The hype of nov­el­ty has died down. The Nyan Cat meme was sold for $580,000. Enthu­si­asts con­tin­ue to believe, and haters keep hat­ing.

In the mean­time, even Insta­gram is con­sid­er­ing open­ing an NFT mar­ket­place. Is this a sig­nal that every­thing was not in vain and the world is chang­ing? After all, if ear­li­er a con­di­tion­al pho­tog­ra­ph­er, post­ing his work on Insta­gram, helped the social net­work to attract traf­fic for free, now he will final­ly receive a fair pay­ment for his work?

This can only be answered by fol­low­ing the path of NFT from the very begin­ning.

The Beeple pic­ture that start­ed the NFT hype. Sold for $69 mil­lion. Source: Beeple

What is NFT and why is it needed?

Let’s start with the basics. NFT stands for non-fun­gi­ble token, “non-fun­gi­ble token”. This is a unique link point­ing to a dig­i­tal asset, which can be either a pho­to or a doc­u­ment.

It is under­stood that NFT is a way to own some­thing on the Inter­net — in an envi­ron­ment where infor­ma­tion is avail­able and repro­ducible so that the con­ven­tion­al pho­tog­ra­ph­er may not even be aware that his pho­tographs have been bor­rowed by some­one. Per­haps his pic­tures are used for prof­it — while the pho­tog­ra­ph­er him­self does not receive any­thing from this.

How does NFT solve this pho­tog­ra­pher’s prob­lem? Makes his work unique, one-of-a-kind, gen­uine.

The one who pur­chased the token thus secures his right to own­er­ship. Infor­ma­tion about this, as well as the his­to­ry of oper­a­tions asso­ci­at­ed with the token, is pub­licly stored on the blockchain (think of this as a record inside a data­base). The author of NFT is also not­ed there.

NFTs are sold for “ethers” — coins of the Ethereum cryp­tocur­ren­cy. Ethereum was con­ceived as a blockchain plat­form for decen­tral­ized appli­ca­tions and was launched on July 30, 2015 by Cana­di­an-Russ­ian bil­lion­aire pro­gram­mer Vita­lik Buterin.

Anoth­er pop­u­lar NFT project is Cryp­toP­unks. At first they were dis­trib­uted for free, but now the cost reach­es hun­dreds of thou­sands of dol­lars. Source: Cryp­toP­unks

Blockchain is a sys­tem that stores infor­ma­tion about all pre­vi­ous trans­ac­tions with­in the chain in blocks. It is impos­si­ble to remove a sep­a­rate block from such a sys­tem and erase any infor­ma­tion.

When a user makes a transaction—for exam­ple, buy­ing a pho­to they like—a new block is cre­at­ed on the chain to rep­re­sent that trans­ac­tion. Then it com­mu­ni­cates with the rest of the blocks.

Pitfalls of NFTs

The mean­ing of NFT is non-inter­change­abil­i­ty. If you have, for exam­ple, bit­coin, you can exchange it for anoth­er bit­coin. NFT tokens are unique and can­not be replaced.

How­ev­er, when buy­ing NFT, the user does not nec­es­sar­i­ly buy the pho­to itself, record­ed in one of the blockchain blocks, and to which no one else has access. The NFT can only be a link to the pur­chased work, and the link leads out­side of the blockchain to some­where on the out­side inter­net. There­fore, no one pre­vents an attack­er from cre­at­ing anoth­er NFT with the same job. The sys­tem does not pre­vent this — the token will also be con­sid­ered unique.

NFT plat­forms already have prece­dents for sell­ing oth­er peo­ple’s work. Vice writes that dig­i­tal artists, vis­it­ing these plat­forms, found that their work was already for sale — they had to prove copy­right with a scratch.

NFT photographers

Justin Aversano

Start­ed releas­ing his selec­tion of 100 “Twin Flames” pho­tos at the Native­ly Dig­i­tal auc­tion. The selec­tion fea­tures pho­tos of 100 pairs of twins on Valen­tine’s Day in 2021. Since then, the col­lec­tion has totaled about $17 mil­lion in sales.

Dave Krugman

The pop­u­lar street pho­tog­ra­ph­er released the “DRIVE” col­lec­tion on the OpenSea mar­ket­place, where it con­tin­ues to be one of the top sell­ing pho­to­graph­ic NFTs. The col­lec­tion includes 111 pho­tographs of cars col­lect­ed over ten years of work.

Mario Testino

The mas­ter of fash­ion pho­tog­ra­phy released his first NFT col­lec­tion in ear­ly 2021. It was called “Four reimag­ined cult por­traits” and fea­tured such stars as Kate Moss and Gise­le Bünd­chen.

Antonius Viriajai

Cre­at­ed a series of “Food­masku” in which he makes face masks out of his food, pho­tographs him­self in them, and then eats. He made his NFT debut with a col­lec­tion of 100 pho­tos on the Known Ori­gin mar­ket­place.

Algorithm on how to create your own NFT

The algo­rithm for cre­at­ing your own NFT is as fol­lows:

  • A wal­let is cre­at­ed on Meta­mask or Ledge — these are cryp­to-wal­lets that allow you to receive, store and send cryp­tocur­ren­cy assets.
  • Reg­is­ter on an NFT plat­form that suits your top­ic.
  • The wal­let is linked to the account.
  • The work is laid out, a price tag is put on it.

Dis­claimer: In order to cre­ate an NFT of their work, a pho­tog­ra­ph­er must pay a few hun­dred dol­lars of blockchain trans­ac­tion fees (we won’t go into details, we’ll take it for grant­ed that now, in order to sell your­self, you first need to pay).

You can sell and pur­chase NFT objects on spe­cial plat­forms. Some work as mar­ket­places with many cat­e­gories, and some spe­cial­ize, for exam­ple, in art or games.

We col­lect­ed the most pop­u­lar sites:

1. OpenSea is the largest NFT trad­ing plat­form. On OpenSea, you don’t have to pay all com­mis­sions — the artist pays a one-time rental fee, and all fees asso­ci­at­ed with trans­ac­tions are cov­ered by the buy­er’s pay­ment.

2. Rari­ble is a Russ­ian devel­op­ment, an impor­tant dif­fer­ence of which is the oppor­tu­ni­ty for authors to receive remu­ner­a­tion every time their works are resold. Reg­is­tra­tion on the site is free. For the place­ment of each new token, you will need to pay a com­mis­sion from the Ethereum net­work — $ 30–100.

3. Super­Rare — cura­to­r­i­al selec­tion takes place on this site, and to con­firm their author­ship, artists devel­op a spe­cial­ized cer­tifi­cate and an inter­view with the own­ers of the site. You can post your work for free, but on the first sale, Super­Rare with­holds 15% of the trans­ac­tion. Also, the plat­form takes 3% com­mis­sion from each suc­cess­ful NFT sale.

4. KnownO­ri­gin care­ful­ly selects entries. Par­tic­u­lar atten­tion is paid to dig­i­tal art on the site.

5. Foun­da­tion — only invit­ed users can become an author on this site. Nyan Cat meme NFTs, Edward Snow­den’s first NFT, and an audio­vi­su­al dig­i­tal col­lec­tion cre­at­ed by renowned musi­cian Aphex Twin were sold at the Foun­da­tion.

How to sell NFTs

Once the NFT is placed, it’s time to move for­ward. That is, to fill your work with a price. Some artists (after all, we are talk­ing about dig­i­tal art in gen­er­al) even write to col­lec­tors, beg­ging them to buy their work.

Anoth­er com­mon way to raise the price and con­vince a poten­tial buy­er that the work is worth buy­ing is to resell the NFT to your­self. So a poten­tial buy­er will see that some­one is already ready to pay a cer­tain amount for the work, and, per­haps, will buy it more expen­sive — the dif­fer­ence goes into the pock­et of the spec­u­la­tor.

Some pub­li­ca­tions attribute the growth of the NFT mar­ket to spec­u­la­tion. A Reuters study shows that users bought NFTs in order to sell them lat­er at a high­er price.

In gen­er­al, sta­tis­tics show that more than 50% of token sales took place at a price below $300 dol­lars. Per­haps their authors did not even recap­ture the com­mis­sion for the cre­ation of the NFT. And those who sold dear­ly were suc­cess­ful and had their own audi­ence with­out that.

Read also:

Why you won’t make mon­ey on NFTs, or JPEGs per mil­lion

What will happen next?

Experts believe that now the main prob­lem in the devel­op­ment of the NFT mar­ket is the lack of a legal frame­work. Because of this, there are no guar­an­tees in NFT trans­ac­tions and there are many blind spots: the author can change one pix­el and sell the result as a new work.

How­ev­er, most like­ly, the legal frame­work is not far off, the prices for NFTs will become more rea­son­able, and after that the scope of NFTs will expand. They can even be used to rep­re­sent real world assets as dig­i­tal doc­u­ments.

So, for exam­ple, when buy­ing real estate, the main task is to trans­fer own­er­ship rights. The use of blockchain would avoid many dif­fi­cul­ties. There was an exam­ple when investor Ivan Malpi­ka issued an NFT tied to a 50% stake in a res­i­den­tial build­ing in the US city of St. Louis, Mis­souri. It was assumed that an agree­ment on joint own­er­ship of real estate would be drawn up with the buy­er. The deal, how­ev­er, did not go through for unknown rea­sons.