What Is NFT Art And How Does It Work

Published on: 27 January 2024 Last Updated on: 29 January 2024

At its core, an NFT (Non-Fungible Token) is a digital asset that represents ownership or proof of authenticity of a unique item or piece of content, often an artwork, using blockchain technology.

Unlike cryptocurrencies such as Bitcoin, NFTs are not interchangeable; each NFT has a distinct digital signature, making it unique and non-fungible.

NFT art refers to digital artworks bought, sold, and traded as NFTs. These can range from digital paintings, animations, music, videos, and more. The art is usually digital, but the NFTs can also represent ownership of physical artwork.

How Does NFT Art Work?

Creation and Minting: Artists create digital art and then “mint” these works as NFTs on various platforms or blockchains like Ethereum. Minting involves creating a new block, validating information, and recording the art as a transaction in the blockchain.

Ownership and Authenticity: Once minted, the NFT’s metadata (including the artist’s signature, the artwork’s details, and ownership history) is securely stored in the blockchain. This ensures the authenticity and provenance of the artwork, making it easy to verify its originality and ownership.

Buying and Selling: NFT art can be purchased on numerous online marketplaces. Transactions are usually made using cryptocurrencies. When an NFT is bought, the ownership is transferred to the buyer, and this transaction is recorded on the blockchain, providing a permanent record of the sale.

Royalties: One of the revolutionary aspects of NFTs is the ability for artists to receive royalties automatically. Artists can program in a royalty system to receive a percentage of sales whenever their art is sold to a new owner.

Benefits of NFT Art

Provenance and Authenticity: NFTs provide a secure and transparent way to prove the authenticity and ownership of artwork.
Global Market Access: Artists can reach a global audience, and buyers can purchase from anywhere.
Royalties: Artists can benefit financially from secondary sales of their work.
Innovative Art Forms: NFTs have encouraged new digital art and creativity forms.

Criticisms and Challenges

Environmental Concerns: The energy consumption of blockchain technology and NFT transactions has raised environmental concerns.
Market Volatility: The NFT market can be volatile, with prices fluctuating dramatically.
Copyright and Plagiarism Issues: There have been instances of art being tokenized without the creator’s permission.

Future of NFT Art

The world of NFT art is still in its infancy, and its potential is vast. As technology evolves and more artists and collectors embrace NFTs, we may see new forms of art, innovative uses, and solutions to current challenges. Despite the controversies and growing pains, NFT art is paving the way for a new digital creativity and ownership era.

NFT art represents a significant shift in how we perceive and handle digital ownership and art. By leveraging blockchain technology, NFTs provide a secure and transparent method to buy, sell, and collect digital art.

While there are challenges to address, the NFT space’s potential for growth and innovation is immense, making it an exciting frontier in the art world. As with any emerging technology, artists, collectors, and enthusiasts need to stay informed and engaged with the evolving landscape of NFT art.

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Ankita Tripathy

Ankita Tripathy loves to write about food and the Hallyu Wave in particular. During her free time, she enjoys looking at the sky or reading books while sipping a cup of hot coffee. Her favourite niches are food, music, lifestyle, travel, and Korean Pop music and drama.

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Know the Applicable Stamp Duty when Gifting an Asset

Ravi Krishnan was retiring from central government service. At this time, he decided to gift his three-bedroom flat in Navi Mumbai to his son Akaash. Krishnan is now 60 years old and would relocate to his native Bengaluru from Mumbai. Widower Krishnan has planned for his golden years well. He can easily manage with a pension of Rs.2.5 lakh a year in Bengaluru where he owns a house. While Krishnan was formally transferring the rights of his Mumbai flat to his son, he came to know that there are certain tax implications. He got down to assess what needs to be taken care of with regard to stamp duty gift deed. It turns out that the transfer of any immovable property, even from father to son, is considered as a gift as per the existing laws. Stamp Duty on Gifts Stamp duty is the tax levied on a property which is being sold or transferred. Stamp duty varies from state to state. It is in the range of 3–7% of the value of the property. The Transfer of Property Act mandates that the gifted property be registered as a ‘gift deed’. This should be duly signed by the person who is gifting it. It also needs to be signed in front of two witnesses. A gift deed is a legal document that endorses the transfer of property from the donor to the receiver. There is no exchange of money in this case. The rate of stamp duty, however, is the same as in the regular sale of the property. However, some states are lenient in terms of stamp duty gift deed when it involves gifting of property between close relatives. You can make use of a free stamp duty calculator available on various real estate aggregator websites. Then you will know the exact rate applicable in the case of your gift deed property. Components of a Gift Deed Details of the property that is being given as a gift Details of the donor such as name, father’s name, Aadhaar number, address, etc. Details of the receiver such as name, father’s name, Aadhaar number, address, etc. The date and place where the gift deed is being signed Signature and details of two witnesses who were present when the gift deed was executed Relationship between the donor and the receiver Income Tax on Property Gifts According to the Income Tax Act, 1961, you are not liable to pay tax on gifts received of up to Rs.50,000 in a year. What if the value of the gifts exceeds Rs.50,000? Then a gift tax is imposed on the receiver. The Income Tax Department has taken into consideration that movable and immovable assets change hands between close relatives. So, it has exempted the receiver from paying any tax for a property received as a gift. What is heartening is that there is no cap on the price of the property. However, the donor of such a gift has to be from a list prepared by the Income Tax Department. Which donors are exempt from taxes? That includes parents, spouse, siblings, siblings of the spouse, and direct ascendants and descendants of the donor and their spouse. As a receiver of the property as a gift, you would only need to pay income tax when you decide to sell it. The Income Tax Department will treat the proceeds from the sale of the property as an income. You are liable to pay taxes on such an income. The rate of the taxes, however, will be decided on your period of holding. Short-term capital gains will apply to holdings below 36 months. If the holding period is beyond 36 months, you will have to pay long-term capital gains tax of 20%. But in this case, you will also be entitled to indexation benefits. Conclusion The gifting of immovable assets attracts taxes. One has to pay stamp duty and registration charges when the transfer of rights of a property takes place. Stamp duty varies from state to state but is essential in formalizing the gift you have received. For property received as a gift, you will not be required to pay any taxes unless you decide to sell it. Read Also: 5 Gorgeous Hairstyles For A Perfect Date Night

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What Is NFT Art And How Does It Work