HISTORY

In 2015, I wrote the first blog post on the topic of blockchain & art for the British think tank communication platform furtherfield. It was about copyright in the age of copy & paste, transparency in the art market and blockchain.

At the time, artists like Aram Bartholl, who deal with digital issues, were already thinking through the possibilities of blockchain for art or, like Stephan Vogler, unleashing intelligent synergies in collaboration with a German law firm (BLOGnews).

Th enormous potential for issuing assets on blockchains, starting from the meme culture, was already known (-> history). The limited function of the Bitcoin blockchain was expanded in 2014 by the peer-to-peer financial platform Counterparty into a malleable blockchain with distributed open-source internet protocol. Counterparty was the first platform to enable trading of digital assets, had a decentralised exchange and even its own crypto token

 

Playing cards were traded up to the popular are Pepes which were brought to life by the meme „Pepe the Frog„. And even then, it became apparent that a group of computer nerds wanted to gain ownership of unique digital objects.

2017 gingen mit den CryptoPunks die ersten NFTs online. Im selben Jahr wurden NFTs mit CryptoKitties zum Mainstreamphänomen. Der Handel verlagerte sich bald und zunehmend auf die benutzerfreundlichere Ethereum Blockchain.

In 2017, one of the first NFTs went online with the CryptoPunks . In the same year, NFTs became a mainstream phenomenon with CryptoPunks. Trading soon and increasingly shifted to the more user-friendly Ethereum Blockchain.

Since then, the events have been rolling over.  

 

MARKET

In 2018 and 2019, the NFT ecosystem experienced massive growth with new projects and thriving marketplaces, led at the time by OpenSea and SuperRare. Newly developed digital wallets such as MetaMask facilitated entry into the NFT world. Information and statistics about the NFT market, such as nonfungible.com , created trust and transparency.

In 2020, the world’s largest NFT trading platform OpenSea recorded a trading volume of 21 million US dollars. In August 2021, the transaction volume on OpenSea is already more than 3 billion US dollars and the NFT market as a whole has in October surpassed 10bn US dollars.

Critics continue to speak of a bubble and speculation.

The fact is: the NFT sector is still in an exponential growth phase with a meanwhile horrror of possibilities, even if most of humanity has never heard of NFTs.

For those interested, here are some basics to get you started:

NFT (NON-FUNGIBLE-TOKEN)

A non-fungible token is a non-exchangeable and therefore unique digital asset. Assets such as Bitcoin, on the other hand, are fungible, which means that all Bitcoins are equal and fully exchangeable. The technology associated with a blockchain is used to offer digital assets as unique items. Digital artworks can also be turned into independently tradable virtual goods as a result, which was not possible until now. The analogy to NFTs in the non-digital space would be the Mona Lisa. The artwork, too, is 99% viral, but exists only once as an original.

SMART CONTRATCS

The copyright of digital assets remains unaffected. The system of NFTs is based on licence agreements using blockchain technology. The most commonly used blockchain for NFTs is Ethereum (as of September 2021). All works are provided with an electronic signature which, according to the law, is also recognised as an original signature and also provides proof that the file existed at the specified time. Its authenticity can thus be mathematically proven and is a boon for provenance research. The right of resale is exclusive. The owner of the rights of use is registered in a decentralised blockchain. The rights of the work are allocated through a blockchain transaction. However, you should make sure that your NFTs are created by a correctly programmed smart contract. On OpenSea, for example, this can be verified by the blue tick.
Digital artworks thus become collectible and tradable without being materialised. Purchase and transaction take place simultaneously.

 

BLOCKCHAIN

A blockchain is a decentralised, public database. It works like the endless links of a chain in that transactions can be added in chronological order on blocks of records. In addition, cryptographic mechanisms such as hashtag functions or digital signatures ensure that once data has been added to the blockchain, it can practically no longer be changed. Transactions are thus documented seamlessly and forgery-proof.

 

WALLETS

Digital wallets are required for the transfer of NFTs. A wallet always consists of a private and a public key. The public key consists of a series of numbers and letters that function like an account number and enable the payment transfer. The private key consists of a secret signature key that a random generator assigns to each wallet. It is the PIN for your account and must never be lost (millions of Bitcoins have been lost because owners have misplaced or forgotten the signature key). Credit is transferred from one participant to another as computer code. Transactions are cryptographically signed and documented on a blockchain. Each transaction is verified by a computer. The transactions are monitored by so-called miners (computers that solve complex algorithms), who are also authorised to create new blocks within a blockchain. Well-known wallets are MetaMask, Coinbase Wallet, Trust Wallet, etc… 

 

SECURITY & HACKING

The blockchain itself is only as secure as the platform behind it. For example, there have been reports of hacked accounts, stolen NFTs and misuse of credit cards on the Nifty Gateway platform (news)). Users of the largest platform OpenSea (including myself) were also targeted by a sophisticated phishing attack aimed at stealing NFTs and cryptocurrency (news). In the process, users fell for a fake support service. I myself have lost NFTs and Ether. This is extremely annoying, but also a learning process.

Much of the NFT market is still in its infancy. A legal basis for tokens is still missing. The blockchain is decentralised. There is only one point of contact via the platforms, but even that is not guaranteed. MetaMask and OpenSea have not yet responded to my hacked account. A collector is currently suing Nifty Gateway after the terms of the contract for the purchase of a Beeple work were subsequently changed (news).

The only thing that remains is to stick to the rules:

• Never lose the security key to your wallet, which you should ideally only keep in analogue form.
• Create extremely strong passwords in your wallets
• Do not keep large sums of money in your PC and smartphone wallets.
• Try not to leave any traces of your real person in your platform accounts. Ideally, use your own emails and keep yourself as anonymous as possible.
• Most of the time, it is fake emails that give hackers access to sensitive data on your computer.

CLOSING SENTENCE

NFTs allow us to attach value to digital and real assets and to trade in a tamper-proof way.
I think NFTs, the world of blockchain and the opportunities that come with it, are the biggest transformation we have ever seen and will change all areas of business.