What are NFTs? blockchain NFT token Unique ID and digital art. NFTs for dummies
how NFTs works (NFT art for beginners)

Everything you need to know about NFTs

NFTs for digital art has recently exploded into the mainstream, allowing artists to be able to sell their art in a way that can sustain them, and allow the buyers of the art to own the art in a verifiable way.

In this article we will go over what NFTs actually are, the types of digital art, where your art is stored and finally red flags to look out for when shopping for NFTs.

TLDR: How does NFT art work?

In short, NFT art works by creating unique tokens and then attaching artwork to it, either by linking the art to the token or storing the art with the NFT on the blockchain.

There are two main types of art, generative and non-generative. Non-generative is created by a person. Generative art takes advantage of the unique ID of the token, using it as a “seed” that will then determine the look and traits of your NFT.

The art for your NFT can be stored in three different ways:

  1. With the NFT token on the same blockchain
  2. On a different blockchain or decentralised storage
  3. In a private or centralised server

These different storage mechanisms introduce different risks to your NFT. If the art is not stored with your NFT on the same blockchain, there is a chance the link between your NFT and art breaks, and your NFT becomes worthless.

Finally, while a few blockchains right now use a lot of energy, there are major efforts and plans in place to greatly reduce energy consumption.

What are NFTs, and what does NFT mean?

NFT’s are a token with a unique identifier, an ID. With “normal” crypto tokens, there is no way to distinguish between one token and another, thus normal tokens are “fungible” (one is equal to another, like cash). NFT (Non-Fungible Tokens) are each identifiable and unique, meaning that one is not inherently equal to another.

Each NFT has a unique ID, making them non-fungible (one is not equal to another)
Each NFT has a unique ID, making them non-fungible (one is not equal to another)

You can think of it as a token with unique properties that allow you to create digitally unique assets.

This simple concept enables digital scarcity for unique and traceable items. Scarcity in this context means a limited (and controllable) supply. There could be one NFT created, or 100, but each of them would have a unique ID.

As NFTs are unique, scarce digital items, that you could really attach anything to. There are many great uses for NFTs, the below list is a very limited look at potential uses:

  • Supply chain management (i.e tracking vaccines from production through the distribution network all the way to the clinic or hospital where it gets used)
  • Unique redeemable ticket items (i.e concert tickets, lottery tickets, access tokens etc)
  • Badges and non-tradable assets (i.e attendance proofs, certificates from boot camps, having an NFT for your identity on a platform etc)

Types of art

There are two major types of NFT artworks. Generative and non-generative.

Non-generated artworks are what you’d think of as typical artworks. It is an image created by a human artist and uploaded to the blockchain, then attached to an NFT token. Most NFT artworks you will see are non-generative. Some major artist includes:

Generative artworks are created by an algorithm of some kind, where the unique ID of your NFT is used as the “seed” to generate your art. Each generative art piece is unique, and uniquely tied to its NFT. An artist of course does create the bits and bobs of art that feed the algorithm, and tell it how to mash them together. There are lots of very successful projects that use generative art:

  • Crypto Kitties | NFT generative cats | Seed (DNA) stored on-chain, images generated off-chain, stored on centralised private servers
  • Axie | NFT generative Pokemon-like game | Seed (DNA) stored on-chain, images generated off-chain, stored off-chain but accessible to 3rd parties
  • AutoGlyphs | NFT generative art | Stored and generated on-chain
  • ChainFaces | NFT generative art | Stored and generated on-chain
  • HashMasks | NFT generative art | Seed stored on-chain, Generated on-chain, stored in decentralised storage

Some NFTs also enable the artist to collect royalties, allowing them to earn funds from every token sale, and not just the first sale.

Where is my NFT’s art?

So we have our unique NFT token, but how do we attach an artwork to it?

Tokens have a unique ID that can then be linked to digital art, or even real-world assets!
Tokens have a unique ID that can then be linked to digital art, or even real-world assets!

There are a few ways that this can be done, and while it might seem a bit nitty-gritty, it is important to understand to protect yourself from scams, NFT tokens that are not going to last, and or poorly designed and rushed projects.

There is a chance the code (Smart Contracts) get hacked, but this is a concern with all decentralised applications (dapps) built on any blockchain. This applies to all methods of art storage.

Art on the blockchain

The first way we will discuss how art can be attached to an NFT is when the art itself is stored on the same blockchain as your NFT. This is the most secure way, where the longevity of your NFT is practically guaranteed.

This means that even if the group that created the project went out of business and the website was removed from the internet, your artwork would still exist and be safely stored on the blockchain.

The NFT token and digital art live on the same blockchain
The safest storage mechanism for your NFT is when the art and NFT token live on the same blockchain

Examples:

  • AutoGlyphs | NFT generative art | Stored and generated on-chain
  • ChainFaces | NFT generative art | Stored and generated on-chain

Art on a different blockchain or decentralised storage

Your art could also be stored on a different blockchain or decentralized storage mechanism (like IPFS, Arweave etc) to the blockchain that your NFT lives on.

NFT token is on one blockchain, the art is on another blockchain or decentralised storeage solution
Your NFT token and art are stored on different blockchains or decentralised storage

When your art is stored on a different blockchain or decentralized storage there are a few things that affect the “risk profile” of your NFT:

  • How is the link handled?

A lot of projects host the link between your art and NFT. This means if the group were to stop maintaining the link, your NFT’s link would break, and your NFT would become worthless.

  • Where is it stored?

Not all storage is created equal. For example, if your NFT’s art is on IPFS someone needs to pin the art. If the creators of the NFT stop “pinning” the art, your artwork will disappear, even if the link is still active.

Examples:

  • HashMasks | NFT generative art | Seed stored on-chain, Generated on-chain, stored in decentralised storage

This method of storage is still significantly “safer” than the next method…

Art stored on centralised storage

Centralised storage refers to what you might consider normal storage, such as storing on AWS or private servers. This method means that should the group that created your NFT stops hosting your NFT, your NFT is now completely worthless.

Your NFT token lives on the blockchain, but the art does not.
Your NFT is on a blockchain, the art is not on any blockchain or decentralised storage, and is instead privately stored by the company or group that launched the token.

The risk profile of your NFT is now very high:

  • If the group stops storing your art, your NFT is worthless
  • If the storage mechanism goes down (which happens) your NFT is now worthless

Examples:

  • Crypto Kitties | NFT generative cats | Seed (DNA) stored on-chain, images generated off-chain, stored on centralised private servers
  • Axie | NFT generative Pokemon-like game | Seed (DNA) stored on-chain, images generated off-chain, stored off-chain but accessible to 3rd parties

What to look out for?

When looking to buy an NFT there are a few things you should check:

Is the market place legit?

There are many NFT market places. The major ones, such as OpenSea, have lots of NFTs on them, and lots of people using them. If you are unsure of a marketplace, google “<market name> scam” and or “<market place> stole my funds” to give you an idea.

Is this the original art?

Occasionally, sneaky scammers will steal art and create a new NFT for it, claiming it as their own. This is a little more tricky to check, but not impossible. What you will need to do is:

  • Right-click on the image of the art and copy it
  • Go into google’s search bar and paste the image in
  • Chances are pretty good that the first link associated with the image (ignoring any ads) is the original listing
  • If that listing is the one you were looking at, great! It is the real one. If not it is (probably) a copy.

Another way NFTs can be copied is the whole project being launched to a different chain. Most of the time it is a safe bet that the original is on Ethereum.

Is the amount “gambling money”? AKA: is NFT art a good investment?

You should never put more money into anything crypto than you are willing to lose. Most NFTs will not retain any value over the long term, and this is something you need to be very conscious about when buying an NFT.

Closing thoughts: What about the energy usage of the blockchain??

TLDR: Many blockchains have solutions for energy consumption in the pipeline.

Ethereum (the major blockchain where most NFTs are created) has a major update scheduled soon™ where the chain’s energy consumption would be massively reduced.

The energy consumption of “the blockchain”, while significant, is often blown out of proportion and used as a FUD technique to scare new people away from getting into blockchain. As a general disclaimer, not all blockchains are created equal, and not all blockchains use the energy of a small country like Bitcoin.

Opinion warning:

Irrespective of blockchains energy consumption, the technology is here to stay. On top of that, blockchain technology has massive potential to put the power (of data ownership, transparency, sovereignty etc) into the hands of the general consumer in a way that has never been possible.

Many major companies are trying to scare the general consumer away from decentralized blockchains to give them time to figure out how to make a blockchain alternative where they can still own all your data and have all the power. If you need an example just look at Facebook’s attempt at a cryptocurrency (so much wrong with it).

If you still don’t want to use blockchains because of their major energy usage, wait a year or two and come back. The blockchain has solutions for energy consumption in the pipeline.

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Veronica Coutts

Veronica Coutts

A blockchain believer & Ethereum developer. Trying to spread knowledge, peace and critical thinking.