Blockchain Technology Revolutionizing the Art World Through Decentralized Finance Networks & NFTs
Non-Fungible tokens represent a new era of capital transformation and wealth creation that empowers a paradigm shift of human behavior at a pivotal time.
When mentioning cryptocurrencies, payments and investing are often the first things that come to one’s mind. While that may be the ultimate purpose of digital assets, there are far more use cases for crypto, especially today. One such use case includes Non-fungible Tokens (NFTs) and their beautiful synergy with art.
But what are NFTs, and why are artists so interested in ‘tokenizing’ their artwork? What implications does blockchain technology have for art, and are we about to see a revolution that forever changes digital artists’ economy?
Non-Fungible Tokens (NFTs)
The rise of decentralized finance (DeFi) has brought many great concepts and features to crypto. As an incentive that aims to decentralize modern financial instruments, the $14.65 billion DeFi market led to the creation of products and services such as yield farming, prediction markets, wrapped assets, lending protocols, decentralized exchanges, and so on.
Liquidity soon became an important hallmark for the market, and ‘farming tokens’ was the most important thing that a trader could spend their time on. But once the popular yield farming craze calmed down in September 2020, investors turned their attention towards other ventures, and soon enough, we saw NFTs become the next hottest thing in crypto. Discussions on Crypto Twitter transitioned from yield farming topics to NFTs almost overnight.
NFTs are cryptographic tokens representing a unique asset whose main feature is digital scarcity that cannot be interchanged, unlike fungible assets, including gold, fiat currencies, and even cryptocurrencies. Each NFT is entirely distinguishable from others in both its value and properties.
If we take fiat currencies like the U.S. dollar, we see that each 1 dollar bill is the same. They all have the same design and value. Furthermore, they can be printed at will and have an unlimited supply.
On the other hand, NFTs are the complete opposite as each token is unique and different compared to other assets in its respective category. Even when they do come in larger quantities, their supply remains immensely small.
Simply put, NFTs are tokenized versions of digital or real-world assets. In the DeFi sector, these unique tokens create digital collectibles and items that can be collected and traded on a decentralized marketplace without any intermediary.
Whether we are talking about digital or non-digital mediums, we must tokenize both forms in order to bring them to a blockchain network. In this context, Tokenization is the process of converting things into digital assets or tokens.
Most people mistakenly believe that Tokenization is a process that can be performed only on financial assets. But the truth is that you can tokenize absolutely anything. Have a pet? You can tokenize your dog and create a digital certificate of ownership.
Is there a piece of rock that someone wants to buy? You can tokenize it as well. As long as a material or immaterial object has monetary value and you can assign it under your ownership, it can be tokenized.
A great real use case of Tokenization is the real estate market. Are you looking to sell your house? You could tokenize your home and convert it into a digital form, a token. By doing so, you can sell the house on the digital open market without dealing with any traditional hassles and paperwork.
Like most protocols, projects, and niches in crypto, tokenized assets are primarily found on the Ethereum network under either the ERC-721 or the more recent ERC-1155 token standard. Both enable developers and users to create a smart contract containing non-fungible assets represented by a unique ID putting an end to the online reproducibility of assets.
The Rise of NFTs
Near the end of 2017, we saw a rise in blockchain games and digital collectibles that were built on blockchain technology. One such protocol that offered these items is CryptoKitties, a game in which users can buy, sell, and breed digital cats. The game exploded in popularity, with one CryptoKitty selling for $140,000 (May 12, 2018).
Each CryptoKitty is represented as a non-fungible token using the ERC-721 token standard on Ethereum. Cats are breedable and carry a unique number and 256 bit distinct genome with DNA and different attributes (cattributes) that can be passed to offspring.
DeFi & NFTs
The growing surge in popularity of DeFi (decentralized finance), a financial alternative that does not rely on central financial intermediaries such as brokerages, exchanges, or banks, and instead utilizes smart contracts on blockchains, has brought NFTs back into the spotlight.
The trustless blockchain transaction is now the only requirement two global strangers need to encompass the parameters of their barter. The true shift can be understood by considering the nature and multitude of unique global assets that can be wrapped in a NFT. It represents a new era of capital transformation and wealth creation that is empowering a paradigm shift of human behavior at a moment of crisis. — Randy McGuire, CEO, Liquid Ledgers
The Artworld and Blockchain Technology Collide
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Rarible, branded as the world’s first “community-owned NFT marketplace,” is thought to have kickstarted the recent surge in interest. The platform enables users to create their own NFTs and to have it to featured on Rarible’s decentralized marketplace.
Be it digital artwork or in-game collectibles; we can conclude based on the past that NFTs certainly have a market segment to fill. During the 90s, cards and stickers were massively collected by kids looking to create collections of their favorite football players, cartoon, and video game characters.
Cartoon shows like Pokemon and Yu-Gi-Oh, which enjoyed immense popularity, offered cards that people could collect and play with. Some individuals own these card sets still today, and some have become more valuable than ever.
This shows that as long as something generates interest and is available in a limited supply, it can hold monetary value. For example, those who decades ago dabbled with Pokemon cards are now selling them for thousands of dollars. Internet marketplaces like Amazon and eBay are filled with sellers who offer cards from this niche at insanely high prices. Certain rare and unique cards can be even sold for up to $100,000!
On that account, we see collectible items will never disappear and that we can further innovate them with the help of NFTs.
Ephimera — A One of a Kind NFT Platform
Ephimera, a new entrant to the NFT marketplace, is currently focused solely on photography and video art. Created on the Ethereum network, artists can access Ephimera to publish their work and sell them through auctions in the form of non-fungible tokens.
What makes Ephimera unique is that the platform limits the supply of each artwork to only one token. Therefore, every individual NFT will only have one owner at a time.
NFTs on Ephimera are based on the ERC-721 token standard, and all of them are sold and bought with ETH (ether). To purchase artwork, collectors can connect to Ephimera using a Web3 browser wallet like Metamask and use ETH to bid on auctions. It is also possible to bid at a listing price to instantly buy an NFT.
As for artists, they can register on Ephimera and onboard to the platform. By publishing their artwork and listing it on auctions, an artist can monetize his creative flow with blockchain technology.
Once the artwork is sold, artists also earn an additional stream of passive income through the help of secondary sale royalties. Every time the artwork is resold, the artist receives 10% of the winning bid.
Why is Ephimera such a popular option? Ephimera is a global, barrier-free home for the appreciation, creation, and collection of tokenized fine photography and media art enforcing single token supplies for NFTs created for the collector, and more importantly, for the artist. These cryptocurrency assets provide an entirely new world and economy to those who struggle to gain exposure and sell their work.
With the help of Tokenization, artists can now access a simple and easy-to-use infrastructure through which they can access a decentralized marketplace that lacks 3rd-parties and intermediaries.
‘NFT’s can enable a significant change in the way people interact individually and collectively.
The ‘Tokenization’ of an non-fungible asset establishes an intrinsic value that can be globally expressed based on the genuine aggregate demand of its unique asset value (including intellectual property processes captured in smart contracts) irrespective of extraneous services like traditional marketing, distribution, escrow, brokering, and reconciliation. Anyone who has a digital wallet on a smartphone can have the full services traditionally processed by discrete fiefdoms that would individually handle lucrative asset services, like brokering, custody, escrow, and liability.
NFT’s are a true elevation on top of the huge shift that Blockchain represents in general with its inherent trustless and democratizing nature. Since the prerequisite for these NFT asset trading instruments to reach the most vulnerable is only a smart phone digital wallet, near ubiquitous digital access and service is now possible. The Non-fungible tokens governance and cryptocurrency interoperability features represent a new management and recurring revenue opportunity based on this modified view of the concept of property; the underlying feature of market dynamics, Tokenization is a way to value (and devalue) anything that can be envisioned, manifested, and desired in a way that can be owned, traded, and vested.
John Locke now has the tools to empower his seventeenth century egalitarian vision of Capitalism’. — Randy McGuire, CEO, Liquid Ledgers
The evolution of this segment will be fascinating over the next 5 years.
PUBLISHED BY– Audrey Nesbitt