We bought an NFT. Here’s what we learned

We bought an NFT. Here’s what we learned

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For the uninitiated – a group to which we belong until recently – NFTs, or non-fungible tokens, refer to pieces of digital content linked to blockchain, the digital accounting system that supports cryptocurrencies like bitcoin and ethereum (ETH). While these cryptocurrencies are fungible, which means that you can exchange a bitcoin (or in the IRL world, a dollar) for an identical one, each NFT is unique. NFTs can take different forms, such as virtual business cards and other collectibles, tweets and even physical objects.

More commonly, however, NFTs are being used to buy and sell digital art. It is not a new phenomenon, but in recent weeks NFTs have been sold by seven or even eight digits, reflecting a broader euphoria in the market currently supporting stocks, sports trading cards and cryptocurrencies. Twitter founder Jack Dorsey, musician Grimes and Super Bowl champion Rob Gronkowski are among the big names who joined the movement. Earlier this week, digital artist Mike Winkelmann, better known as Beeple, sold a compilation of 5,000 images at auction house Christie’s for an incredible $ 69.3 million.

And on the night of March 4, we became the last to click to buy a piece of digital art – very, very affordable art, so as not to have our corporate expense accounts confiscated. In the process, we join not only the growing list of buyers and sellers in this expanding market, but also a much smaller community of co-owners of that specific piece of art. A new digital family.

The perfect digital work of art

After much deliberation, we chose a piece by the digital artist Alexander Shelupinin, from Moscow, called “Little Alien” – a portrait that changes shape and changes color of a hairless Sphynx cat. This caught our attention because the CNN Business team has a long and colorful history with hairless cats, but that is a story for another time. We bought it from Known Origin, one of the many NFT markets that are rapidly gaining momentum, where it was listed by the artist for 0.01 ETH, or $ 15 at the time. Thanks to a slight jump in ethereum 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 making crypto art about three years ago, after building his own “mining platform” for ethereum, which creates a new cryptocurrency using computers for solve complex mathematical problems. But it’s a time and resource-intensive process that uses a lot of electricity and computing power, so when the price of ethereum dropped in mid-2018, he started looking for other uses for this equipment.
He started creating “lots of funny images” – lots of abstract art, a gorilla looking at a banana and even an animated Covid-19 particle – by coding them to exist using the Python programming language. Then he discovered the Known Origin and signed up to sell his images there.

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

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

As each blockchain transaction is permanently registered and public, NFTs provide a way to assign value to objects online, giving artists like Shelupinin more control over what they produce and how much they can get from the sale.

“There is a real fit between technology and the problems in these industries,” said Tal Elyashiv, founder and managing partner of SpiCE VC, a venture capital firm that invests in blockchain startups.

NFTs are also benefiting from a “legal factor”, giving the average Internet user a different way to get into cryptocurrencies. “Cryptography is already … kind of old, so here’s something new, somehow related, that we can participate in,” said Elyashiv. “There is a lot of celebrity factor playing into that too.”

A complicated process

However, there is at least one major obstacle: the system is still notoriously complex for the lay buyer, as evidenced by our process of buying hairless cat portraits.

First, we had to transfer $ 20 in ethereum from the Coinbase digital exchange to a wallet app called Rainbow and then connect Rainbow to the known source. So, we had to send the $ 15 ethereum we needed to buy Shelupinin’s artwork.

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But receiving the NFT instantly would cost us “gas” of the order of 100 Gwei – a small unit of ethereum – which would equal about $ 52. So, as we are cheap and in no hurry, we chose to pay a mere 5 Gwei, but As a result, we’ve been waiting for over a week and have already spent another $ 10. Still, we still don’t officially own the “Little Alien”.

“The world of cryptography has made a big mistake, an evolutionary mistake … the whole user interface around it is very difficult and is embedded in the being of cryptography,” said Elyashiv. “I think we will wait a while before seeing a simpler and more transparent user interface.”

But he believes that the shopping experience will improve over time. NFT platforms, like Known Origin and OpenSea, already look more like traditional online shopping, with works of art displayed in a grid and a “Buy now” or “Insert bid” button next to them.

And others say that the huge popularity of NFTs, despite their complexity, is a testament to their staying power.

This piece by digital artist Beeple has sold for more than $ 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 you are, you have the biggest influencers, celebrities and brands,” said “pet3rpan”, a crypt investor and artist who declined to provide his full name, saying that he normally uses his username and does not reveal his real name.

“Yes, it is a barrier, I don’t think anyone would disagree with that,” he said. Pet3rpan also said that he has worked as a graphic designer and sold 15 of his own NFT pieces at Known Origin for about 2 ETH. “But one reason why NFTs really exploded initially is that most designers … they are very technical themselves.”

A community of owners

Pet3rpan is also one of the 15 other owners of the “Little Alien” artwork we bought, a possible scenario 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 and how much they paid.

Pet3rpan initially did not remember buying the portrait of the hairless cat, saying that he casually picks up the NFT art whenever something catches his eye.

“For me, it was always like we were valuing someone’s work,” he said. Occasionally, he buys an NFT anticipating that the value will increase and he can resell it at a higher price. “But I really don’t buy much to invest. In most cases, most of the art I own is because I want to appreciate someone’s work and say ‘hey, big deal, I’m a fan’ and buy it. ”

We tried to get in touch with some of the other hairless cat owners, but we didn’t get any answers from them. More than half of them bought the piece more than a year ago, and the most recent purchase was two days ago.

Are NFTs here to stay?

As the NFT trend gains momentum, it also attracts curious new buyers – like us – and traditional artists who might otherwise have stayed away. At the same time, it is raising concerns among some artists about environmental impacts, as mining and the cryptocurrency trade consume large amounts of electricity.
You can buy the first tweet. Current bid: $ 2.5 million

But there is also a more basic question for the digital art community: will NFTs end up being a fad? Elyashiv and others in the industry argue that they are here to stay.

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

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

“[That] Expanding the amount of money in the ethereum ecosystem must be ‘parked’ somewhere and the NFT is the perfect place for that, “he said. He is also excited that ethereum developers are continuing to improve cryptocurrency to make her more friendly.

“Under these conditions, it is technically impossible to reduce the size of the NFT market, it can only increase,” added Shelupinin.

It remains to be seen whether the hairless cat becomes a collection item that appreciates its value over time or simply a reminder of a strange and forgotten trend on the Internet. For now, we love it just the same.

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