In Part 1 of my series on NFTs and crypto, I explained the basics. In Part 2, let’s dig deeper into this NFT universe so that you can start playing in it!
First let’s define the term “Block Chain” because you’re going to see and hear a lot about it. Simply put, block chain is a digital database that records all digital transactions in chronological order. Once recorded, it cannot be deleted or changed, so it is a highly secure and accurate record of the digital economy. The records are open to anyone transacting in the digital universe. If you purchase an NFT with cryptocurrency, that information is recorded so everyone can see, which as you’ll see later, affords both security and proof of ownership.
Let’s now look at an example of an NFT, photographs.
Investment Grade Photographic NFTs
The first thing you should know about investment grade NFTs is that there are several ways to confirm that the photo you are interested in investing in is “authentic.” Some methods include utilizing embedded data, such as time stamp descriptions in the data description of every digital image (date created vs. date modified), additional meta-data such as the caption information (who, what, when, where and why), and the overall story of the photos creation AND creator.
To get a digital photo NFT into the block chain and available for purchase, it must be “minted.” This means that the owner must have a digital wallet and associate with a block chain (Ethereum, for example). Then think of minting like you would a coin in that the NFT is minted as a TOKEN.
Once minted, a photo NFT has a fairly easy path to confirming authenticity through the aforementioned meta-data, including other images posted on the worldwide web and the story behind the event and the photographer who created the photo. The EXIF (Exchangeable Image File Format) information attached to every digital image also carries information such as the time of day the image was taken, the camera used, aperture, shutter speed, ISO as well as the lens used and other camera settings. These prove authenticity and provide a unique finger print using the pixel meta-data.
As for Investment Grade Photo NFTs produced on film, the obvious way to prove provenance (the history of ownership) is with the original negative, slide or transparency. For example, you cannot definitively prove a Picasso original (painting), but you can definitively prove an original Marc Serota photographic image because I have it! In the case of non-digital photographic NFTs, you can invest and own a piece of the original frame whether it is on negative film or a positive transparency slide. In addition, some companies are now offering the actual original photographic frame for investment and collectors receive the one-of-a-kind original to keep in their collection.
So just like any exotic or valuable investment, a “chain of custody” is also important in determining authenticity. This, for photographs, begins with the creator and copyright holder. In my particular case at nonstockagency.com, it’s simple. The chain of custody goes from me, the creator, to the agency and then to the purchaser. Other examples include “Rights Managed” stock agencies like Getty Images, Corbis, or the Associated Press. In those instances, the chain of custody might be the creator to Getty Images to nonstockagency.com (or other minting platform) to the buyer.
Scarcity And Uniqueness
Depending on your financial situation and risk tolerance, you may or may not want to invest a significant amount in an NFT. But if you do, scarcity and uniqueness are two very important factors in assessing the overall value of an investment grade photo NFT.
Establishing the uniqueness of an image helps determine the value of that image. For example, photo of LeBron James wearing his infamous ‘Black Mask’ is very rare for a number of reasons.
It was a broken nose that forced him to wear the mask and the NBA outlawed the “Black Mask” after the one game and only allowed clear masks moving forward. So, in all likelihood, the photo will never be produced again.
In addition, there are new (post-COVID) media coverage rules in the NBA and throughout most professional sports leagues that have all photographers either shooting in overhead positions or far behind the basket on the scorers table while sitting on a chair. Prior to COVID, we were directly under the basket sitting on the floor, accounting for some of those spectacular shots. So going forward, at least for some time to come, the post-pandemic images by sports photographers like me will never look the same as pre-pandemic ones.
And these new restrictions apply to entertainment venues such as concerts and red carpet events. We refer to this as ‘Access Denied’.
So, you’ve set yourself up and you want to start buying. In Part 3 we’ll explore the many options for buying and owning NFTs. For more information, check out the Manopod podcast on cryptocurrencies and NFTs with me and Christopher Unger, or visit us at nonstockagency.com.