NFT: just click, save and you're rich, right?

«My punk is not for sale. It doesn’t matter how much they offer for it!»

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A year ago someone suggestedto the owner of CryptoPunk #6046 who posted thistweet, 2.5 thousand ETH ($9.6 million at that rate). This could be a record dollar deal for an NFT from the CryptoPunks collection. This is the price offered for a pixelated jpeg image that redefines the dictionary definition of art and makes investors salivate.

At the same time, early investors understand that this “object of art”, like 9999 other unique cryptopunks, was simply given away in 2017is free. However, they were part of one of the firstdocumented experiments in NFT minting when the technology was still in its infancy. It was a culturally significant moment for &#171;crypto art&#187; as currents, resulting in returns that investment managers can only dream of.

When I have the pleasure of telling thisstory at conferences, open discussions on the topic of NFTs, or people who are just starting their journey into NFTs, they look at me with obvious bewilderment. This bewilderment usually gives way to an expression of nervous complacency as they assess both the scale of the numbers and the absurdity of the situation. The look clearly reads: &#171;What the hell? $9.6 million for a jpeg with a pixelated image?!&#187; Almost looking around in search of emotional reinforcement, they cross their arms over their chest with some challenge.

“But I can just right-click on a picture of a cryptopunk and save it to my computer and I’ll be rich, right?”

“Yes, you can keep this picture for yourself,” I then answer with professional politeness. And here is the same saved image:

Cryptopunk #6046

Then I politely ask a simple question:

- But can you sell?my$9.6 million copy of the picture?

For many, this question became the starting point on the way to the &#171;rabbit hole&#187; NFT&#8230;

By any measure, $9.6 million is a significantthe amount laid out for a non-functional pixel jpeg-image; this is more than many iconic works by established artists such as Andy Warhol and Mark Rothko are worth. And while we can easily save this $9.6 million image to any of our devices, that doesn't make us the owners of the original. But how do you verify ownership of a digital file when anyone can easily copy it? This is where the disruptive power of NFT-related technologies lies.

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The underlying cryptographic technology behind NFTsallows you to confirm ownership of any digital file - a work of digital art, a 3D film or a text document, for example. You can createunique digital fingerprintdigital file called a cryptographic hash, which is a string of 64 text and numeric characters.

I won't go into detail here.technical aspects of hashing, but the importance of having a unique digital fingerprint should not be overlooked. If you change the original digital file even by one pixel, frame or text character, its digital fingerprint will change. In other words, every digital file has a unique digital fingerprint, just like a fingerprint. And history shows us how powerful the use of fingerprints is.

Back in 1984, Scientific American wrote,that the probability of finding two identical fingerprints from different people is 1 in 64 trillion. Similarly, in cryptographic digital fingerprints, there are 2 to 256 different combinations - this is more than the number of grains of sand on the planet. You can also watch a real-time visual demonstration of how these hashes are created using the online demo shown in the screenshot below.

Cryptographic hash of a text sentence

When entering text in the window, the online applicationautomatically generates a cryptographic hash associated with the entered sentence. This particular technology, called SHA-256 (google it for technical details), is used for a similar cryptographic hashing of digital files.

By creating a unique digitalfingerprint, you can capture it as a block of data on the public blockchain. Without going too deep into technical aspects, I can only say that blockchains provide permanent storage of data, and the data recorded in them cannot be deleted - they can only be added and updated. The diagram below shows how the digital fingerprint (hash) fits into blocks of data.

How Blockchains Work

This means – at a very high level – that with the technology behind NFTs, you can:

• create a unique digital fingerprint for a digital file, and
• securely store a record of this digital fingerprint in a blockchain that is open to all.

And these basic concepts are enough to understand what kind of &#171;elixir&#187; is fueling NFTs, and early investors know it.

The earliest investors in NFTs are, for the most part,have considerable experience in the crypto market. They have a good understanding of the underlying technology and have been convinced of its effectiveness more than once. Many people have been working with this technology since its inception with Bitcoin in 2009, and then since the launch of the Ethereum smart contract platform in 2014. In fact, it was the creation of smart contracts that significantly expanded the commercial and financial possibilities of using blockchains.

Smart contracts allow programmingfunds and value in the form of cryptocurrencies. This makes it possible, for example, to automatically transfer a verified digital fingerprint to another person after payment has been received.

To show this in practice, let's seefor information about the origin of Cryptopunk #6046 on Open Sea, the world's largest NFT marketplace, which accounts for about 90% of all NFT transactions.

Cryptopunk #6046 entry on OpenSea

The picture above shows the current status of Cryptopunk #6046: it is not for sale.

Action history with Cryptopunk #6046

Scrolling down to the &#171;Item sectionActivity&#187;, you can see information about the origin and activities from Cryptopunk #6046. Here we see that the current owner, one Richerd, bought this NFT from an account under the name moineau for 45 ETH. You can also see the subsequent purchase offer for 2500 ETH dated October 15, 2021. The truly powerful nature of NFTs is that all the data is completely transparent, and this makes them even better&#8230;

By clicking on the arrow (red rectangle onpicture above), you can navigate to the corresponding on-chain transaction in the explorer. Her entry confirms the bid of 2500 ETH (see red box below).

Transaction data in the block explorer confirming the stake of 2500 ETH

Such access to completely transparent dataallows you to establish and trace the origin of any digital file and its unique digital signature - from the original creator to subsequent buyers and owners through a chain of interconnected data.

So, from the above data, transparent andunchanged, you can see how powerful this technology can be, and there are 9.6 million (&#171;green&#187;) reasons why investors are realizing how powerful NFTs can be used in the future. And they not only understand this power, but they are putting real money on it, and this is just the very beginning of where the NFT space as a whole is heading.

 

Important:The NFT market is extremely risky. Think thrice and remember to do your own research before investing in it and never invest more money than you can afford to lose.

 

BitNews disclaim responsibility for anyinvestment recommendations that may be contained in this article. All the opinions expressed express exclusively the personal opinions of the author and the respondents. Any actions related to investments and trading on crypto markets involve the risk of losing the invested funds. Based on the data provided, you make investment decisions in a balanced, responsible manner and at your own risk.

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