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Today, the artwork can be downloaded and copied for free. Artistic ownership and royalties for artists suffered a serious injury. Fortunately, non-fungible tokens (NFTs) have arrived as a new balm 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 traded willy-nilly without considering their special characteristics and valuation. Compare this to fungible assets and assets, such as money or stocks in a specific company that have identical characteristics and valuations for each unit.
The inherent problem with the digitization of art became evident with the advent of MP3. Artists and record companies lost huge sums of money because songs could be uploaded and downloaded for free through websites such as Napster and Limewire. Likewise, the film industry has experienced dwindling profits as counterfeit DVDs have been pirated and placed on sites like BitTorrent and Isohunt.
With such disruptive technologies, not only the industries responsible for being intermediaries between artists and consumers have felt the pain, but artists have suffered with them as well. Yet technology, when used appropriately, has an empowering, liberating and life-enhancing effect. This is certainly true of the blockchain, with the positive influence continuing to emit in areas previously shaded by helplessness, vulnerability and centralization. The excellent use cases of the blockchain have spread to include fine art and collectibles.
With innovations in the world of blockchain, many artists are starting to reach a level of empowerment they have never known before. NFTs are making this possible. NFTs as art or crypto-collectibles are scarce and can be authenticated on the blockchain. It has become a generous medium through which artists can create and sell their work, while collectors can buy and trade.
It is worth noting that actual art work is not encoded 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 better understand this revolution in ownership, it’s best to start with a brief overview of how NFTs were born.
The first cryptocurrency assets were the Rare Pepes. Pepe is a popular internet meme that started out as a comic book character created by Matt Furie. The concept behind Rare Pepes is to create an image of the character in a unique circumstance or condition.
Creating a rare pepper and selling it to consumers is a neat process very similar to what one would expect in the traditional art world. An artist pays to post their Rare Pepe image on a directory and decide if it is unique enough to be featured on the website.
Collectors can then purchase tokens linked to images on the Bitcoin blockchain. The blockchain acts as a way to verify the artist’s unique signature and image ownership through tokens.
Although the tokens for Rare Pepes are on the Bitcoin blockchain, this is not the case with most NFTs. A specific Ethereum token, known as ERC-721, has become the standard for NFTs. ERC-721 are a class of unique tokens that are supposed 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. However, they didn’t stop with the pioneers of non-fungible tokens, they proceeded to develop a highly profitable use case for them by launching Crypto Kitties.
Crypto Kitties is one of the first blockchain collectibles to get real attention. It allows users to buy, sell and breed unique digital cats. Thanks to the original smart contract and its use of ERC-721 tokens, the ownership of each individual feline can be linked to a specific token.
Any single cat cannot be replicated nor can it 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 raised they are able to pass these traits on to their offspring. The game’s inherent genetic diversity allows for four billion potential distinctive digital cats. However, there are limitations on the frequency of reproduction to ensure that the kitten market is not flooded.
Crypto Kitties has been a huge hit for NFTs, once accounting for 12% of total transactions on the Ethereum blockchain. Furthermore, they can be very valuable. To date, the maximum anyone 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.
However, significant token purchases related to digital art and crypto-collectibles are not limited to Crypto Kitties. More cases are occurring where large sums of money are being spent to secure ownership of rare, high-quality works of art.
Although blockchain-based games and crypto-collectibles are indeed artistic creations, the main focus here is on manifestations of digital art that is linked to more traditional media. True digital masterpieces have achieved an excellent reputation and attracted admirable interest in at least the past couple of years.
On Valentine’s Day 2018, the Forever Rose project, billed as “the most valuable Crypto-Artwork in the world, was 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 allows the tokens to mimic (by ten percent) the ERC-721’s rarity. However, ERC-721 tokens remain singularly unique, indivisible and possess special characteristics and applications that ERC-20 does not possess, including non-fungibility.
NFT sales related specifically to art are increasing rapidly. Today, the all-time transaction volume is nearly $ 9 million in US dollars, with nearly $ 2 million added in the past month.
Obviously, in the NFT market, art purchases are behind the transactions for games and collectibles. This is frankly not surprising as art collectors tend to be a more niche crowd. What these staggering numbers reveal is a general explosion of NFT interest and a steady growth in the desire for digital art ownership amid an even wider and growing enthusiasm for non-fungible digital assets.
Despite the masterpieces that can be produced with digital art, the form has generally been rejected by a significant majority of the art world, due to the ease with which it can be reproduced and the frequent confusion of ownership. This has been an unfortunate state of affairs for many, as there are specific aesthetic benefits to digital art, including the permanence of its original state.
With the emergence of NFTs, when a digital work is created, its authorship is recorded immediately and permanently. It can be added to a gallery, where a unique non-fungible token is produced by a smart contract and deposited securely in the artist’s wallet.
This elegant solution to authenticity and ownership solves the decades-old problem with digital art. It also promotes a liquid environment where artists can freely sell and trade their work, as the unique work becomes available on a blockchain. Equally significant, it can remove the middleman in art transactions, allowing the artist to receive higher royalties for their work and the collector to receive a fairer price.
There remain other advantages for artists and collectors in using blockchain technology and NFTs to confer ownership of a work. For artists and collectors, transparency in past sales records, in a free and decentralized market, allows for broad price equity and allows the artist to build a professional reputation in an ecosystem of greater equity.
Another benefit for artists is the ability to earn revenue from derivative works called “layers” and secondary sales. Because smart contracts are so versatile, this feature can be written into contract codes, allowing artists to generate more revenue for their work than was previously possible, before NFTs appeared on the blockchain.
Perhaps the main trade-off for art-based NFTs, and any other non-fungible tokens, are the shortcomings of the dominant platform for their trading and selling. To overcome Ethereum’s high transaction fees and inherent limited scalability, digital art NFTs need to find a better option. Lattice Exchange has all the ingredients needed to facilitate large amounts of sales and trading activities, eliminating expensive and exorbitant gas tariffs.
Additionally, since Lattice can aggregate assets from a multitude of DEXs, they would represent a one-stop shop for any digital art enthusiast to find that masterpiece they so crave.
Forgive the brief digression on blockchain-based games and NFTs, but I must mention that given the unlimited scalability of Lattice’s engine, the Constellation Network, and its use of the language-independent JVM, the potential is immense for premium games connected with. fungible tokens on the network. Lattice Exchange could easily facilitate seamless trading of these NFTs. This is a simple unrelated example, but what Lattice and Constellation can bring to NFTs are use cases that have so far only existed in the imagination or in a fractured state on other networks.
It is perhaps too early to predict the role the Lattice Exchange will play in the realm of NFTs and the digital art market, but the potential to be used as a long-desired premium DeFi exchange, not only for fungible tokens, but also for this new and unique class of non-fungible digital assets is enormously exciting.
