NFT or irreplaceable token is being put to use for artists where the Bitcoin Blockchain (BTC) is going to be used as a medium for transaction and other uses.
It can be said that the irreplaceable token or NFT is a 2012 concept. For example, the creation of “Colored Coins” in 2012 could form the basis for today's NFT, as this project demonstrates how the Bitcoin Blockchain (BTC) can be used as a transaction mechanism for real assets. Fast forward to 2017, when CryptoKitties became one of the most popular decentralized applications, or DApps, Ethereum has ever created. CryptoKitties was described in 2017 by Ryan Hoover, founder of Product Hunt, as "the first Ethereum-based decentralized Pokemon-like game where users can collect and raise digital kittens".
Unsurprisingly, as cryptocurrency adoption increases, so does the irreplaceable concept of tokens. NFT's revenue exceeded $2.5 billion in the first half of 2021, demonstrating the potential of what appears to be a new business model for digital content creators. However, as 2021 progresses, some in the industry believe that the original intentions behind NFTs have been tarnished by the financial gains often associated with these digital collectibles.
John Walpert, co-founder of TreeTrunk.io and CEO of Enterprise Mainnet at Consensys Mesh, said that what makes NFT attractive and problematic is that people bring it to market financially. "There's a lot of money to be made in NFT, but we have to wonder if we're talking about NFT as a stock or if we really care about artists and their art," he said. While it's impressive that artists like Mike Winkelman, aka Beeple, make millions selling NFTs, Wolpert wonders how long this case will last: "What if NFT Sells Millions of Dollars for Less than $1,000?" There is no evidence that we are in a model that does not have a repulsion effect. Then the question arises is there a real and sustainable business model beyond the noise of NFT?
According to Wolpert, the NFT community needs to find a more consistent way for all artists - not just celebrities - to make more money. Against this backdrop, Wolpert believes in a structure that is based on a multi-level marketing approach and which provides a steady stream of income for NFT artists worldwide. Known as the “log approach”, Wolpert states that this will ensure buyers are selling a source of income while also solving the “double cost” problem that arises when digital media is reproduced endlessly without any variation.
For example, although irreplaceable tokens are considered fixed blockchain entries, Wolpert discovered that they can be easily replicated. “If the NFT was an image, I could copy IPFS to a token and paste it into another blockchain. However, by keeping the NFT as a log”, Walpert explained that each owner or dealer of the artwork will have a unique and exclusive version that cannot be copied before being sold to others.
While not yet published, Wolpert says they were created using cryptography, a mechanism that uses evidence without proof: “With evidence without evidence, the NFT file is invisible to anyone, including the owner, but you can still prove the appearance of the NFT. likes and whether the image is based on an original work by NFT. Like the family tree, Wolpert refers to the original NFT image as a "master file" while copies based on the original are referred to as "child files". There may even be a "grandchildren" file if enough copies are made.
Each artist can go through a verification process. Such a tool is important, according to Wolpert, because in the digital world, when the 1's and 0's of an artwork are revealed, it can be easily copied. As a result, others can claim to own the original work. "This process is all about generating file lines that can be proven to have been generated from the original file without knowledge," says Walpert.
In terms of sales, Wolpert mentions that TreeTrunk NFT can be sold on secondary markets such as OpenSea and states that every distributor - including the original creator - receives a reward when selling NFT. "Now there's a source of income like a tree with a real artist as the trunk," says Walpert. While the concept behind NFT TreeTrunk is very interesting, a number of challenges can arise. In particular, the thought of compensating the buyer can lead to legal problems.
Brett Harrison, president of cryptocurrency exchange FTX.US, said the FTX-NFT marketplace allows cont2ent creators to receive gifts from retailers, but complexity arises when an artist makes NFT look like an investment product. As a result, Harrison stated that the FTX would not approve the NFT, which may oversee the securities: “We believe that if the NFT distributed a portion of the secondary compensation to all holders, it would look more like an investment contract.
Although the NFT FTX market has chosen not to support buyer fees, it is important to note that the regulations remain unclear. In March, Hester Peers, agent for the Securities and Exchange Commission, also known as Crypto Mom, warned that issuers of irreplaceable fractional NFT tokens and index baskets could sell investment products. However, it is too early to say whether the NFT will soon become a security. Dan Simmerman, director of financial relations for the Iota Foundation, said that what is most likely needed now is a lightweight framework that is stable like current securities laws but doesn't hinder innovation: "With blockchain technology, all digital 'things' can benefit and reward, so we may need to rethink what it means to be secure in the first place, or to get copyrighted in the first place."
In addition to copyright law, ensuring the integrity of the NFT is an important issue that needs to be addressed before determining the structure of a sustainable business model. While TreeTrunk NFT uses zero-knowledge proof based on basic protocol standards to ensure authenticity, other markets take a different approach.
For example, Harrison states that the NFT FTX marketplace takes special steps to ensure that NFT trades on the platform are genuine: “When NFTs are created, they come with a number of creator addresses that ensure that the original Creator can verify his work by signing a deal with Solana for example. He adds, “If you're not a creator and you don't have control over another creator's portfolio, you won't be able to authenticate as that user. No one can pretend to be someone else's purse."
While they were at it, Harrison realized that people could still make copies of JPG images. To address this issue, Emily Poplawski, chief operating officer of Metaplex Studios - a solution for NFT stores – said that some platforms use human verification for NFT. For example, Poplavsky notes that DigitalEyes' NFT marketplace allows Solana to review NFTs with a blue tick, similar to Twitter. However, Poplavski notes that this solution is still imperfect and prone to errors:
“The NFT business model is still in its infancy and we are seeing a lot of experimentation. However, for now, this is a game changer for thousands of people. Stories in our community of people quitting gas station jobs, paying off student loans, or writing $100,000 checks for charities are common in the bold new world of financial empowerment enabled by decentralization.