This technology will disrupt our existence and is a market with enormous potential for some; in contrast, it is a game for its own sake and a speculative bubble that will deflate sooner rather than later for others. However you think about it, the phenomenon cannot be ignored (the futuristic Quantum was finally auctioned at Sotheby’s last year for 1.4 million dollars!). To try and outline its substance and proportions, we talked about it with Achille Minerva, co-founder of ItaliaNFT with Marco Capria, the first marketplace dedicated to NFTs linked with Made in Italy excellences. At the end of June, StartupItalia selected ItaliaNft among the 5 most promising Italian startups in the NFT and Metaverse fields. ItaliaNFT has been talked about recently for creating NFTs for the Giro d’Italia’s Trofeo Senza Fine and the iconic photograph of Liz Taylor and Richard Burton kissing, snapped by Marcello Geppetti in 1962.
Let’s start from the beginning. What exactly are we talking about when we say NFT?
The first step to understanding an NFT is understanding what a blockchain is. To simplify, we can define a blockchain as a digital public ledger that is not managed by any central unit or body but distributed over a series of networks, computers and servers located worldwide. A whole range of information and data are recorded in this “database”, including transactions involving digital objects. Any data in the register is visible to all and cannot be changed without the network’s consent. In practice, it is an inviolable, unchangeable register. When we talk about NFT, an acronym for Non[1]Fungible Token, we are talking about a unique token, which identifies and certifies any digital asset to which it refers. Any photo, image, video or text found on the Internet can be associated with a unique token. generated – in jargon, minted – on the blockchain. Minting this token on the blockchain creates the so-called ‘digital scarcity’, i.e. being able to associate an asset to a reference token that certifies its ownership. It is a disruptive innovation because it makes it possible for the first time to attribute ownership of a digital asset, which can be proved through this ‘ownership certificate’ on the blockchain.
Any digital product can be replicated, while, for example, the Mona Lisa is unique and unrepeatable. Where does the concept of uniqueness and rarity lie in a file?
This is another critical point. You can replicate a file, just as you can replicate the Mona Lisa. Prints, drawings, lithographs, and posters of Leonardo’s masterpiece exist and are sold worldwide, but the original is always kept in the Louvre. The concept for NFTs is the same: a token can only be associated with a specific file, which belongs exclusively to that token’s owner and their wallet; the owner is the only one who can resell it to third parties. So, I can replicate the related asset, but I will never be able to sell the property.
Are NFTs bought and sold exclusively through auctions and cryptocurrencies?
Not necessarily. On our ItaliaNFT platform, for example, we also allow visitors to buy through the so-called Buy now system: in this case, the customer enters and purchases for a fixed price. Also – unlike many other marketplaces – we also provide the option to buy with credit cards.
How do you ensure that an NFT remains usable despite the rapid changes in new technologies?
These tokens can store metadata, including files (as said before: videos, images, texts…), in a specific format called IPFS, which stands for Interplanetary File System. Technically, this format is not part of the blockchain for now because the operation would be too “heavy” in terms of space. So you add the link that refers to this IPFS, an “interplanetary” file distributed on millions and millions of servers worldwide. This eliminates the corruption problem: if one server goes down, there are still millions of others.
So NFT certifications are confined to the digital world?
Not really. An NFT can certify a digital asset’s ownership, but also a series of data or physical objects. Think about a piece of jewellery or a watch; all the characteristics of that specific item, if written on paper, could get lost or deteriorate sooner or later, but it is impossible if they are “fixed” in the blockchain in the form of an NFT. And there’s more to it: in the blockchain, small and medium-sized businesses that may not have big budgets can create NFTs that certify their drawings, technical and industrial prototypes, and even patents that bypass the patent issued by the relevant institute. At the moment, the blockchain has no legal value, but in case of disputes, I would still be able to say that in year X on day X at time X, I added this file to the blockchain, so it comes before any other reproduction. It is a hot topic in the industry.
Legality is another highly debated issue.
Once you understand that an NFT is a technology, an incorruptible and inviolable ownership enabler, applicable to any digital or physical product, then you also know the benefits it can bring. We are already wondering whether our identities can also be certified by NFTs in the future. Speaking of legality… when live streaming services appeared, there was talk of piracy, a slap in the face of the music industry and copyright. In reality, illegal activities have been duly fought, but the technology has remained, so much so that the music and broadcasting industries now rely heavily on streaming, which is a winning, fast, and efficient technology. The same is happening today.
The Taylor-Burton kiss photo was already a recognised masterpiece. Where is the added value of its NFT?
The historical importance remains in all its value. It was the last day of the filming of Cleopatra; they were the two most famous stars in Hollywood, there were rumours of a relationship between them, and that was their first public kiss, photographed by Geppetti. But we did something new. Using the morphing technique, we combined many photos taken in sequence: a video appears on the auction site where the two stars meet and kiss. It is also a digital unicum because it has been transferred to the blockchain. While it is true that anything can be transformed into NFT, it is also true that not all NFTs have equal dignity and raison d’être. Had this picture been taken as it was and turned into NFT, it wouldn’t have the same impact. There wouldn’t have been all the great computer graphics work that led to this unreleased video.
Can you explain what makes an NFT worthy of value?
The real point is to understand what will remain of this innovation. According to us ‘believers’, if we do not start from an intrinsic value – an event, a historical document, a great brand, and so on – the NFT will have no following, no real recognition. Then the execution makes all the difference: in our digital age, young people, in particular, want to see beautiful things in the digital space. We must not think it is enough to copy and paste some good physical work into an NFT to make something of value; specific rules are being defined. An NFT is the result of complex work that involves various professionals: a craft designer, a 3D artist, a sketcher… and then technical experts who take care of all the processes leading to the token’s creation and its storage in the blockchain. It is no coincidence that our platform does not give users the possibility, as other platforms do, to upload their NFTs. There is an upstream quality control system to protect all the players involved and ensure that only quality works are submitted.
What are the main markets for NFTs? Is there a typical buyer?
According to several reports, the NFT buyer is mainly male and is 20 to 35 years old. Asian countries buy more NFTs. China (even though it has banned cryptocurrencies), Singapore, Hong Kong, etc. Partly because those who buy are still very close to the gaming sector – and Asia has a robust number of gamers – and partly because countries like China have always been at the forefront of technology. In the face of so many very young buyers, can scepticism for NFTs also be an age[1]related factor? Partly, maybe. But any innovative, disruptive technology had a hard time before it was accepted. At the end of the 1990s, press articles declared that the Internet was dead. In more recent years, online marketplaces were predicted an uncertain future because people would never lose the pleasure of making physical purchases in stores; in the dawn of the Internet, some shook their heads in front of emails. In the face of so much scepticism about the blockchain, however, I can see that important multinationals are starting to adopt it because it optimises a whole series of processes.
An NFT is often sold with its tangible counterpart or, in any case, together with physical objects. Isn’t that a limit?
It is true that many users still struggle to perceive an item’s digital value alone, and to understand that, because it is rare, an NFT enables rare experiences. For example, whoever bought our Senza Fine trophy NFT also received the 4 original Giro physical jerseys signed by the winners. But this is the beginning of a journey; the more we go digital, the more we will come into contact with the Metaverse, a new dimension impossible to ignore.
The sales of NFTs in the first half of the year decreased compared to the same period in 2021. According to some, the bubble has started to deflate.
Like cryptocurrencies, the world of NFTs was also affected by mere speculation, especially at the beginning. I see the reduction in trading volumes primarily as riddance of elements that have polluted real trade until now. However, I’d like to point out that according to Citi, the Metaverse may reach a turnover of 13 trillion dollars by 2030.
