Oases Opinions Series: What NFTs are and why digital ownership matters
July 22nd, 2022

With Oases being a marketplace for NFTs, we naturally believe in the fundamental value and utility of NFTs. While blockchains are still a very young industry, NFTs have emerged as one of the more obvious contemporary use cases of the technology and already transpiring into everyday culture. Because of the industry's infancy, we find it highly relevant to back up and start exploring what NFTs actually are and what the general applications of the technology are, and also specifically for culture and artists. We intend to keep the scoop narrow and publish a series of educational and explorative articles on relevant topics within NFTs, art, and the intersection between technology and human cultural expression.

Key takeaways

  • NFTs are cryptographic tokens secured by the blockchain, making them immutable and practically impossible to change or forge in any way.
  • When minting an NFT with a specific data file of digital creations, this artwork cannot be duplicated in another NFT on the same blockchain.
  • NFTs have for the first introduced genuine digital ownership, providing transparency and true scarcity to native digital assets.
  • The blockchain provides, through the NFT, a permanent record of the creator and ownership with its changes over time.
  • NFTs are a cheap and effective way for artists to protect their IP removing the need for the middlemen of the art world.

What are NFTs?

NFTs, short for non-fungible tokens, are blockchain-based cryptographic tokens. The big distinction from fungible tokens like bitcoin is that each NFT has unique properties, containing different data like details of or directions to a specific artwork. This is in comparison to the example of bitcoin, where each token is in theory the same, mutually interchangeable, and therefore fungible tokens. A blockchain-based token means it can be natively owned and exchanged in the digital realm. Recorded on public ledgers secured by blockchain technology means the tokens are theoretically immutable and therefore become digital certificates of ownership.

The previous paragraph was a try to boil down a technical difficult topic to highlight the value and functionality of the technology. But we will try to dig a bit deeper to really explain why NFTs are practically impossible to forge and are immutable digital ownership. When minting artwork as an NFT, a mathematical hash function is used to calculate a unique hash (a series of numbers and letters of fixed length) which can be seen as the ID or a serial number of the NFT. After the creation of the NFT, it's theoretically impossible to mint another NFT on the same chain with the same data input (the digital asset). While this is starting to get very technical, it is also very important as it is what makes NFTs unique and as mentioned before, a true certificate of ownership of a digital asset. The hash size is small compared to the input and has the same length regardless of the size of the original artwork data. The mathematical hash function is deterministic and "one way" which means that the artwork data cannot be recreated from only the hash. But if you have the original file, you can, with the mathematical hash function verify that you get the same hash from the data file of the artwork because the mathematical hash function always gives the identical hash or "serial number" output if you have the identical artwork data as input. Essentially, the hash of the NFT contains the compressed and verifiable version of a digital asset and can also contain data that points to a unique digital asset that could be a photo, video, audio, or any other digital data that is stored decentrally on the internet through IPFS for example.

One may assume that it is unsafe that the NFT doesn't contain the actual artwork. This may be a topic for another time but Indeed, the NFT doesn't contain the actual artwork but the authenticity can be mathematically proven and in the NFT you often have an address pointing to the decentralized storage of the original artwork data file. For an owner of the token, the origin is always cryptographically provable and the history is transparent on the blockchain which also includes the token's original creator.

The importance of digital ownership

Since the start of the internet era, we have seen ownership become a tough issue. When digitalization started and we got cultural expression in natively digital form represented by data, it's been easily copiable and easily distributed outside the control of the creator or owner. As soon as something got digital and was on the internet, it was impossible to distinguish the true origin of a digital item, and it practically become common property. During the years there have been many high-profile copyright cases and there has been legal action against piracy and illegal distribution of copyrighted material. But it has only been feasible for very large companies actually to pursue breaches of copyright and actually enforce digital ownership. Smaller creators on the other hand have not been able to protect their work in the digital space which has made the barrier to living on your creations hard.

NFTs enable artists to digitalize their work and the ownership to be recorded immutably on-chain. An artist's piece of work can be digitalized and the ownership transacted with but most importantly, the work's origin is transparent and not possible to tamper with. In interactions with smart contracts, NFTs with their digital nature, are also programmable. This enables predetermined actions like a part of the transaction can be directed back to the creator of the NFT. These properties open up a whole range of new possibilities both for owners and creators of unique digital assets. With practical copyright now acquired through an NFT, the barrier for creators is almost entirely removed. Small-scale independent creators can now come in and actually have a chance to benefit from their work within a global and highly digital economy, which is one of the main reasons we see for the increasing adoption of NFTs.

Digital ownership transitioning culture and art into web 3.0

With the increased adoption of NFTs as technology and the democratization it brings to all types of creators, one could ask themselves what art really is. Artistic and cultural expression is something that has existed amongst humans as long as we have existed. There are findings of decorated items in Africa dating back as much as 100.000 years while maybe one of the most famous is the extensive paleolithic cave paintings of animals found in France dating back up to 50.000 years. While there is no commonly agreed definition of art, one could argue that it is fundamentally a form of communication. Human appreciation for artistic expression of all kinds is deeply rooted within us as a tool to create the very social fabric between individuals.

With the digital revolution, humans have experienced within just a couple of generations a rapid transition of the very nature of our existence into the digital realm or in what is popularly referred to as the Metaverse. The transition from physical life to digital in many ways is a big change and we think this is a shift in human evolution that everyone should embrace and explore. Still, the art world could rightly be considered quite conservative in many ways. This could be a whole story in itself but the art world have a long history where rigid structures have been organically created with a lot of middlemen like art dealers, critics, and so on. This type of structure is something that keeps the art world in a smaller circle in a way to keep things exclusive and so on. Small artists have a big threshold to get into the right circles to get exposure on a good scale. In the digital realm, this is suddenly very smooth.

On the other hand, the fringes of cultural expression have always been early adopters of new technologies and inventions like photography, film, and so on. Technological innovations have always opened up new ways of expression and we think we are at the beginning of such a process and are still very early on this adoption curve. Interestingly we have already seen Sotheby, one of the most prominent legacy marketplaces for art, hosting successful auctions of NFTs.

To round up, we conclude that traditional art can sometimes be inaccessible and frankly a bit excluding with its conservatism. NFTs provide an opportunity for broad democratization and a highly increased opportunity to participate and reach a global audience and community for both different participants and most importantly for the artists themselves.

About Oases

Oases represent the Metaverse, the new oasis of humanity. It also indicates that NFTs, starting as niche collectibles are rejuvenating the art market. Oases, as its name implies, is an open, innovative, and vibrant community. We are committed to providing trendy, engaging, and distinctive products and functions to meet the demands of our users.

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