NFT art: who needs it and why is it so expensive?

In 2021, the world is literally obsessed with NFT art. Gallery owners and auctioneers talk about it, Silicon Valley businessmen and Hollywood stars invest in it, and the most popular digital artists are already making millions of dollars from it.

In terms of cost, works of NFT art can already be compared with works of classical art. At the moment, the record belongs to the work Everydays: The 5000 Day Selects by the artist Beeple (real name – Mike Winkelmann). For a collage of five thousand works paid 69 million dollars. This is the level of paintings by Picasso and Van Gogh. And it’s not about one-off sales, the entire NFT art market is growing rapidly. In the first four months of 2021, sales totaled $ 437 million, according to British think tank ArtTactic. Crypto influencer Georgiy Romanov, a successful trader and top author of TradingView, helped Robb Report Russia to understand how NFT art works and why there is such a fuss around it now.

WHAT IS NFT?

The abbreviation NFT stands for non-fungible token – a non-fungible token. And the key word here is not interchangeable. It means that the object is unique and cannot be replaced with exactly the same one, because the exact same thing simply does not exist in nature. An interchangeable item can be freely exchanged for another one exactly the same. For example, each draft by Pushkin is unique. You will not be able to exchange one for another without losing content. But the books with the writer’s poems, published in the same edition, are the same. It doesn’t matter what kind of book you take from the shelf – one is identical to the other.

The next word that needs clarification is token. This is the name of the unit of account in systems that operate on the blockchain. The blockchain itself is a technology that organizes a database in the form of a blockchain. Moreover, each of them stores information about the previous block. The entire system is decentralized – that is, the data is stored not on one server, but on the computers of the chain participants.

In centralized systems, you trust one middleman to store all the information. For example, information about all real estate transactions in Russia is stored in the Rossreestr. If the system were decentralized, then all property owners in Russia would have information on all transactions in the country stored on their computers.

Why is this needed? A decentralized system cannot be hacked, faked or destroyed, since this will have to be done on all computers in the system. The most famous example of blockchain use is cryptocurrencies. All information about all operations with them is stored on many machines and is constantly updated.

The next step in the development of the blockchain was Ethereum – a platform for creating decentralized services, on which smart contracts appeared. These are contracts that don’t require a person to execute. They made any digital asset transaction possible.

Thus, NFT is a digital certificate that is a unique entity. A non-fungible token can be tied to any digital product: image, audio or video file, etc.

WHY IS THIS ART?

The impetus for the rapid development of NFT art was the pandemic. All auctions moved to the online format – even those that sold antiques and cars, not to mention paintings and sculptures. Online gallery sales skyrocketed 27% during the pandemic, according to a 2020 report by UBS Bank and Art Basel. The second catalyst was a change in the very portrait of collectors. Now almost 49% of collectors in the world are millennials, of whom 92% prefer to buy art online.

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