VERSE NFT Gallery: Singapore (Photo: HIDDEN)
The arrival of NFTs in the art world has heralded monumental change for many, yet the very concept may still be confusing to some. To artists, they offer the possibility of a sustainable stream of income and stronger protection of copyright over their work. To aspiring collectors, who have wanted to start a collection but may have been put off purchasing anything due to lack of affordability or space, NFTs present a lower barrier to entry to starting a collection. So what are NFTs and cryptocurrency? What is their purpose and function? What does one actually own when they purchase an NFT? In this article, Art Outreach intern Sophie-Isabelle Tan attempts to break down otherwise abstract concepts surrounding cryptocurrency and NFTs by using easy-to-understand metaphors and analogies.
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What is an NFT?
NFT stands for Non-Fungible Token. Non-fungible means unique, or not interchangeable. For example, a $100 note is fungible as it can be exchanged into an equivalent currency or smaller denominations. Non-fungible tokens, however, cannot be exchanged for other items. They are entirely distinctive - the value of NFTs are simply based upon their own inherent characteristics.
What one owns when they purchase an NFT is actually the record of the artwork on the blockchain that stores the information of the digital file. This is what is meant by “token”, it represents the ownership of a unique item.
Visual Representation of the blockchain (Photo: Shubham Dhage on Unsplash)
What is the blockchain and what makes it so revolutionary?
The blockchain is a public digital ledger, or a system that records transactions. Think of it as a library that contains records. An NFT is like a single book inside a library containing the details of who created it, who bought it and who has owned it throughout history. As mentioned previously, this NFT/book is distinguishable and certifiable, unique and unreplicable.
In order to verify that an NFT is truly authentic, it has to be checked. Imagine if a librarian was to check each book to ensure it was genuine rather than a photocopy or forgery. With NFTs, this authentication process is made all the more thorough as a record is checked by multiple computers, further ensuring its legitimacy and making it very difficult to hack or cheat the system.
This is one of the reasons why NFTs are so remarkable: blockchain technology makes them both incredibly secure and impossible to counterfeit. This security protects the rights of the artist and ensures that the collector receives an authentic work.
Lines and lines of code (Photo: Ilya Pavlov on Unsplash)
What does one buy an NFT with?
With cryptocurrency, usually Ethereum. While Ethereum is but one of many cryptocurrencies, it is the preferred cryptocurrency in most NFT marketplaces, such as OpenSea and Nifty Gateway. This article by CNBC explains in greater detail why Ethereum is so popular for NFTs.
How does one get Ethereum?
By converting money into cryptocurrency, the way one might convert their Singapore Dollars into another currency like Malaysian Ringgit. Ethereum can be simply bought with a debit card or even Apple Pay and stored in a digital wallet. One such wallet is MetaMask, a popular choice amongst NFT collectors. Find out more about different digital wallets here.
What is a digital wallet?
A digital wallet is a computer extension that stores most cryptocurrency-related things. It might help to think of it like a normal physical wallet. It can hold however much money, credit or debit cards, even polaroids and precious memorabilia can be kept in a wallet. The same rule applies to a digital wallet: it can store cash, different types of cryptocurrency, and NFTs you own. Digital wallets can be linked to NFT marketplaces to allow for ease of transaction.
A wallet can hold quite a lot (Photo: Sophie-Isabelle Tan)
What complications should I take note of when buying NFTs?
Once the digital wallet is set up, buying NFTs is as simple as making an online purchase on a webstore. However, there are some complexities to take note of when navigating NFT purchases. One example is the gas fees.
Gas fees are a transaction fee incurred in the buying of cryptocurrency and NFTs. They are payments to compensate for the computing energy and labor required to process and validate transactions on the blockchain. Gas fees go straight to the miners, the term for the people behind the verification of these transactions, not to the artist or marketplace.
Sometimes it’s better to wait it out (Photo: Sophie-Isabelle Tan)
Gas fees can rise and fall depending on how many people are transacting at the same time. It’s like a Grab price surge: if it’s raining at 6.30pm and there is higher demand for private cars, the price increases. However, if it's 10am and the roads are clearer, the fare won’t be as expensive. One way to avoid incurring high gas fees is to monitor when transaction activity is high on the network, and transact at odd hours or periods when there are fewer transactions taking place.
Can I buy NFTs on behalf of someone else then transfer it to them?
Yes you can, but do note there is a transaction fee involved, as this is a transaction made on the blockchain and thus a gas fee will be incurred to verify the procedure. Here is a step by step guide on how to transfer an NFT.
Famous NFT Collector Beeple’s OpenSea Account (Photo: Beeple)
Can people see what NFTs I have?
People can view your NFTs through your NFT marketplace account, which will automatically show up once the NFT has been purchased. In this sense, your marketplace account functions similarly to social media. All it takes for someone to find your NFT collection would be to know your marketplace profile name and search you up. However, if you wish to hide your NFTs, some marketplaces, such as OpenSea and Nifty Gateway, allow you to do so. Digital wallets, on the other hand, are private, so no one can view what NFTs you have within your wallet.
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We hope that this guide has provided a helpful starting point to demystify NFTs. Have more questions about NFTs? We have published a guide on how to set up your Metamask Wallet here.
You can also find out more about our IMMEMORIAL NFTs, our first-ever NFT project in collaboration with artist Rizman Putra, here.