With the ever-increasing developments in technology, art and artists have much space to adapt their work and rely on new and valuable technologies to provide solutions. Due to the prevalence of physical artworks in our world, digital creations by artists have long been undervalued and often not considered, in part due to being so freely available everywhere.
Non-Fungible Tokens, or NFTs, are becoming a much more viable solution for artists to create financial value from the digital artwork they produce.
Most often, investors seek to rely on the likes of galleries and auction houses to discover and buy new and exciting art.
The emergence of NFTs is in the process of bringing about an artistic revolution, changing the ways in which artists can sell their art. These NFTs function as a form of crypto token connected to a digital asset, such as a song, a piece of digital art, or royalties. This in turn assists artists in the sale of their work, directly to art connoisseurs.
What is NFT Art?
NFT stands for Non-Fungible Token.
NFT art is a collectible digital asset that can be tradeable in the digital world.
For obvious reasons, traditional works of art such as paintings are most valuable because they truly are one of a kind – painted by hand, with a special technique, often with special paint.
As we are well and truly aware, digital files can easily and endlessly copy and pasted as much as the owner wants. Not so with NFTs. These items are bought and sold with a digital certificate, showing ownership of a unique virtual or physical asset that someone has produced.
Like everything else in our world, these digital items can only have one official owner at a time.
These are secured and protected by blockchain technology, an incorruptible database, which cannot be tampered with. Blockchains are a database that cryptocurrencies such as bitcoin and Ethereum utilize, and if they wished could implement their own system for NFTs.
Due to the nature of blockchain, no one can change the record of ownership nor copy or paste to create a new version of the NFT. They can be easily traded easily, are verifiable, and have no tangible existence in the real world. While NFTs utilize the same database as cryptocurrency, it allows them to store extra information which makes them work differently.
What is “Fungible” in NFT? How do NFTs work?
When we are considering economics, something which is a fungible asset has units that can be interchanged easily, such as money.
A $10 note can be seen as being the same thing as two $5 notes. We know that these have the exact same value. If an item is non-fungible, this is quite simply impossible. The item has such unique properties that it is unable to be interchanged with something else of similar value.
For example, the house that you live in or a painting such as the Mona Lisa are one-of-a-kind items – they cannot be reproduced, their value cannot be interchanged.
Sure, you can take a photo of a painting or buy a print of it, but it will never be the same as the original painting you saw.
The term can be used to describe things like furniture, a song file, real estate, collectibles, or even your computer. Think of things such as rare Pokémon cards, old coins, GIFs, tweets, video game skins, virtual real estate, or some of the rarest Air Jordan’s in the world. These things all have properties that make them unique, usually with a certificate of authenticity to prove it.
Not only this, but they are also in a scarce supply amongst the assets with infinite availability to the masses. In the simplest of terms, an NFT makes digital items, works of art, or other collectibles into a “one-of-a-kind” asset that can be bought and sold by their makers and buyers like any other property.
While cryptocurrency assets are fungible and can be interchanged for other currencies of the same value, such as one bitcoin for another one bitcoin.
In the same way, ether and dollars are fungible, for example, because 1 ETH is equal to $1 USD and can be exchanged as such. This is not the case for NFTs as no two NFTs are the same and cannot undergo the same treatment as currencies.
Their unique value is set by the highest bidder, like any famous Picasso or van Gogh painting.
Anyone who seeks to sell must sign up with a marketplace and then upload and validate NFT information on the blockchain, at a cost of around $40 to $200, and it can then be listed for auction.
How is blockchain technology enables NFTs?
The decentralized and unique nature of blockchain helps to create new ways in which art can be produced and acquired. This can certainly be used to an artist’s advantage.
The use of blockchain has the potential to alleviate some of the power big collectors and dealers hold over the art world, shifting some of the power back to the artists. The move cuts out the mediators in the middle who often seek to take out a big cut of the profit made on an art sale.
For art investors, a model over blockchain would provide more incentive to provide a backing for new and promising talent, taking advantage of the art valuation growth by joining an artist in the beginning.
Art collectors pay ridiculous sums of six to eight-figure values to acquire a piece of art when oftentimes the works they purchase can be seen and shared online for free.
Many critics have suggested that the NFT idea is just the latest fad, much like the Reddit stock market bolster of stocks like GameStop. However, the NFT craze is attracting groups of artists and investors, as well as speculators and their imaginings seeking to get rich off the NFT idea, while a subtle emergence of a new economy is on rising.
How do artists price NFTs?
Anybody can make a token and sell their creations as an NFT, but most recently, interest has been garnered through several high-profile, multi-million-dollar sales.
The price of the NFT defines by the subjective value of your work
The “value” of any object is not defined by the number of resources and the hours of labor that went into creating and producing it but is variable according to its context and the rationale or perspective of its users. In fact, the theory argues, the value of any object is determined by the individual who buys or sells it.
Why so much momentum?
There are quite a several reasons why it has gained so much momentum in the art world, from freedom of expression to the removal of the middleman.
Freedom of Expression
One of the greatest things worth celebrating about the NFT system is that it boasts the incredible ability for artists to freely express themselves.
Digital arts medium has no limitations and the artist, unlike more traditional art forms where the artist is confined only to a canvas or a photo. NFTs have altered the definition of art, helping to make the art world and art forms more inclusive of digital expression than it ever has been.
There are many artists working in unusual, controversial, and oftentimes groundbreaking art styles in digital art, and these are received much interest from the collectors and investors in NFT art. Some of these, such as whirling 3D images, oversaturated street-style artworks, and cartoons are thriving in the online marketplace.
The younger generations who spend all their time on Instagram and all the individuals who are drawn to cryptocurrencies are drawn to the aesthetics, fueled, and given screen-time by the internet. Mat Dryhurst noted that “the street art and countercultural style are being used to reinforce the impression that most finance-crypto people have that they are the ‘punks’ in the broader tech and finance world.”
Being online, all of this happens without the support network of the galleries of the art world.
In some ways, the galleries are gatekeepers, choosing who or what to display or taking big cuts of the work when it is sold. The artists who produced NFT art are forming online groups and communities, where they help each other and educate one another across their networks. Several artists from India have produced digital artworks and sold them to collectors in other countries around the world.
Investors normally have quite a diverse portfolio, and many big businesses and celebrities are making use of the blockchain platform to purchase and sell NFTs.
Some, such as the NBA Top Shot are using the official platform of the National Basketball Association to buy and sell basketball highlights online, packaged as digital trading cards. These sales have amounted to over $390 million dollars in sales since it was launched, according to its parent company. Football star Rob Gronkowski has sold some Super Bowl highlights as trading cards for over $1.6 million dollars, and the rock band Kings of Leon sold some music as NFTs for over $2 million dollars.
The very first tweet put up for auction by Twitter’s founder is expected to sell for as much as $2.5 million dollars. As time goes on, NFTs are selling for higher and higher for many millions of dollars.
Proof for Many
The NFT movement for many is evidence of the belief for many that these technological developments such as cryptocurrency and blockchain platforms have the chance and the power to change the world as we know it.
Blockchain technology has already been utilized to improve voting security in the United States of America, in combatting insurance fraud as well as securing the medical information of several United States healthcare enterprises.
Advocates for the blockchain systems say that it can assist companies with ensuring transparency within their chain of supply, streamline processes such as mutual aid effort and reduce bias when it comes to the process of the loan application.
As with many technologies, there are certainly challenges to be overcome by the NFT movement.
Even as many people benefit from the craze, there is a darker side to it all. There are barriers to entry, as it costs money and requires knowledge of technology to be able to sell an NFT, which could easily prevent certain artists from participating and selling.
There are some concerns that this would especially impact young artists of color, who have traditionally been marginalized within the physical art world. The experts in law are faced with difficult discussions about how copyright laws will impact or need to be updated to catch up to the innovative technology, as some people have stolen and sold the work of others as NFTs without artist permission.
If people can steal something, they will, and “it’s providing another platform for people to take advantage of other people’s work,” said Connor Bell, someone who has experienced this.
Of course, there are also concerns about the impact on the environment. The creation of an NFT requires a huge amount of computing power, and the server farms used to produce such a digital asset are powered by fossil fuels. An assistant professor of visual arts administration at New York University, Amy Whitaker, notes that “the environmental impact of blockchain is a huge problem.” The majority of the major NFT marketplaces make use of the Ethereum blockchain, which uses a lot of energy to work.
The system uses a digital mining process like that of Bitcoin, where computers solve complex Math problems to verify and confirm transactions.
The popularity of Ethereum is mostly due to how it can deal with transactions outside of its own blockchain, and its this fact that makes it a much more flexible system than Bitcoin. Due to its complexity, it is a known fact that it requires enormous amounts of energy to process transactions.
However, some advocates for cryptocurrency consider these fears to be overstated. These proponents suggest that the energy use is offset by energy reductions in other areas, such as the reduction in manufacturing, shipping, and transportation energy costs. In addition to this, NFTs don’t use natural resources, so no paper or ink is used or consumed in the process.
Notable NFT Projects
There are several NFT protocols, or projects, making a lot of money through the sale of NFTs. Mentioned already is NBA Top Shot, but here are some other examples of NFT protocols really taking off.
1. Cryptopunks – one of the earliest projects, this consists of 10,000 randomly generated characters. They were initially given for free but are now selling on marketplaces. The value of the “punks” is based on their type, attributes, and accessories, such as their clothes, glasses, or hats. Cryptopunk 7804 is the highest collectible sale to date, selling at around $7.8 million dollars.
2. Hashmasks – this protocol offers digital art collectibles produced by over seventy artists from around the world. 16,384 digital portraits are available, unique in terms of their character, mask, eye, and skin color, and items. The main difference between this and other blockchain protocols is that there are aspects of a game, where the holder of the mask gains tokens every day, where they are then able to rename their masks.
3. SuperRare – A digital art marketplace, SuperRare is designed as a marketplace for authentic, single edition artwork. It functions as an art gallery of sorts, where SuperRare takes 15% from all sales, with artists getting the rest. All works are secured on the blockchain, traceable and certified. The platform describes itself as a mix of Instagram and Christie’s auction house.
4. Rarible – Another marketplace, selling different collectibles and products such as digital art, domain names, Defi insurance, memes, and the metaverse. This is a platform where users can mine, buy, and sell their items easily. The collectible can be uploaded in any of the supported digital formats, along with descriptions and pricing details.
It’s clear that NFTs are in the limelight during this time, and the creators of NFT artworks, such as the artists, gamers, and big business brands across the world are certainly cashing in on big money.
A new player seems to enter the NFT marketplace on the daily basis, bringing with them new NFTs to be sold in a desire to earn big.
What is NFT art? Whether they are here to stay or soon to go, in the here and now, they are mostly the toy for the rich and powerful, the ones with money who can make it all happen.
The non-fungible token phase of the 21st century gives a new meaning and purpose to digital artwork and its artists, and the huge costs of these works online suggest that the digital works produced by artists of our day and age have a future in the art world as we know it. Also, check out our post What Makes Art Sell.
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