A blockchain architect unravels the art world’s enigma with non-fungible tokens (NFTs)

Home » A blockchain architect unravels the art world’s enigma with non-fungible tokens (NFTs)

Abir Pothi gets into the basics of the boom that is sweeping the art world off its feet. The new buzzwords for art in the digital era — NFTs, blockchain and cryptocurrency  — are explained by blockchain architect and expert Rohas Nagpal in his own words.

It all starts with the building blocks. So, what is blockchain?

Blockchain representative image | Adobe stock

Let’s say that Pooja borrows Rs 1,000 from me. She is supposed to return it in a week, but doesn’t. I remind her, but she has conveniently “forgotten” about it. What can I do? Nothing except never lending her anything ever again! True story.

Now, suppose that at the time of lending the money, a few friends are present. They all clicked a photo or shot a video of me lending Pooja the money and her promising to return it in a week. And, each of these friends posts the proof on Instagram, Facebook, etc. Now that is solid evidence. And Pooja can’t really delete all these videos / photos from the Internet. That’s something like a blockchain.

A blockchain is typically a bunch of computers (nodes) connected to each other. All of these computers contain the same information (e.g. a ledger of transactions). To “hack” this information, you will need to “hack” most of these computers at the same time. And that’s a pretty tough thing to do!

There are many blockchains in the world. The Bitcoin Blockchain is the first and oldest one. It records all transactions of the bitcoin cryptocurrency. Anyone can run a node of this blockchain. All you need is a computer with a large hard disk and a strong Internet connection.

And what then is cryptocurrency?

Cryptocurrency is like money, but not issued by any government. The Indian rupee, US dollar, euro etc. are all issued by governments (and central banks). We call them “fiat” currencies. Bitcoin is not issued by a government, so it’s called a cryptocurrency.

The next buzzword, the most popular one at the moment, is NFT or non-fungible token. What’s that?

Creator: CHRISTIE’S IMAGES LTD. 2021/BEEP | Credit: via REUTERS

Consider the balance in your mobile wallet (say Rs 10,000). Is there any difference between each of these rupees? No, there isn’t.  So, we can say that this digital money is “fungible” — every rupee is exactly the same as another rupee.

Is every Rs 500 note identical in value? Most people would say yes. But it’s not! An older Rs 500 note is worth zero — remember demonetisation? So, we can say that physical currency notes are “non-fungible”.

To understand what a non-fungible token (NFT) is, let’s take an example. Sanya is an artist who creates a bunch of manga ink on paper drawings. She sells them online as well as at a physical art gallery. But she can sell each drawing only once because, hey, it’s a physical drawing.

She can also create multiple reprints and sell them. Each reprint is identical. So, if there are very few official reprints, the price can be high. If there are many reprints, the price will be very low. That’s the law of scarcity at work. We are usually ready to pay more for things that are rare.

Now, NFTs come in as a way for a buyer to know how many reprints are in existence. Sanya can release digital copies of her drawings on the blockchain in the form of non-fungible cryptocurrencies. Because of the blockchain’s inherent transparency, any buyer can see how many digital copies are actually in circulation. And anyone can see who owns how many digital copies.

But wait, there’s more. When you “buy” a digital version of a manga from an artist, you only get the right to use it for personal viewing. That’s because the artist holds the copyright over the manga. But in an NFT, the artist can grant you special licenses, like the right to print the manga on t-shirts and make money by selling those t-shirts. Now, isn’t that cool?

Is selling through the blockchain really a better idea for artists?

There are definitely some benefits for artists using NFTs. These include:

  1. Artists are ensured their share every time their creations are re-sold.
  2. Anyone with a smartphone can verify the genuineness of art in a few seconds.
  3. NFTs bring transparency in art pricing and ownership history. This converts art from an expense to an investment.

Are NFTs exclusive to artists?

Not really. NFTs can be of many types, including:

  • Art
  • Collectibles (trading cards, sneakers)
  • Domain names
  • Financial instruments
  • Intellectual Property assets, like trademarks, patents, designs, etc.
  • Music
  • Photos
  • Tokenized assets (cars, land, oil)
  • Videos of iconic events
  • Virtual game items (avatars, skins, weapons, etc.)

In an unusual example, Twitter CEO Jack Dorsey’s first ever tweet recently got sold for almost $3 million. Let’s also take another instance. When you buy a book, the only thing you can do is read it. With an NFT, the author can give you the right to translate it into another language and make money by selling the translated version.

Twitter CEO Jack Dorsey’s first tweet from 2006

Okay, what does an NFT look like?

There are many ways to create an NFT. Let’s take an example of creating an NFT using cargo.build.

‘To The Lighthouse’ by Sanya Nagpal

Title: Sanya’s vision of ‘To The Lighthouse’

Description: Digital image of an acrylic on canvas painting titled ‘To The Lighthouse’ by Sanya Nagpal

Price: 0.0065 Ether (10 US$)

Collection Address: 0x728d21f7373eE21268F793dCC6F65cD993b49dA2

Token ID: 718

Unlockable content: Yes

Public URL: https://lnkd.in/d4BsbHg

What more should we know?

It must also be noted that the NFT that relates to your art can be sold through the blockchain. But, the actual physical art will need to be sent separately to the buyer.

Now remember that there are two sides to art. One is the actual art (oil on canvas, ink on paper, etc.) and the second is the license to that art. So, while someone can “copy-paste” or duplicate the digital version of your art, they can’t “steal” a copyright license. Plus, most countries have tough laws to protect copyright. Penalties include jail and fines.

Looking to the future, if you ask if the entire gallery experience can be totally blockchain-driven, and if such a gallery survives, I say yes! The cost of running a virtual gallery is a fraction of the cost of running a physical gallery. Plus you can reach a global audience through a virtual gallery — even during the time of any lockdown!

Rohas Nagpal has been a Blockchain Architect for many years, currently at HyFi Blockchain, the world’s first hybrid finance blockchain. He has co-founded Primechain Technologies Pvt. Ltd. and BankChain, and is also author of Future Money Playbook. He also co-founded the Asian School of Cyber Laws and assisted the Government of India in framing draft rules and regulations under the Information Technology Act. He has designed the R.O.H.A.S. Cryptocurrency Valuator.