What is NFT or Crypto Art?

What is NFT or Crypto Art?

In the past few weeks, I’ve seen huge headlines about record prices for art. Recently a work of art was auctioned off at Christie’s that contained 5,000 digital images and sold for 69 million dollars! This is great news because it shows how much people want to invest in something they believe will increase their net worth – just like with stocks or bonds. It also proves that NFTs are more than an idea; they’re actually happening now, so competitors Sotheby’s have started dealing them too as well. There may be many other applications this could offer besides only investing in artwork but for now, the digital art scene is celebrating this development a lot.

In this text I explain how this works, how NFTs stand on copyright, and what possible applications they could result in for the art industry.

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NFTs are a registry entry for digital files

An NFT is like a register entry for digital files. The register specifies the owner of a piece of property – an NFT stipulates who is the owner of a digital object, such as a picture, video or piece of music.

The abbreviation NFT stands for “non-fungible token”: “Non-fungible” can be translated as “not interchangeable” or “unique”. “Token” in this context means, for example, ID or token.

An NFT links information (such as ownership) to a digital object in a non-interchangeable manner. The NFT is considered unchangeable and forgery-proof, as it is permanently stored in a blockchain. In this way, an NFT becomes a kind of certificate of authenticity for ownership.

Digital files become tradable goods

My first sold NFT

My first sold NFT

This is an advantage for trading virtual objects in the digital world: While physical objects can only be in one place, digital files can be copied. Depending on the object, they can be reproduced, shared and sent, saved and edited as often as required. NFTs turn digital objects into tradable goods: These can be bought and sold and auctioned.

The certificate of ownership of a digital file stored via NFT cannot be copied and cannot be changed – and thus becomes a tradable good, and in some cases also an object of speculation. The work to which the NFT refers itself can still be copied.

The value of uniqueness

Chances are good that NFTs will persist in the long term rather than just being a huge hype train. The most important prerequisite for this is that there is a market in which buyers and sellers with money trade NFTs. For this, both sides must assign a value to NFTs. Scarcity is key, but also quality.

On the buyer side, there is definitely a demand for scarce goods: For some years now, certain consumer goods have increasingly been marketed and sold as unique items. Regardless of whether it is a limited edition sneaker or numbered collectors card, the logic is to suggest the uniqueness of the product – in the hope of being able to achieve higher prices.

From economics and sociology, but also from market research, we know that the value of such consumer goods does not arise solely from their use. Above all, it arises from the fact that people want to signal their own social status to others through special or unique products. This is exactly where NFTs come in.

In conclusion

NFTs are digital certificates of authenticity for various objects. They offer various new exploitation opportunities, especially in the art and music sectors and in the digital world.

Instead of selling property rights, NFTs make it possible to create music and art events, artificially narrow them down, while retaining property rights. However, it remains to see in the future to what extent NFTs deliver the democratization of the art and music industry.

 

 

 

 

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