Today, artistic work can be downloaded and copied for free. Artistic ownership and royalties for artists have received a serious wound. Fortunately, Non-Fungible Tokens (NFTs) have arrived as a new salve for authenticating ownership of digital artifacts.
Non-fungibility simply means that the tokens are unique and indivisible, like cars or houses. Ergo, they cannot be traded or exchanged willy-nilly without considering their special features and valuation. Contrast this with fungible goods and assets, such as money or stocks in a specific company that have identical features and valuations for each unit.
The intrinsic problem with digitizing art became obvious with the advent of the MP3. Artists and record companies lost huge amounts of money because songs could be uploaded and downloaded for free through websites like Napster and Limewire. Similarly, the film industry has suffered decreasing profits as bootlegged DVDs were pirated and placed on sites like BitTorrent and Isohunt.
With such disruptive technologies, not only did the industries responsible for being middlemen between artists and consumers feel the pain, but the artists suffered with them. Yet technology, when put to proper use, has an empowering, liberating, and life-improving effect. This is certainly true of blockchain, with the positive influence it continues to emit into areas previously shaded with helplessness, vulnerability, and centralization. The excellent use cases of blockchain have spread to include fine art and collectibles.
With innovations in the world of blockchain, many artists are beginning to attain a level of empowerment they have never known before. NFTs are making this possible. NFTs as art or cryptocollectibles are scarce and are authenticable on the blockchain. It has become a bountiful means through which artists can create and sell their work, and collectors can purchase and trade.
It is worth noting that the actual artistic work is not codified in the blockchain. Rather, the tokens are proof of ownership. The artwork itself is often stored on separate website servers in the case of digital art, and in galleries or elsewhere for physical masterpieces.
To gain a better understanding of this revolution in ownership, it is best to begin with a brief overview of how NFTs came to be.
The first crypto art assets were the Rare Pepes. Pepe is a popular internet meme that started as a comic book character created by Matt Furie. The concept behind Rare Pepes is to craft an image of the character in a unique circumstance or condition.
Creating a Rare Pepe and selling it to consumers is a curated process much like one would expect in the traditional art world. An artist pays to issue their image of a Rare Pepe on a directory, and it is decided whether it is unique enough to be featured on the website.
Collectors may then purchase tokens connected with the images on the Bitcoin blockchain. The blockchain acts as a way to verify the unique artist signature, and the ownership of the image through the tokens.
Although tokens for Rare Pepes are on the Bitcoin blockchain, this is not the case with most NFTs. A specific Ethereum token, known as an ERC-721 has become the standard for NFTs. ERC-721 are a class of unique tokens that are meant to be non-fungible.
Axiom Zen, a venture capital firm, innovation studio, and business incubator, is the start-up that proposed the ERC-721 token class. Yet, they did not stop with pioneering non-fungible tokens, they proceeded to develop a highly lucrative use case for them by launching Crypto Kitties.
Crypto Kitties is one of the first blockchain collectibles to gain real attention. It allows users to buy, sell, and breed unique digital cats. Thanks to the original smart contract and its employment of ERC-721 tokens, the ownership of each individual feline can be connected to a specific token.
Every single cat cannot be replicated nor can they be transferred without the owner’s permission. They all have a unique genome and a total of 12 attributes (referred to as cattributes) expressed in their phenotype (appearance). When they are bred they are capable of passing these traits to their offspring. The genetic diversity intrinsic to the game allows for four billion potential distinctive digital cats. However, there are limitations on the frequency of breeding to ensure the kitty market is not flooded.
Crypto Kitties was a major success for NFTs, at one time accounting for 12 percent of the total transactions on the Ethereum blockchain. Furthermore, they can be very valuable. To date, the most anyone has paid for a crypto kitten is equivalent to over $117,000, when the first crypto kitty, Genesis, was purchased. At the time of this writing, over $38 million in volume has been used to purchase these digital kittens on their platform.
Yet, significant purchases of tokens linked with digital art and cryptocollectibles are not limited to Crypto Kitties. More instances are arising where large amounts of money are being spent to secure ownership of rare and high-quality artwork.
Although blockchain-based games and cryptocollectibles are indeed artistic creations, the primary focus here is on manifestations of digital art that is linked to more traditional media. Serious digital masterpieces have achieved excellent reputations and attracted admirable interest for at least the last two years.
On Valentine’s Day 2018, the Forever Rose Project, touted as the “world’s most valuable Crypto-Artwork, sold to ten collectors for a total of $1 million on an Ethereum-based platform.
The only caveat is that the tokens were not ERC-721, but ERC-20, which are fungible. However, the total supply was limited to ten, which permits the tokens to mimic (by ten percent) the rarity of ERC-721. However, ERC-721 tokens remain individually unique, indivisible, and possess special features and applications that ERC-20 does not, including non-fungibility.
Sales of NFTs linked specifically to art are rising swiftly. Today, the all-time transaction volume is nearly $9 million in US dollars, with almost $2 million added in the past month.
Of course, in the NFT market, art purchases trail behind transactions for games and collectibles. This is frankly unsurprising as art collectors tend to be a more niche crowd. What these impressive numbers reveal is a general explosion in NFT interest, and a steady growth in desire for digital art ownership amidst an even wider, increasing enthusiasm for non-fungible digital assets.
Despite the masterpieces that can be produced with digital art, the form was generally dismissed by a significant majority of the artworld, for the facility by which it can be reproduced and the frequent confusion of ownership. This was for many an unfortunate state of affairs, as there are specific aesthetic advantages to digital art, including the permanence of its original state.
With the emergence of NFTs, when a digital work is created its authorship is immediately and permanently recorded. It can be added to a gallery, where a unique non-fungible token is produced by a smart contract, and securely deposited into the artist’ wallet.
This nifty solution to authenticity and ownership solves the decades’ old problem with digital art. It also fosters a liquid environment for artists to freely sell and trade their work, as the unique work becomes available on a blockchain. Just as significant, it can remove the middle-man in art transactions, permitting the artist to receive larger royalties for their work, and for the collector to receive a fairer price.
There remain other advantages for artists and collectors in using blockchain tech and NFTs for conferring ownership of a work. For artists and collectors alike, transparency in records of previous sales, in a free and decentralized market, allows for ample fairness in prices, and permits the artist to build a professional reputation in an ecosystem of greater equity.
Another perk for artists is the possibility of attaining revenue from derivative works called “layers” and secondary sales. Because smart contracts are so versatile, this feature can be written into the contract codes, enabling artists to generate more revenue for their work than was previously possible, before the appearance of NFTs on the blockchain.
Perhaps the major trade-off for Art-based NFTs, and any other non-fungible token, is the shortcomings of the dominant platform for their trade and sale. In order to obviate the high transaction fees and limited scalability intrinsic to Ethereum, NFTs linked to digital art must find a better option. Lattice Exchange has all the ingredients necessary to facilitate large quantities of sales and trading activity while cutting out burdensome and exorbitant gas fees.
Moreover, because Lattice can aggregate assets from a multitude of DEXes, they would stand as a one-stop shop for any digital art enthusiast to find that masterpiece they so ardently desire.
Pardon the brief digression into blockchain-based games and NFTs, but I must mention that given the limitless scalability of Lattice’s engine, the Constellation Network, and its use of the language-agnostic JVM, the potential is immense for premium games linked with non-fungible tokens on the network. Lattice Exchange could easily facilitate the seamless trading of these NFTs. This is a mere extraneous example, but what Lattice and Constellation can bring to NFTs are use cases that have hitherto only existed in the imagination, or in a fractured state on other networks.
It is perhaps too early to foretell the role Lattice Exchange will play in the realm of NFTs and the digital art market, but the potential for it to be utilized as the long-desired premium DeFi exchange, not just for fungible tokens, yet also for this new and unique class of non-fungible digital assets, is enormously exciting.
PUBLISHED BY- gritdaily.com