WTF is an NFT? Barney style breakdown

January 1, 2022

The question several crypto newbies ask is “Why is everyone paying so much for NFT’s? WTF even is an NFT? The way I like to explain NFT’s (Non Fungible Tokens) is that they are digital art that cannot be replicated. Why is this important? The same reason why famous physical artworks are also incredibly important.

To put this into perspective, let’s use paintings, or sculptures, from artists like Leonardo Da Vinci, Michelangelo, Picasso, and others. Not a reproduction, or a JPEG you can screenshot, but the original.

These iconic works are often auctioned for millions of dollars, and displayed at museums, or even stolen. Investing in art can be a real asset. Even people like the Axis knew how valuable art was, which is why they stole thousands of priceless paintings during World War II.

All kinds of art went missing and still has yet to be found. Unfortunately, some people capitalized on this tragedy, claiming they found these missing paintings, when really they replicated them.

Fake or Real?

Some replica’s were so well done, that it made it very difficult to distinguish a fake painting from the original painting. Over time, these fraudulent paintings have been sold, and resold for significant amounts of money. Then when a potential buyer has the painting tested for verification, and finds out it’s a fraud, the question remains, “Where is the original?”

Physical artworks are hard enough to keep track of. Locating who has owned them over the past few centuries is even harder. If your grandma has a painting, and she gives it to you as a family heirloom, how do you know if it’s truly an original? Who owned it before her? How about who owned it before them?

In order to verify a painting’s authenticity, experts have to use sophisticated technology to test the paint materials, canvas, frame etc. It can take days, sometimes months, to verify if a painting is an original. The same goes with historical artworks.

NFT: Chain of custody

It’s very hard to track who has purchased these artworks, how long they were in possession, and then who they were resold/passed on to. This presents a problem that has being going on for centuries in the art industry.

NFT’s are the solution to this problem. With blockchain technology, we can now digitally “mint” (aka convert) these iconic works from a physical painting into a digital verified NFT. Not only that, we can also track who buys it. This is because interested buyers are required to have their own crypto wallet addresses to be eligible to bid.

This means after they buy an NFT, the blockchain assigns each new owner a digital receipt, and that number is logged onto the NFT’s ownership history. So if that buyer ever decides to sell, the NFT will still have the previous owner’s code logged, as well as the new owner’s. We can now track the NFT purchase history.

Security in the digital world

How does this affect you? Creating a “digital wallet” (aka bank account) on platforms like OpenSea, Rarible, Nifty Gateway, and more, are the digital equivalents to famous art auctions like Southeby’s in New York City. Only this time, you don’t need to be an exclusive high society member to be able to bid on these beautiful pieces.

Platforms, like OpenSea, allow you to purchase rare art that would have otherwise only been available to the super wealthy. This is because NFT’s can only be purchased with cryptocurrency, not dollars. So if you bought 1000 Ethereum coins, when they were five dollars a coin, today you wold have around 4 million dollars worth of Ethereum. Thus, if you were one of those early cryptocurrency investors, you could easily afford to snatch up one of these priceless artwork’s verified NFT. All while the physical artwork can remain in museums for the public to enjoy. It’s like investing in stock that represents the entire artwork.

Minting history with an NFT

This works for not only physical art, but also digital art. Digital art like photography, graphics, logos, and even music. Can you imagine being the owner of the nike logo? Or owning the digital NFT of Michale Jackson’s hit Thriller?

The possibilities are endless because anyone who invests in cryptocurrency like Ethereum and Bitcoin, have been earning huge profits. Some may still wonder, “But what would I pay so much for a digital image?” You have to understand that you are paying is not only the talent and skill that went into the art, but you are paying for the right to prove you are the verified owner (aka bragging rights). You can always sell the art for more than what you bought it for while still supporting the original artist. It’s the new frontier of art dealing, where more people can profit from investing in art.

Do your homework

What they don’t really tell you about NFT’s is that you do need to be invested in Ethereum first. What they also don’t tell you, is if you are an artist looking to mint your artwork into an NFT, you need to really understand marketing as well. So before jumping in, you might want to do a little research on what platforms have lower gas fee’s (aka crypto taxes) for when you do decide to become a NFT investor, or seller. You also may want to take a look at what NFT’s are selling versus what are not.

What do they all have in common? Is your art consistent with what is in demand right now? Where many artist’s tend to go wrong, is they are too quick to mint an NFT thinking it will sell simply because it is a NFT. Before they know it, they spent valuable Ethereum trying to mint artwork that wasn’t even selling on Etsy. If you are an artist and interested in selling your art as an NFT, here are some of the top NFT’s to study. Yes, some are mind boggling, but other’s are quite incredible.