For the uninitiated — a group that we belonged to until recently — NFTs, or non-fungible tokens, refer to pieces of digital content linked to the blockchain, the digital ledger system underpinning cryptocurrencies such as bitcoin and ethereum (ETH). While those cryptocurrencies are fungible, meaning you can trade one bitcoin (or in the IRL world, one dollar) for another identical one, each NFT is unique. NFTs can take different forms, such as virtual trading cards and other collectibles, tweets and even physical objects.
And on the evening of March 4, we became the latest to click purchase on a piece of digital art — very, very affordable art, so as not to have our corporate expense accounts confiscated. In the process, we joined not just the growing list of buyers and sellers in this burgeoning marketplace but also a much smaller community of co-owners for this specific art piece. A new digital family.
The perfect piece of digital art
“They approved me, so I officially became an artist,” he said.
Because every blockchain transaction is permanently recorded and public, NFTs provide a way to assign value to online objects, giving artists like Shelupinin more control over what they produce and how much they can get from selling it.
“There is a true fit between the technology and problems in those industries,” said Tal Elyashiv, founder and managing partner of SpiCE VC, a venture capital firm that invests in blockchain startups.
NFTs are also now benefitting from a “cool factor,” giving the average internet user a different way to get into cryptocurrencies. “Crypto is already … kind of old, so here is something new that’s somewhat related that we can participate in,” Elyashiv said. “There is a lot of celebrity factor playing in this as well.”
A complicated process
There is at least one major hurdle, however: The system is still notoriously complex for the lay-buyer, as evidenced by our hairless cat portrait purchase process.
First, we had to transfer $20 worth of ethereum from digital currency exchange Coinbase into a wallet app called Rainbow, and then connect Rainbow to Known Origin. Then we had to send the $15 worth of ethereum we needed to buy Shelupinin’s artwork.
But to receive the NFT instantaneously would cost us “gas” to the tune of 100 Gwei — a small unit of ethereum — that would be equal to about $52. So, because we’re cheap and not in a hurry, we opted to pay a mere 5 Gwei, but as a result we’ve been waiting more than a week and have already spent an additional $10. Even so, we still don’t officially own the “Little Alien.”
“The crypto world made a big mistake, an evolutionary mistake … the whole user interface around that is very difficult and it’s built into the being of crypto,” Elyashiv said. “I think we’re going to wait awhile before we see a more simple and transparent user interface.”
But he believes that buying experience will improve over time. NFT platforms such as Known Origin and OpenSea already look more like traditional online shopping, with artworks displayed in a grid and a “Buy Now” or “Enter Bid” button next to them.
And others say the huge popularity of NFTs, despite how complex they are, is a testament to their staying power.
“Yeah it’s a barrier, I don’t think anyone disagrees with that,” he said. Pet3rpan also said he previously worked as a graphic designer and has sold 15 of his own NFT pieces on Known Origin for around 2 ETH. “But one reason why NFTs really blew up initially is most designers … are very technical themselves.”
A community of owners
Pet3rpan is also one of 15 other owners of the ‘Little Alien” artwork we bought, a scenario that’s possible because it’s a virtual piece rather than a physical one. Known Origin, like all blockchain-based platforms, lists all the owners of each piece, along with details of when they bought it and how much they paid.
Pet3rpan initially didn’t remember buying the hairless cat portrait, saying he casually picks up NFT art whenever something catches his eye.
“For me it’s always been like we’re appreciating someone’s work,” he said. Occasionally he’ll buy an NFT anticipating that the value will go up and he can resell it at a higher price. “But I don’t really buy for investments too much. In most cases, most of the art I own is because I want to appreciate someone’s work and say ‘hey, great stuff, I’m a fan,’ and buy it.”
We attempted to reach some of the other owners of the hairless cat, but did not receive responses from them. More than half of them bought the piece over a year ago, and the most recent purchase was two days ago.
Are NFTs here to stay?
But there is also a more basic question for the digital art community: Will NFTs end up being a passing fad? Elyashiv and others in the industry argue they’re here to stay.
“It’s a very, very relevant technology for a bunch of industries, it will make a very big difference,” Elyashiv said. “I think it’s very real and I think it has a lot of staying power.”
“[That] expanding amount of money in the ethereum ecosystem must be ‘parked’ somewhere and NFT is the perfect place for it,” he said. He is also encouraged that ethereum developers continue to improve the cryptocurrency to make it more user-friendly.
“In such conditions it is just technically impossible to have the NFT market shrink in size, it can only increase,” Shelupinin added.
Whether the hairless cat becomes a collectible that appreciates in value over time or simply a souvenir of a strange and forgotten internet trend remains to be seen. For now, we love it all the same.