Generally, digital artists won’t spend time and energy to learn about new financial technologies; but the current rage over NFTs is hard to ignore.While it’s difficult to believe that a simple collage of digital art pieces sold as NFT, fetched as much as $69 million in an online auction, the reality is that there is truth to the story. However all the news hype about the sale, did not include important details about Nft technology or for that matter, why others call them Defi nfts.
Not truly understanding left many digital artists baffled and wary about treading in unknown waters.
What Makes a Digital Asset a Non-Fungible Object?
Okay, so NFT acronym stands for non-fungible tokens, where fungibility is described as that quality which allows the trade or swap of assets or objects for the same value. A pair of sneakers on display at a shoe store is fungible because there other pairs that can be bought at the store for the same price.
Yet if Michael Jordan owns the same style of sneakers and the pair goes up for sale at an auction site, the sneakers is non-fungible. Mainly because it had evolved into becoming a one-of-a-kind collector’s item in relation to its owner’s reputation as a basketball legend.
However, it should be clear that with a DeFi NFT, the buyer becomes the owner of the key to the encryption code containing data that minted Beeple’s digital art into a non-fungible token. While the buyer, Vignesh Sundaresan paid 42,329 ETH, he can have copies of the NFT artwork made and claim them all originals.
When Beeple had his artwork minted as a non-fungible token via the ethereum platform, his copy assumed the distinction of being rare in light of its intrinsic value as the original copy. Why Sundaresan was willing to buy the NFT for such a price, remains a mystery because not all NFTs of digital assets that went up for sale commanded such a high price.
Actually, there’s more to learn about Beeple’s NFT feat as it came with a Smart Contract for a related commission. The NFT Smart Contract includes a stipulation that Beeple stands to earn a commission everytime ownership of the NFT changes hand. As mentioned earlier, Sundaresan only bought the key to the NFT code and not Beeple’s copyright over the digital artwork; giving the artist the right to collect royalties over the sale or use of his digital work.
What Does the Term DeFi Mean?
DeFi is simply the abbreviation of decentralized finance, which refers to the entire set of financial technologies used by public blockchain platforms, in disrupting the conventional financial system. The main goal of which is to avoid all the red tape and fees that come with traditional financial transactions but through a secure method of using cryptocurrency. Through encryptions and keys (public and private) the blockchain entries cannot be tampered or altered by viewers of the public blockchain ledger. Moreover, every entry in the blockchain ledger requires verification and confirmation through validation of the encryptions before a transaction pushes through.
Ethereum’s NFT is part of the development of its decentralized financial system, posing as an additional digital asset that can be traded via the ethereum platform.