Digital Agenda: NFT Technology

With the rise of digitalization and cryptocurrencies, the spotlight has shifted to different monetary technologies and NFT has started to be frequently mentioned on the agenda. Literally referred to as ‘NonFungible Tokens’. Although there is not yet a general consensus on the Turkish translations or definitions of the system, NFT, which is seen as a bubble trend for some and a new window in trade for others, has taken its place at the top of the global trade agenda with millions of dollars of sales.

In short, NFT is the digital equivalent of a physical asset such as an audio file, picture, video in a virtual environment. Digital assets find buyers for millions of dollars in areas such as culture, art, music, sports or real estate. Digital transformation expert and lecturer İsmail Hakkı Polat explains the concept of NFT: “A digital certificate that records the authenticity, history and ownership status of a digitized asset in an unalterable form over a blockchain”, in other words, a kind of ‘digital ownership certificate’. NFT can be done with virtual shoes, virtual games, virtual photos or pictures, in short, anything virtual.

The trend that emerged 5 years ago with the game called Crypto-kitties and started with the sale of virtual characters created in games over the Ethereum blockchain, known as the corporate cryptocurrency Ether, is considered the birth of the NFT system. While cryptocurrencies (Ethereum, Bitcoin, etc.) are interchangeable, NFTs are different in that they cannot be exchanged for other cryptocurrencies. This is the most important feature of NFT. Just like a recording tool, the blockchain ensures that the files prepared in the virtual environment, to whom they belong, to whom they are transmitted, and the signatures of digital documents are all recorded in the system in an unalterable way and can be viewed and approved by others.

Recording NFT works in this system and using it for trading offers a modern solution for the protection of copyright and artist rights. While some see NFT, which is on the world agenda, as a speculative temporary popular trend, others see it as one of the daily life tools of the future.

It is not possible to buy NFT without Ethereum (ETH). After purchasing Ethereum, NFT can be purchased using the ETH in hand. This is done by opening a username and account on an application that can be described as a kind of self-custody digital wallet. NFTs, which are produced in accordance with ERC-721 token standards, are offered from producers to NFT users through various platforms that serve with an extremely simple, easy-to-understand system away from the technical complexity of Blockchain. In NFT production, sales are not realized without a digital cryptocurrency wallet.

After the file to be converted into NFTs is uploaded to the IPFS system via digital platforms, the number of NFTs to be produced, the price, how much share will be paid in the next sale, and similar unchangeable features are determined and set. Then, when the blockchain network transaction fee is paid, the NFT production is completed. After this process, the NFT is added to the cryptocurrency wallet and recorded on the entire blockchain. The NFT file can be sold in markets for the desired price.

Ever since crypto technology entered the gaming world, it has been enabling players to earn cryptocurrency through ‘play-to-earn’ projects. In games such as Axie Infinity, Star Atlas, Decentraland, The Sandbox, Illuvium, Alien Worlds, TownStar, My Neighbor Alice, MIR4, Metamon Island, Super Galactic, MoMo Block Brawler, Mines of Dalarnia, etc., players can earn and spend NFT coins through actions such as buying and selling in-game items, buying or renting real estate, and competitions.

Social media platforms are also developing infrastructure for the use of NFTs. In the second half of last year, Facebook announced that it was preparing to transform into a platform that combines social media with the physical world by announcing that it was adding different dimensions to its corporate identity under the name Meta. According to the new system, cryptocurrency ads, which were banned in 2018, will continue to advertise within Meta from now on.

The value of the NFTs produced is determined by the investor. Investors are showing more and more interest in NFTs globally. According to DappRadar, in 2020, the NFT market, which a limited number of investors were aware of, was less than $ 1 billion; By the end of 2021, the NFT transaction volume grew rapidly and turned into a giant industry worth over $ 40 billion. Actors, musicians, athletes, and even political campaigns continue to step into the space by releasing all kinds of NFT-related digital works.

Ellen DeGeneres announced on The Ellen Show that a physical drawing of a cat in a music video was the first NFT sale, fetching $33,495 at auction. World famous singer Snoop Dogg released his first NFT collection titled ‘A Journey with the Dogg’. Some world-renowned influencers, sports clubs, corporate organizations and artists have also joined the trend. In the art world, NFTs, which spread rapidly because they solve various problems, are not art itself, but digital works, certificates that can be associated with a work of art and then traded and sold as a representative of ownership. The artist can sell the work that he or she has converted into an NFT while at the same time retaining the copyrights and making more NFTs of his or her work available. In this way, collectors can access artists’ works through the NFT. By monetizing digital art through NFT, artists can sell, exhibit and protect their copyrights around the world.

As commercial demand for NFTs increases, fraud and crypto exploits are expected to rise. Therefore, issues such as privacy and security are expected to be discussed more than ever in the near future, and specializations in this field are expected to become more widely used. Issuing NFTs around the world, bidding for NTFs on various topics, or buying NFTs will open up new marketing avenues for digital marketing and bring e-commerce to the forefront of the agenda for businesses. It seems to be settling in.