A hype has gripped the art and creative world and is being discovered by investors as a new form of investment: non-fungible tokens, also known as NFTs for short. One of the currently sensational examples: Jack Dorsey, the founder of Twitter, sold his first tweet on the CENT platform for 2.9 million US dollars, a software entrepreneur from Malaysia won the bid.
Shermin Voshmgir is the author of the book “Token Economy”, founder of Token Kitchen and the BlockchainHub Berlin. Before that, the business IT specialist was also the director and co-founder of the Institute for Crypto-Economics at the Vienna University of Economics and Business, as well as an advisor to Jolocom, Wunder, the Estonian e-Residency Program and curator of The DAO.
CENT is a decentralized application managed by the Ethereum network. It allows users to register their tweets on the Ethereum blockchain and to provide them with a unique digital signature. This act of digitally signing creates a token, also known as an NFT – that’s exactly what Jack Dorsey auctioned off. And that’s just one of a whole series of spectacular sales in which a lot of money has wandered over the counter or through blockchain networks for memes and Instagram pictures:
- The popular Nyan-Cat meme – a GIF from 2011 – was remastered by the artist, registered on a blockchain network, and digitally signed. The resulting NFT was put up for auction on the crypto art platform Foundation auctioned for around US $ 590,000 (300 ETH).
- Beeple, a digital artist with over 2 million followers on Instagram, had registered a collection of his Instagram images as NFTs last November and sold the entire collection for over $ 3.5 million. That record price was blown again when one of his tokenized images from the collection was recently auctioned off at Christie’s for 69 million US dollars
- Banksy’s 2006 painting “Morons”, which criticizes the art world, was bought for $ 95,000 by the Injective Protocol group of artists who burned the painting and recorded the action on the Ethereum network. The NFT they signed was sold for $ 380,000 (228.69 ETH) on the NFT trading platform OpenSea sold.
The technology behind the latest craze in the art scene has been around for a long time. Basically, the concept of jointly managing unique values with an infrastructure like a blockchain network has been around for almost as long as blockchains have existed.
The “Web3” and cryptographically signed tokens
Blockchain technology is generally associated with cryptocurrencies such as Bitcoin. But there is more to it than that: the “Web3”. In the crypto scene, the term is used by many developers when they talk about the next generation of the internet. The very controversial term was coined in particular in the Ethereum environment and is now also spreading outside the scene. The vision: data are jointly managed in public infrastructure.
The backbone of this Web3 are distributed blockchain databases, often also called ledgers. A number of other protocols are then necessary to create decentralized applications that dock on the blockchain. A whole web stack should be available to create such services. And they can then, for example, generate and manage tokens.
One ability of these tokens is to use a cryptographic signature to give digital content a form of uniqueness that files do not have on the conventional Internet. The data structures of “Web2” based on client-server architectures do not allow us to distinguish between originals and copies. Data packets are data packets; at most, DRM can be used to create an access barrier on the part of the producer and to sanction piracy with legal means.