We bought an NFT. This is what we have learned

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For the uninitiated – a group we belonged to until recently – NFTs, or non-replaceable tokens, refer to bits of digital content tied to the blockchain, the digital ledger system that underpins cryptocurrencies such as bitcoin and ethereum (ETH) . While those cryptocurrencies are fungible, meaning you can trade one bitcoin (or in the IRL world, one dollar) for another identical one, each NFT is unique. NFTs can take a variety of forms, such as virtual trading cards and other collectibles, tweets, and even physical objects.

Mostly, however, NFTs are used to buy and sell digital artworks. It’s not a new phenomenon, but in recent weeks, NFTs have been selling for seven or even eight figures, reflecting a broader euphoria in the marketplace that currently supports stocks, sports trading cards and cryptocurrencies. Twitter founder Jack Dorsey, musician Grimes and Super Bowl champion Rob Gronkowski are among the big names who have jumped on the cart. Earlier this week, digital artist Mike Winkelmann, better known as Beeple, sold a compilation of 5,000 images at Christie’s auction house for a whopping $ 69.3 million.

And on the evening of March 4, we were the last to click purchase on a piece of digital art – very, very affordable art so that our business expense accounts wouldn’t be confiscated. In the process, we not only joined the growing list of buyers and sellers in this fast-growing market, but also a much smaller community of co-owners for this particular work of art. A new digital family.

The perfect piece of digital art

After much deliberation, we chose a piece by Moscow-based digital artist Alexander Shelupinin called “Little Alien” – a shape-shifting, color-shifting portrait of a hairless Sphynx cat. This appealed to us because the CNN Business team has a long and colorful history with hairless cats, but that’s a story for another time. We bought it from Known Origin, one of the many NFT marketplaces that is rapidly gaining popularity, where it was listed by the artist at the time for 0.01 ETH, or $ 15. Thanks to a slight rise in ether prices since then, it is now worth a princely sum of $ 17.
Shelupinin, who sells his art under the name ‘Alex Shell’, told CNN Business that he started creating crypto art about three years ago, after building his own ‘mining rig’ for ethereum, which creates new cryptocurrency by using computers. to solve complex mathematical problems. . But it’s a time- and resource-intensive process that requires a lot of electricity and computing power, so when the price of ethereum crashed in mid-2018, he started looking for other uses for that machine.
He started by creating “lots of funny pictures” – lots of abstract art, a gorilla staring at a banana, and even an animated Covid-19 particle – by coding them using the Python programming language. Then he discovered Known Origin and applied to sell his images there.

“They approved me, so I officially became an artist,” he said.

Little Alien, multicolored edition, an NFT artwork by artist Alex Shell.
Since joining the platform in early 2019, Shelupinin has sold 226 different pieces (261 if you count the multiple copies of some of them) for a total of around 15 ETH – currently worth $ 27,000. He’s also made money buying and selling NFT artwork on other popular platforms like OpenSea, like this one he bought for around $ 56 and resold for over $ 6,200.

Because every blockchain transaction is permanently recorded and public, NFTs provide a way to assign value to online objects, giving artists like Shelupinin more control over what they produce and how much they can get by selling it.

“There is a great match between the technology and the problems in those industries,” said Tal Elyashiv, founder and managing partner of SpiCE VC, a venture capital firm investing in blockchain startups.

NFTs now also benefit from a “cool factor”, giving the average internet user another way to get into cryptocurrencies. “Crypto is already… a little bit old, so here’s something new that is somewhat related that we can participate in,” said Elyashiv. “There are also a lot of celebrities in it.”

A complicated process

There’s at least one major hurdle, though: The system is still notoriously complex for the layman-buyer, as evidenced by our purchasing process for hairless cat portraits.

First, we had to transfer $ 20 worth of ethereum from Coinbase digital currency exchange to a wallet app called Rainbow, then connect Rainbow to Known Origin. Then we had to send the $ 15 worth of ethereum we needed to purchase Shelupinin’s artwork.

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But to receive the NFT instantaneously, our “gas” would cost us at 100 Gwei – a small unit of ether – that would equate to about $ 52. So because we are cheap and in no rush, we chose to only 5 Gwei to pay, but as a result we waited over a week and already spent $ 10 extra. Still, we still don’t officially own the “Little Alien.”

“The crypto world has made a big mistake, an evolutionary mistake … the whole user interface around it is very difficult and it’s built into the very essence of crypto,” said Elyashiv. “I think we’ll wait a while before we see a simpler and more transparent user interface.”

But he believes the buying experience will improve over time. NFT platforms such as Known Origin and OpenSea already look more like traditional online shopping, with artwork displayed in a grid and a “Buy Now” or “Enter Offer” button next to it.

And others say the widespread popularity of NFTs, despite how complex they are, is a testament to their endurance.

This piece by digital artist Beeple sold for over $ 69 million.
“To me this is a sign of how powerful the technology is. It’s like it’s so bad, but despite how bad it is, you have the biggest influencers and celebrities and brands,” said pet3rpan, a crypto investor and artist who refused to provide his full name, saying that he usually uses his username and does not reveal his real name.

“Yes, it’s a barrier, I don’t think anyone would disagree with that,” he said. Pet3rpan also said he previously worked as a graphic designer, selling 15 of his own NFT pieces on Known Origin for around 2 ETH. “But one reason NFTs really explode at first is that most designers … are very technical themselves.”

A community of owners

Pet3rpan is also one of 15 other owners of the ‘Little Alien’ artwork we purchased, a scenario that is possible because it is a virtual piece rather than a physical one. Known Origin, like all blockchain-based platforms, lists all owners of each piece, along with details of when they bought it and how much they paid.

Pet3rpan initially didn’t remember buying the hairless cat portrait, saying he casually picked up NFT art when something caught his eye.

“For me it’s always like we appreciate someone’s work,” he said. Occasionally, he buys an NFT expecting its value to rise and can resell it at a higher price. “But I don’t really buy too much for investment. In most cases most of the art I own is because I want to appreciate someone’s work and say ‘hey, great stuff, I’m a fan’, and buy it.”

We tried to reach out to some of the other hairless cat owners but got no response from them. More than half of them bought the piece more than a year ago and the last purchase was two days ago.

Are NFTs Here to Stay?

As the NFT trend picks up, it also attracts curious new buyers – like us – and traditional artists who might otherwise have stayed away. At the same time, it raises concerns among some artists about its environmental impact as mining and trading cryptocurrencies consumes massive amounts of electricity.
You can buy the very first tweet. Current offer: $ 2.5 million

But there’s also a more fundamental question for the digital art community: Will NFTs become a passing fad? Elyashiv and others in the industry claim they are here to stay.

“It’s a very, very relevant technology for a lot of industries, it will make a really big difference,” said Elyashiv. “I think it’s very real and I think it has a lot of staying power.”

For Shelupinin, who has a day job as a technical advisor, digital art is above all “a fun part of my life without obligations and without time pressure”. But he believes the NFT market will continue to grow as long as cryptocurrencies – particularly the ethereum network on which NFTs are built – continue to grow. The NFT market quadrupled to more than $ 250 million by 2020, according to a report last month from blockchain website Non Fungible and BNP Paribas subsidiary L’Atelier.
Since he posted his first artwork on Known Origin in January 2019, the number of ethereum accounts has increased by 160% and the cryptocurrency’s price has increased by 1,355%.

[That] The growing amount of money in the ethereum ecosystem needs to be ‘parked’ somewhere and NFT is the perfect place for that, ”he said. He is also encouraged that ethereum developers continue to improve the cryptocurrency to make it more user-friendly.

“Under such circumstances, it is simply technically impossible for the NFT market to shrink in size, it can only grow,” added Shelupinin.

Whether the hairless cat becomes a collector’s item that increases in value over time or just a souvenir of a strange and forgotten internet trend remains to be seen. For now we all love it.

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