realm. Collectors can buy, trade, and own virtual cards representing athletes, celebrities, or fictional characters.
NBA Top Shot, mentioned earlier, allows users to buy and exchange digital basketball player cards, replicating the traditional card experience in a digital format.
Collectibles
NFTs have opened doors for digital collectibles, where unique items can be bought, sold, and collected. These can include virtual items like weapons, rare items in video games, or even virtual pets.
CryptoPunks, a collection of 10,000 unique 24×24 pixel art characters, has gained significant attention as a digital collectible, with some punks selling for substantial amounts.
Music
Musicians and creators can leverage NFTs to sell unique music tracks, concert tickets, or exclusive experiences.
Kings of Leon, an American rock band, released their latest album as an NFT, allowing fans to purchase limited edition packages that included special perks and digital collectibles.
Crypto gaming
NFTs have revolutionized the gaming industry by introducing a new dimension of ownership and value to in-game assets. These unique virtual items can be bought, sold, and collected, providing players with unprecedented opportunities to monetize their gaming experiences.
One notable example of a crypto gaming NFT is “CryptoKitties,” a game where players can collect, breed, and trade virtual cats.
Benefits
- Financial Opportunities: NFTs provide a means for artists and creators to monetize their work, allowing them to earn money directly from their digital assets.
Example: An artist sells a unique digital artwork as an NFT and earns a substantial amount of money from the sale.
- Empowerment of Individuals: NFTs empower individuals, including creators, collectors, and gamers, by giving them true ownership and control over their digital assets.
Example: An artist retains ownership of their artwork and can control its usage and distribution, even after selling it as an NFT.
- Possible real-world usage: NFTs can enable fractional ownership of real estate properties. This means that multiple investors can own a fraction of a property by purchasing corresponding NFT tokens. It allows for more accessible and affordable investment opportunities, especially for high-value properties.
Example: A $1 million beachfront villa can be divided into 100 NFTs, each representing a 1% ownership stake. Investors buy these tokens, enabling fractional possession and access to high-value real estate investments.
Drawbacks
- Environmental Impact: The creation and dealing of NFTs consume a significant amount of energy, contributing to the carbon footprint of blockchain networks like Ethereum.
Example: The high energy consumption required for minting and trading NFTs raises concerns about their ecological impact.
- Potential for Fraud and Copying: While NFTs represent ownership of a unique digital asset, copies of the item can still be made, leading to questions about the actual value of owning the original NFT.
Example: Despite owning an NFT for a virtual painting, someone can still create identical copies of the artwork, potentially diminishing its exclusivity and value.
How to buy NFTs
Step-by-step Guide to Buying on Platforms like OpenSea:
- Set up a digital wallet: To buy tokens on OpenSea, you need a wallet with Ether (ETH) funds. Wallet options include MetaMask and Coinbase Wallet. Choose and set up a wallet that suits your preferences.
- Access OpenSea: OpenSea is the largest NFT marketplace where you can buy, sell, create, and trade NFTs. Visit the OpenSea website or app to get started.
- Browse and search for NFTs: Use the search function or explore different categories to find NFT collections that interest you. OpenSea supports various types, such as digital art, videos, and other assets.
- Select an NFT: Once you find an NFT you want to buy, click on it to view more details and verify its authenticity.
- Purchase or make an offer: If you are ready to buy the NFT immediately, click on the “Buy now” option. Alternatively, you can make an offer if the seller allows negotiations.
The Trump NFT
Donald Trump introduced his initial NFT collection, “Trump Trading Cards,” featuring digital illustrations depicting him in various heroic poses and outfits. The collection included 45,000 Non-fungible tokens, which were sold at $99 each. Despite initial skepticism, the collection quickly sold out within a day.
Trump’s NFT Income
Former President Donald Trump’s recently released financial disclosure form revealed that he earned a substantial income, estimated to be between $100,001 and $1 million, from selling nonfungible tokens.
NFT Sales and Political Associations
It’s important to note that the NFTs were explicitly declared as non-political and unrelated to any political campaign. The collectibles were exchanged under the name NFT INT LLC, which had a paid licensing agreement to use Trump’s name and likeness. The cards were not associated with any specific political agenda.
Financial Disclosures and Candidacy
As Trump is currently a prominent contender for the 2024 Republican presidential nomination, he was required to file the financial disclosure form as a candidate for federal office. The disclosure sheds light on his income generated from NFT sales and other ventures.
His wife follows
Melania Trump’s “The 1776 Collection” NFTs
Melania Trump has joined the NFT market with her latest collection called “The 1776 Collection.” The NFTs are inspired by American imagery and feature landmarks like the Statue of Liberty and Mount Rushmore on animated placards. Priced at $50 each, the collection includes seven designs and a total of 3,500 NFTs available.
The collectibles are being sold exclusively through the website USA Collectibles. Melania Trump’s Twitter account retweeted the company’s tweet promoting the sale. In addition to “The 1776 Collection,” the website also offers “POTUS TRUMP” NFTs, featuring photos of Donald and Melania.
Value Fluctuations and Market Impact
The introduction of Donald Trump’s second collection of digital cards caused the value of the original NFTs to decline. At present, the original cards hold a value of roughly $221 in ETH on the secondary market, whereas the second set begins at approximately $47 in ETH.