We bought an NFT. Here is what we learned

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For the uninitiated – a group we belonged to until recently – NFTs, or non-fungible tokens, refer to pieces of digital content related to blockchain, the digital ledger system that underlies crypto currencies such as bitcoin and ethereum (ETH). While these cryptocurrencies are fungible, meaning that you can exchange one bitcoin (or in the IRL world, a dollar) for an identical one, each NFT is unique. NFTs can take different forms, such as virtual trading cards and other collectibles, tweets, and even physical items.

Most often, however, NFTs are used to buy and sell digital artwork. This is not a new phenomenon, but in recent weeks NFTs have sold for seven or even eight digits, reflecting a broader market euphoria that currently supports stocks, sports trading cards and crypto. currencies. Twitter founder Jack Dorsey, musician Grimes and Super Bowl champion Rob Gronkowski are some of the big names who have jumped on the bandwagon. Earlier this week, digital artist Mike Winkelmann, better known as Beeple, sold a compilation of 5,000 images to auction house Christie’s for $ 69.3 million.

And on the evening of March 4, we became the last to click on buying a digital artwork – very, very affordable art, so we didn’t have our business expense accounts confiscated. . In the process, we have joined not only the growing list of buyers and sellers in this booming market, but also a much smaller community of co-owners for this specific piece of art. A new digital family.

The perfect digital artwork

After much deliberation, we chose a piece by Moscow digital artist Alexander Shelupinin titled “Little Alien” – a shape-shifting, color-changing portrait of a hairless Sphynx cat. It spoke 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 rapidly gaining NFT marketplaces, where it was listed by the artist for 0.01 ETH, or $ 15 at the time. Thanks to a slight rise in Ethereum prices since, it is now worth a princely sum of $ 17.
Shelupinin, who sells his art as “Alex Shell,” told CNN Business that he started making crypto art about three years ago, after building his own “mining rig” for Ethereum, which creates a new cryptocurrency by using computers to solve complex mathematical problems. . But it’s a time-consuming and resource-intensive process that uses a lot of electricity and computing power, so when the price of ethereum collapsed in mid-2018, it started looking for other uses for this platform.
He began to create “a lot of funny images” – a lot of abstract art, a gorilla looking at a banana and even an animated Covid-19 particle – by coding them into existence 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 coins there (261 if you count 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 the one he bought for around $ 56 and re-sold for over $ 6,200.

Because every blockchain transaction is permanently recorded and public, NFTs offer a way to place value on things online, giving artists like Shelupinin more control over what they produce and how much they can get out of it.

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

NFTs now also benefit from a ‘cool factor’, giving the average internet user a different way of entering cryptocurrency. “Crypto is already… a bit old, so here is something new that is somewhat related that we can participate in,” Elyashiv said. “There are also a lot of celebrities in this field.”

A complicated process

There is at least one major hurdle, however: the system is still notoriously complex for the layman buyer, as evidenced by our process of buying hairless cat portraits.

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

How a year of living almost exclusively online made the internet weird again

But receiving the NFT instantly would cost us “gas” to the tune of 100 Gwei – a small unit of ethereum – which would equate to around $ 52. So because we are cheap and in no rush, we chose to pay only 5 Gwei, but as a result we waited over a week and have already spent an extra $ 10. Even so, we still don’t officially own the “Little Alien”.

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

But he believes the shopping experience will improve over time. NFT platforms like 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 them.

And others say the enormous popularity of NFTs, despite their complexity, is a testament to their resistance.

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

“Yeah, that’s a barrier, I don’t think anyone would disagree with that,” he said. Pet3rpan also said he previously worked as a graphic designer and sold 15 of his own NFT coins on Known Origin for around 2 ETH. “But one of the reasons NFTs really exploded in the first place 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 that we purchased, a possible scenario because it is a virtual piece rather than a physical one. Known Origin, like all blockchain-based platforms, lists all of the owners of each coin, along with details of when they bought it and how much they paid.

Pet3rpan didn’t initially recall purchasing the hairless cat portrait, saying he casually chooses NFT art whenever something catches his eye.

“For me, it’s like we appreciate someone’s work,” he said. From time to time, he will buy an NFT with the expectation that the value will increase and he may resell it for a higher price. “But I don’t really buy for too large an 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 have attempted to reach some of the other owners of the hairless cat, but have not received a response from them. More than half of them bought the coin over a year ago, and the most recent purchase was two days ago.

Are NFTs Here to Stay?

As the NFT trend gains momentum, it is also attracting curious new buyers – like us – and mainstream artists who might otherwise have stayed away. At the same time, it is raising concerns among some artists about the environmental impacts, as mining and trading in cryptocurrencies consumes huge amounts of electricity.
You can buy the very first tweet. Current bid: $ 2.5 million

But there’s also a more fundamental question for the digital art community: will NFTs end up being a passing fad? Elyashiv and others in the industry say they are here to stay.

“This is a very, very relevant technology for a group of industries, it will make a very big difference,” Elyashiv said. “I think it’s very real and I think he has a lot of resistance.”

For Shelupinin, who has a day job as a technical consultant, digital art is primarily “a fun part of my life with no obligations and no time constraints.” But he believes the NFT market will continue to grow as long as cryptocurrencies – especially the Ethereum network that NFTs are built on – continue to grow. The NFT market quadrupled in size in 2020, to more than $ 250 million, according to a report last month from blockchain site Non Fungible and BNP Paribas subsidiary L’Atelier.
Since posting his first artwork on Known Origin in January 2019, the number of Ethereum accounts has increased by 160% and the price of cryptocurrency has risen by 1,355%.

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

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

It remains to be seen whether the hairless cat becomes a collector’s item that grows in value over time, or simply a keepsake of a weird and forgotten internet trend. For now, we love it all the same.

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