How Digital Art is Selling for Millions and What that Means for Business: NFT’s Explained
What is a Non-Fungible Token
Through wide circulation on popular media, the buying and selling of Non-Fungible Tokens, often referred to as NFT’s, has increased sharply since their creation by Larva Labs in 2017.
An NFT is a digital asset that, using blockchain, can be securely bought and sold. Using this digital landscape, NFT’s encompass any number of digital pieces, including videos, pictures, drawings, graphics, audio and so on.
Like physical artwork, the artist often retains copyright and reproduction rights but the actual ownership is sold to the buyer. However, unlike physical artwork, copying, downloading, and sharing these digital files is not limited to the buyer and thus creates controversy in the digital space over the purpose of ownership – as digital copies of digital art are thought to be just as good as the original.
Proof of ownership of NFT’s remains within the blockchain, and for the most part, ownership is in name only, as anyone can download and use the image just the same as the owner. However, there are certain instances in which proof of ownership is used and required. Some artists require proof of ownership of the artwork prior to attending conventions or groups. There are digital communities for particular works that also require proof of ownership prior to joining.
Although these outside parties would need to verify ownership through the blockchain, there are opportunities within NFT ownership to maintain exclusivity, leaving the utility of this function for use in digital and physical spaces.
Additionally the artist is able to digitally sign the artwork within the metadata and may continue receiving royalties in each resale if written into the code of the NFT.
In December, 2021, the most expensive NFT ever sold hit the internet with a purchase price of a whopping USD 91.8 million. The piece, called The Merge by artist Pak, is a mass of fragmented artwork sold to over 28,000 buyers in divided units. Though unique in that the art sold to multiple owners, not one, this sale demonstrates the value that some buyers, artists, and collectors place on NFT’s and the potential NFT’s may have for business transactions.
While The Merge represents NFT’s on a higher end market, the majority of NFT’s are sold for under USD 200. Still, the presence of markets on either end of the spectrum shows potential promise for the future of the NFT market.
The term NFT is sometimes used within business and known as Enterprise NFT’s, or ENFT’s. Though NFT and ENFT can essentially be used interchangeably, ENFT’s differ only slightly from NFT’s in that they are aimed at solving Enterprise problems, such as supply chain issues, and help to broaden business developments. ENFT’s allow a business, or enterprise, to tokenize their assets and communicate and interact with their customers on a wider basis.
If adopted by businesses, ENFT’s can be used to follow the lifecycle of a product, changing the interaction a customer has with the business and providing streamlined, transparent processing.
Since ENFT’s are the digital tokens of a business’s physical assets, they allow for more flexibility in the transactions.
Similar to the transactions involving The Merge, ENFT’s could be fragmented and sold as fractions of the whole. For example, in commercial real estate, the value and investment properties of a new building could be digitized and fractionated off to a wide array of investors, bringing in more capital while also ensuring transparency and security through the ENFT blockchain.
Future of NFT’s and their use in business
As a fairly new product, investment in NFT’s is associated with high risk due to the large uncertainty surrounding their value and use in the future.
However, given current trends which digitize many aspects of life, NFT’s as a component of business enterprises and as a component of the future may just be here to stay.
The ENFT business of digitizing assets has the potential to unlock faster, secure connections with investors and clients, providing a guaranteed chain of trust. Given their potential, NFT’s could be a gamechanger in the future of digitizing business.
Follow us on social media for the latest updates in the world of Blockchain and Web3!