Updated: Mar 1, 2021
Lately, I've been trying to figure out how I would implement the use of NFTs into what I am doing. For those who don't know, an NFT refers to a Non-Fungible Token (NFT). That is a unique digital token that securely stores information on a blockchain. A token can be compared to a certificate of authenticity as it is cryptographically signed by the artist. NFTs contain highly trustworthy documentation of their history and origin, and can have code attached to do almost anything programmers dream up (one popular feature is code that ensures that the original creator receives royalties from secondary sales). NFTs are secured by the same technology that enabled Bitcoin to be owned by hundreds of millions of people around the world and represent hundreds of billions of dollars of value.
Tokenization of Nonfungible Assets
Tokenization is a digital representation of ownership of an asset. It converts ownership of assets into tokens, which can then can be recorded and transferred using blockchain. Tokenization allows assets that are difficult to be traded and liquidated to be done so easily using smart contracts, which maintains an immutable ledger of transfers and ownership of tokens. For example, a piece of land worth $100,000,00 can be tokenized as 100,000 tokens. Without tokens, there is no way of owning $1.00 worth of land. By tokenizing the land, someone can hold 1 token worth $1.00 equivalent of land and transfer the token. This idea lets physical assets be tokenized and traded to create immediate liquidity of the asset if doing so makes economic and legal sense. Tokenizing a work of art means creating its digital signature, which can't be changed. A digital signature of the art piece is created and stored in a blockchain. Tokens representing monetary value and ownership of the art piece are issued using a smart contract.
The digital token representing a unique piece of art can then be further divided into smaller tokens. In doing so, shares, so to speak, of a unique piece of art can be traded, and ownership can be distributed. The difference between ERC-20 fungible tokens and ERC-721 standards for nonfungible tokens is to keep track of ownership of smaller tokens when they are first awarded and later transferred.
What could I store on the blockchain?
- Information about each painting
What does it buy me to do so?
Not exactly sure but I heard a few things. Royalties, Cert of Authenticity, track sales costs, experience, learning
Secondary market royalties allow the original artist to be rewarded on subsequent sales which is a huge revolution in the art industry.
It creates a record of provenance.
Upon creation, ownership and trade history can be tracked on a publically verifiable ledger (blockchain). This helps combat issues like plagiarism and can be used to verify copyright of images.
Wealth transfer. Money movement
Permits the art to be efficiently and securely traded.
There are three important reasons why NFTs offer fundamentally better economics for creators.
1. by removing rent-seeking intermediaries. Blockchain-based ownership shifts the power back to creators and users — you can shop around and force the marketplace to earn its fees. (Note that lowering the intermediary fees can have a multiplier effect on creator disposable income. For example, if you make $100K in revenue and have $80K in costs, cutting out a 50% take rate increases your revenue to $200K, multiplying your disposable income 6x, from $20K to $120K.)
2. By enabling granular price tiering. NFTs allow the creator to “cream skim” the most passionate users by offering them special items which cost more. But NFTs go farther than non-crypto products in that they are easily sliced and diced into a descending series of pricing tiers. NBA Top Shot cards range from over $100K to a few dollars. Fan of Bitcoin? You can buy as much or little as you want, down to 8 decimal points, depending on your level of enthusiasm. Crypto’s fine-grained granularity lets creators capture a much larger area under the demand curve.
3. By making users owners, thereby reducing customer acquisition costs to near zero. It’s been able to grow so efficiently because users feel like owners — they have skin in the game. It’s true peer-to-peer marketing, fueled by community, excitement, and ownership.
NiftyGateway: They seem to be looking for celebs to be on their platform.
Rarible: Create, sell or collect digital items secured with blockchain
NFT Showroom: a digital art marketplace built on the Hive blockchain
NBA TopShot: NBA Fans from around the world collecting Top Shot Moments. With over $31M USD in sales across Rookies, Vets, and Rising Star players
Example case studies I have seen using NFTs:
Registering diamonds : register your diamonds for $99 and get a paper certificate associated with a digital NFT. Should I offer an added service to register the NFT, or should I just offer it with all paintings?
Technology available to solve my problem:
I can easily mint on Rarable, and Mintable. I wouldn't have to build my own
Github: For creating an open source project that mints my art contracts. (I'll need a lawyer to draw up art contracts)
What needs to be built:
NFTs are still early, and will evolve.
Other Interesting Sightings:
Future questions that need answers: