NFT Guide

By January 24, 2022News

The first NFT sale through an auction house in New Zealand

Webb’s are thrilled to present Charles Goldie: One of a Kind, the first ever NFT auction to be held by a major auction house in New Zealand. The auction will consist of two NFTs: Charles Frederick Goldie at His Easeland Charles Frederick Goldie in His StudioThese two unique digital assets are derived from the original glass plate negatives of two of the most well-known photographs of C.F. Goldie, perhaps Aotearoa’s most celebrated artist. The photographs were evidently taken by Rupert Farnell Studios sometime between 1910 and 1920, and the negatives have survived in excellent condition to this day. In each case, the purchaser of the NFT will also receive a framed contact print of the image, the original glass plate negative in a custom-built pine box.

The auction will run online from Friday 28 January until Tuesday 1 February. Bidding will operate in standard Webb’s fashion, though in order to take possession of the NFT at the conclusion of the auction, the purchaser will need to have a blockchain wallet. The basics of setting up a wallet are outlined in the explainer below.

NFTs are blockchain-based digital assets. There are many different blockchains, and Ethereum is one of the most popular. It is often used for minting and trading NFTs. However, it comes with a congested network, inflated costs, and significant environmental concerns related to its energy use. The NFTs in this auction have been minted on Polygon, which is an Ethereum layer 2 blockchain. This means that it uses the same technology as Ethereum, and is entirely compatible with it. However, Polygon uses a different validation system which is vastly more energy efficient and consequently has a much smaller ecological footprint (Ethereum uses proof of work whereas Polygon uses proof of stake – the differences between these systems are outlined in the explainer).

N.B. If you are the successful bidder, and you prefer to have the NFT on the Ethereum blockchain, this can easily be arranged. However, asset transfer and network transaction costs will be billed to you in addition to the purchase price. No additional costs will be charged to you if you retain the NFT on Polygon.

NFTs and Blockchains: A Brief Explainer

Blockchains are data ledgers that record assets and transactions. Typically, they are peer-to-peer distributed ledgers – meaning that transactions take place directly between users and the transaction records are maintained by a network of validators. This is in contrast to conventional transactions that run through a centralised entity, such as a bank, who also maintains the records. All of the transactions occurring on a blockchain’s network within a given time period (typically between 20 seconds and 10 minutes) are collated into a dataset, called a block. Each block contains a cryptographic hash of the prior block, creating an unfalsifiable data chain – hence blockchain. 

NFTs, or Non-fungible tokens, are blockchain-based digital assets. They are often comprised of digital images, gifs, or short videos. These digital files are ‘minted’, or established as unique digital tokens on a blockchain. Thereafter, they can be bought and sold like other assets or pieces of property. When sold, an NFT will be transferred from the wallet of the seller to the wallet of the buyer. This transaction is recorded on the blockchain. As blockchains maintain indelible records of transactions, NFTs have a steadfast record of provenance. This has favourable implications for determining the authenticity of a particular NFT.

An issue that has arisen with blockchain technology is energy consumption. Maintaining the security and integrity of a blockchain requires a network of validators, who use a computational system to achieve consensus on block data. The validation system first used in blockchain technology is called proof of work. Proof of work requires validators to compete against one another to solve a cryptographic puzzle, or nonce, in order to validate a block. The nonce is difficult to solve but easy to confirm, and the validator who solves it first is rewarded in cryptocurrency. This incentivises network security, though it also means that a great deal of excess computing power is used by competing parties in their scramble to solve the nonce first.

An alternate system has emerged in recent years, proof of stake. This system allows network participants to vote for validators, and blockchain consensus is achieved on the basis of those votes. Validators therefore compete for votes, rather than computing supremacy. Consequently, proof of stake uses vastly less energy than proof of work; some estimates suggest that a proof of stake consensus consumes 0.05% of the electricity a proof of work system uses. Webb’s has minted the NFTs in this auction on a proof of stake blockchain.

Setting up a Blockchain Wallet

In order to make transactions on a blockchain, a user needs to have a wallet. This is not dissimilar to a digital bank account, though an important distinction is that a blockchain wallet can hold NFTs as well as digital currencies. There are many blockchain wallets available. Some of the most widely used are MetaMask and Trustwallet. These are software wallets that you can download and set up on your computer or smartphone, much like an internet banking app. For additional security, you may wish to purchase a hardware wallet. These are physical devices that need to be connected to your computer or phone in order to make a transaction. Ledger and Trezor are the most reputable hardware wallet brands. Please note, when you establish a blockchain wallet, you will be given a backup phrase – often a string of words or characters. This is in case you lose access to your wallet, either through forgetting a password or losing a hardware wallet. It is very important that you keep this backup phrase entirely secure – do not reveal it to anyone.

We are excited about this sale, and we know that many of our clients will be too. If you have any queries, please get in touch. We would love to hear from you.

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Dr. Julian McKinnon
Content & Research Manager
+64 21 113 5001