Understand what NFTs are, how Vera Fischer will sell her paintings

In her 70s, Vera Fischer has become popular in the digital world. Fired from Globo in June 2020, the actress invested in streaming, social networks and is now increasingly involved with the world of NFTs to market her paintings.

But what are these non-fungible tokens that move millions of cryptocurrencies and are a fever in the art market?

With the popularization of digital transactions during the pandemic, terms such as “blockchain”, “cryptocurrencies” and “NFT” became recurrent on the networks. And this one draws attention to the large amounts of money spent by celebrities to acquire them.

In January of this year, player Neymar spent around R$6 million to buy two copies of the famous Bored Ape Yacht Club collection.

THE sheet listened to experts and prepared a guide to explain what this universe is all about and what are the benefits and risks related to crypto arts.

What is it and how does it work?

NFT is an acronym for “non-fungible token”.

In computing, tokens, also known as digital or crypto-active tokens, are like a token in a June party. You exchange your money (the asset, something that has value) for a token, which allows you to do activities in that environment.

The venue for the party would be the blockchain, the network where cryptocurrencies work and which records users’ transactions with digital currencies. Blockchain is a digital representation and does not interact with the physical world.

As it is something relatively new and abstract, Igor Machado, 33, PhD and professor in Computing at UFF (Federal Fluminense University), explains that to understand the exclusivity of NFTs it is necessary to compare them with something fungible. In this case, think about what you already know and deal with every day: money.

A fungible token refers to something that can be joined to another, since there is no difference between them. The banknotes are fungible, after all, no matter the difference between them, if united, they will remain having final value. And just like notes, you can pass one of these tokens to someone else.

This type of cryptocurrency was quite popular in 2016 and 2017, and during this period, many came and went quickly.

Because there is a need to represent real-world assets, such as real estate, it was necessary to create a digital certificate that could not be fractionated. And it is in this context that the NFTs arise.

“This type of standard has existed since 2018, but only 2021 was declared the year of the NFTs”, says Igor Machado.

Through these tokens it is possible to represent art, music, memes, figures, etc. However, when creating an NFT of some element of the physical world, it is necessary to have behind it some entity that supports it.

It’s safe?

Most of the time, yes. When a cryptocurrency transaction is made, it is possible to go all the way through the big database that is the blockchain.

For example, if you buy a cup of coffee and pay with bitcoin — a widely known cryptocurrency valued at around BRL 228,000 — it is possible to track the entire path of this asset. As much as the people who make transactions on the network are anonymous, all operations are recorded.

Despite this transparency provided by the technology, there have recently been allegations that NFTs can be used to cover up the origin of illegal money, a practice known as money laundering.

In early February, the US Department of the Treasury issued a warning that the emerging digital art market could present new risks, such as NFTs.

According to a report by Elliptic, a provider of crypto-economy analytics in the UK, the huge amounts of money involved in these transactions are attractive to cybercriminals. The company claims that, to date, no transactions involving money laundering and NFTs have been publicly reported. However, he expects the first major cases to appear this year.

On social networks, netizens share memes and express opinions about crypto arts being involved in illegalities.

Rodrigo Monteiro, 45, executive director of ABCripto, explains that “92% of money laundering in the world is done for cash. And the other 8% is done with arts, shell businesses, crypto and financial products”. He says that, as everything is recorded on the blockchain, it is possible to track every movement that is made.

“It’s not practical, it’s not smart, and it doesn’t make sense that someone would want to launder money using crypto. But there is, yes, a small percentage of people who will try.”

Does it affect the environment?

Yes. There are criticisms, mainly disseminated on social networks, about the impact of NFTs on the environment. This is because, in order to be commercialized, it is necessary to use cryptocurrencies, mainly ether, valued at around R$ 16 thousand, and bitcoin.

A Cambridge University study estimates that bitcoin transactions use more energy per year — 125.1 TWh (terawatt hours) — than Ukraine (124.5 TWh) and Norway (124.3 TWh). The research also says that the amount of energy spent in this period by the cryptocurrency is enough to boil the water in the kettles of the British for 28 years.

For Rodrigo Monteiro, humanity’s energy consumption level has grown a lot, more than the planet can support, and with blockchain it would be no different.

For the network to be so secure, it takes a lot of energy to run the operations and this contributes to the intensification of climate change.

“The issue of blockchain technology and NFT is a drop in that ocean.”

However, there is already awareness among artists and buyers about the need to protect the environment, as is the case with the Green NFTs initiative. This consists of a reward system for people who try to improve the energy efficiency of this type of cryptoeconomy.

Worth to buy?

It depends. The advantage of acquiring an NFT is to obtain digital ownership of a unique work, having its authenticity guaranteed. There isn’t an identical copy of it, which makes it rare.

Think of the “Mona Lisa,” says Bruno Perini, 33, a finance specialist and partner at Grupo Primo. You can go to the Louvre Museum in Paris and take pictures of the painting, but you will not own the work. The same happens with the images of the NFTs that were acquired by Neymar.

The entrepreneur explains that the practice of netizens of taking screenshots of an NFT and suggesting that they also bought it, which did not happen, only leads to an even greater appreciation.

It is important to understand that NFTs do not represent an investment like government bonds or stocks, for example.

They can be valued based on external factors such as popularity, scarcity and demand, but the tendency is that, with the increase in supply, most prices will go down in the future.

Another issue to consider is the custody of the tokens. When you buy one, it is stored inside a digital wallet. If you do not write down the password, you will no longer be able to access it.

So, if you have an interest in collecting a unique and authentic work of art, buying an NFT is most likely for you. If you’re thinking of making a profit, it might be better to look for other forms of investment.

How do I buy?

If you have decided to purchase, here is a step-by-step guide on how to do it:

1- You need the asset used in the transactions. The most common is ether, from the ethereum network. To do this, you must have an account at a brokerage, have bought that currency or someone else has made the transfer;

2- Download a digital wallet — the Meta Mask is the most used. You can download it as a mobile application or as a browser extension;

3- After setting up your wallet, transfer the ethers there;

4- Log in to a marketplace — where NFTs are traded. OpenSea is where most of the trading takes place;

5- Choose your collection, just like you do your online shopping.