NFTs: The Price of Bragging Rights
Why would someone spend $2.5 million on a Link to a JPEG?
You might have already seen examples of NFTs like funny ape drawings or celebrity avatars used as an account holder’s picture on Twitter. So, who would buy a personalized digital token of a dancing bear in a tutu? Is it worth $2.5 million dollars? What value are you really getting?
First, a quick definition of an NFT:
Non-fungible token (NFT)
Units of data that are stored on a blockchain. People can buy and sell NFTs; they can be associated with unique digital files such as photos, videos, and audio.
What is the difference between buying an oil painting at a gallery and buying a bunch of 2D digital pixels?
Here’s the definition of ownership.
If you purchase a painting from a gallery, you get to take it home and hang it up in the physical world we live in. You OWN the original painting. All others may have photos or even reproductions, but they will never have that one piece of unique physical canvas. For example, Picasso’s original artwork will always be Picasso. People cannot recreate the same exact painting.
If you purchase an NFT, which could be anything from JPEG to a screenshot of a tweet, it does NOT make you the owner of the “art,” it only gives you the right to claim partial ownership. Buying an NFT does not give you the right to reproduce it and sell copies. Buyers showcase immutable public transactions on the blockchain to prove ownership. Read more: NFTs – what exactly do I own?
It’s worth pointing out that although the owner has the right to use the NFT EXCLUSIVELY, a copy of the digital art can literally ‘look’ as good as the original when people take screenshots to copy and paste the images. With a right-click to save, the copies of digital files are precisely the same as the original NFT. It comes down to the owner bragging about whether they own the original NFT.
For NFT creators, you have the right to reproduce, distribute copies, and display the work in public. However, the NFT royalties work differently. Creators earn royalties through subsequent sales in the secondary market. The transaction occurs without the need for any intermediaries. Remember, not every NFT generates royalties. Everything needs to be written on the smart contract; otherwise, the creator has no claim. Read more: What are NFT royalties?
Why do people go crazy over these?
Let’s break it down.
An NFT gives you a token of ownership on the blockchain. Rather than supporting an artist by donating to them on PayPal or BuyMeACoffee, you can support them by purchasing their NFTs in exchange for documenting your purchasing record on a public, visible ledger. A second benefit, buying an NFT may appeal to collectors who gain pleasure from owning rare, digital goods. A third benefit is that each NFT has a market value, and anyone can buy/sell NFTs. For starters, it is more accessible than investing in the housing market. New to NFTs? Here are some options to store them.
Risks in NFTs
But before you dive right in, consider the risks of buying and selling NFTs. If you want to purchase one to support an artist, ask if the value you derive from ownership aligns with what it means to own an NFT. There are business opportunists who create NFTs from written codes, disregarding the meaning of art creation. For example, the 10000 Lazy Lions NFTs with different combinations of eyes, clothing, and mane are made from randomly generated codes instead of careful craftsmanship from artists.
Another danger is the way we are using NFTs. Before the pandemic, everyone from organizations to influencers jumps on trends trying to chase the cash. For example, agents have produced NFT from past photographs and artwork of the famous deceased to “celebrate” their legacy using them in the NFT market.
Many are predicting this could be the next housing bubble. Has it started to crash? What do you think? Something to consider before purchasing that dancing bear in a tutu.
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