Can Anything Be an NFT? Here's What You Need to Know.
A tweet, a song and an art piece walk into the blockchain and ask for some mints.
Non-fungible tokens (NFTs) are no longer the mysterious, sparsely covered topic they once were. The most noteworthy transactions in this emerging industry, such as Grimes selling a collection of digital art for $6 million or the $69 million sale of a visual art piece by Beeple, have made headlines across countless media sites. The cause for these enormous exchanges is simple: Customers are not only buying and downloading a file, but they're also paying for unique ownership of the entire digital asset.
Despite the spotlight shining on music and the visual arts, it’s important to understand NFTs have evolved far beyond just these functions. Like an autographed painting, record or baseball card, the qualifications for any asset to become a one-of-a-kind NFT are not limited by their real-life functionality — they are almost unlimited because of the flexibility of the NFT-minting system.
How common NFTs are minted
How is an asset converted from a basic file to an NFT? It happens through the process of minting, which can occur on a range of blockchains, but most commonly on Ethereum and the Binance Smart Chain. The process of minting an NFT is actually very simple. For Ethereum, all it takes is an NFT-supported Ethereum wallet and an account on an Ethereum-based NFT marketplace.
This process makes sense for digital graphics, which are simply uploaded in file form and minted directly onto the NFT marketplace. The same can be said for music, which requires a high quality mp3 file and the album art of the creator’s choice. In line with this pattern, just about anything in file form can be uploaded, minted and sold in NFT form on any Ethereum-based NFT-trading platform, with similar processes for other platforms that rely on non-Ethereum blockchains.
Assets in downloadable file form are among the most basic forms of NFTs and can most accurately be related to the classic autographed baseball card example. Mimicking physical, in-person auctions, these transactions often involve a downloadable asset offered to the highest bidder for downloading and limited ownership rights that fall short of copyrights, which are legally reserved for the creator.
In addition to the potential for a lucrative future trade, bragging rights for owning the unique, minted version of the asset are essentially the extent of the benefits of NFT ownership, a far cry from comprehensive copyright ownership. So far, none of the leading NFT-trading platforms have successfully tackled the legal barriers to copyright trading stemming from international legal discrepancies. In the absence of solutions from big names, some emerging NFT platforms are working to solve the issue with complete legal compliance. HUP.MARKET, the soon-to-be-launched NFT marketplace from HUP.LIFE, is poised to be the first NFT marketplace that enables artists to license and sell their artwork and all related copyrights in an internationally enforceable legal framework. The idea is for artists and collectors to own the NFT itself, along with a “Ghost NFT” of its copyright.
Minting and selling visual artwork, music and other file-based works as NFTs may be simple, but the smokescreen of legal implications surrounding their copyrights still remains. Issues of NFT minting and ownership get even more complex when internet hosting is involved.
Online assets complicate the field
You may have heard about Twitter CEO Jack Dorsey selling his first tweet as an NFT earlier this year, the result of a bidding war that reached almost $3 million. The monumental sale represents another aspect of NFT trading that may dominate the industry’s future: online-asset minting.
Unlike the previously mentioned file-based NFTs such as music and art, which are inherently grounded in offline assets, tweets are among the budding class of NFTs that are created on the internet and intrinsically tied to their original online ecosystems.
The process for minting these digital assets is easier than one may think. With the consent of its creator, anybody can mint a tweet to be sold on any supporting NFT-trading platform. The auction winner pays out using either fiat currency or the platform’s native token, and the NFT is then transferred to his or her crypto wallet. The change in ownership is then permanently stamped onto the blockchain.
The recent tweet craze is not an isolated example of online-asset auctioneering. "Charlie Bit My Finger," the beloved clip that was among YouTube’s first viral videos, was recently sold as an NFT for $760,999. The video is now expected to be removed from YouTube, its home for over a decade and the platform from which it originally derived its value, following the sale.
The sale of YouTube videos as NFTs lies somewhere between the more traditional, file-based sales of artistic works and the novel, site-based assets such as tweets. Either way, the implications of such transactions cannot be understated. The expansion of the once isolated NFT market may shift the landscape of the internet as we know it. Whether the impacts of pre-existing digital-asset monetization will be positive or negative is yet to be determined.
Self-sustaining NFT ecosystems
Some of the most interesting uses of NFTs come from blockchain-based projects and collectibles. These endeavors utilize cryptocurrencies and NFTs for asset collecting and entertainment purposes.
Decentraland is a uniquely robust and interactive project. In this virtual-reality world, NFTs represent “LAND” parcels and other in-game items that players can trade between each other. Aside from fully functional video games, asset marketplaces like Binance Collectibles provide a straightforward platform for collectors to trade rare NFTs as one would do with stamps, baseball cards or other traditional collectibles, all on the blockchain.
The NFT field is opening up to a wealth of possibilities. Artists have set the stage for the minting and trading of file-based assets while tweets and YouTube videos represent the first wave of an approaching tsunami of monetized online assets whose partial ownership rights can be sold to the highest bidder. On the other side, NFT projects and collectible-exchange platforms demonstrate that this burgeoning technology can exist in its own ecosystems without relying on outside assets.
Nobody knows what shape NFTs will take in the future, but our existing parameters for what can be an NFT provide some insight. Forthcoming solutions to copyright issues are likely to expand these parameters exponentially. One thing is certain: Trying to assume the limit of NFTs is probably a fruitless endeavor.