Amongst all of the news around cryptocurrencies like Bitcoin and Dogecoin, you may have heard NFTs mentioned a few times. And unless you’re fluent in the language and acronyms of crypto you might not fully understand what an NFT is. Not to worry, we’ve done our research and assembled this beginners guide for how creators can get started with this exciting blockchain-powered medium.
Wondering how NFTs can impact you as a member of the creative community? Read more. Cover image screenshot from Rarible.
NFTs: The Basic Definition
NFT stands for non-fungible token (that’s a fun one).
An NFT can be thought of like a collectible sports card or coin, except it exists only in the digital space. But unlike your Charizard card, each NFT has unique information tied to it that can identify it. Thanks to the use of blockchain to verify and trace ownership of NFTs, they are also easy to verify. While you may never know if the Charizard you traded for in high school is real or a counterfeit, there can be no such trickery when it comes to these digital collectibles.
Since each NFT is unique, there can be no direct trading of another copy of that NFT. Just like your drivers license is the exact same chunk of plastic as everyone else’s, but only yours has your name and information on it. You can’t trade your license with someone else and expect it to work!
The Impact of NFTs
If you’re just hearing about NFTs now, you may be surprised to learn that over $350,000,000 USD (and rising fast) has been spent on them since November 2017.
They have been especially useful for gamers who have been able to get value out of in-game items. Each of these items is unique and it’s easy to prove that they are the sole owner. It allows gamers to sell game cosmetics, collectibles, and in-game currency on the secondary market with a level of security and accountability that just didn’t exist in prior years. It also opens up some interesting doors. Guitars that were once used by a famous musician command a high price tag. And the same can happen for an in-game weapon used by a famous World of Warcraft streamer.
When it comes to art, this blockchain-powered system lets artists sell their digital artwork directly to buyers without going through a third party. This should all result in more profits on their end. The most exciting part is that royalties can be programmed into any digital asset such as art. So the original creator can continue making passive income from their piece, even when someone resells it.
What Does it Mean to Own an NFT?
Owning a digital asset like a piece of art or a song gives you similar rights to when you buy that same song on a platform like iTunes. You’re not buying the copyright of the digital good, you’re just buying a personal copy. You’re sort of getting an autographed version of a digital file. So, no licensing, using for commercial purposes, reproducing, or publicly displaying. You also have an intrinsic promise from the creator that they won’t release more “originals”. This would decrease the value of the one you bought. The creator would get a bad name and reputation if they did that, however, so there are good market reasons for a creator to not engage in this kind of behavior.
Why Do NFTs Have Value?
I’ve mostly figured out how cryptocurrencies work. But I’ll admit it’s taken some time for me to wrap my head around NFTs. If you’re like me, you may be wondering why a piece of digital art would have value. After all, I can download a JPG file of a piece of art and set it as my desktop background just the same as if I bought that piece as an NFT. And I can make a billion copies of that JPG and send it to all my friends. And no one will have a lacking experience with that image file.
If you were wondering that, then don’t worry – you are completely correct.
An artist can decide how many “real” pieces they want to exist. This will all be verified by the history data stored in the blockchain. This doesn’t stop a billion JPG copies from being created. But it does allow the people who care to be able to own the “real thing”. It’s a bit odd for digital goods. We know that owning a copy of a piece of physical art is worse than owning an original. But how many people care when it comes to a digital piece? I grew up during the wild west of digital content. My friends and I would get our music files from strange corners of the internet. So, no one I personally know cares about owning an “original” when there are free or cheap ways to get a non-original.
And yet, like most things, the value of NFTs is driven by the market deciding that they have value. While company stock prices are generally tied to things like profits and future projections, the price of a Magic: The Gathering or Pokemon trading card can be astronomically higher than the paper and ink it was printed on. And the same can be said for actual physical pieces of art. It’s obvious that art is worth more than the paint and the canvas it uses, and even the time it took the artist if they charged an hourly rate!
Like all collectibles and pieces of art, NFTs have value because people decided they have value. They have opened up new markets that didn’t exist before, but that obviously are worth existing. The value may exist due to the artist that made it, the bragging rights of owning a unique copy of something, or from pure speculation and hype. If the hype around NFTs continues, many owners of digital goods will be able to resell their items for a nice profit.
I think one of the most succinct examples of why NFTs are valuable comes from Gary Vee. He uses the blue verification checkmark from sites like Instagram and Twitter as an example. This digital symbol has a lot of value, which is somewhat difficult to describe. Imagine how much money a verification checkmark would go for if users could sell them! Up-and-coming influencers with money to spend would drop a lot of money to have one.
NFTs for Artists
I’ve mentioned a few examples of NFT art, but it really does work for any kind of artistic expression. Digital artwork is the easiest to understand, as its comparable to current artwork. The same can be said for NFT music, which has already taken off with projects from Mike Shinoda (Linkin Park) and 3LAU. Owning these digital assets is like owning a physical CD or vinyl record in terms of collectibility. And purchasing digital music is certainly nothing new.
Artists can get into Crypo Art pretty easily. There are a multitude of marketplaces including SuperRare and Nifty Gateway that allow artists to add their work, tokenize and authenticate it, then put it out on the market to be bid on. Anything goes, so don’t be afraid that you need to adopt some specific style. It takes just minutes to get started on one of these sites and sell your work easier than ever. Buyers are paying not only for the art but also for digital frames so that they can display their purchases on TV and tablet screens.
Just because it’s digital, doesn’t mean it has no real-world downsides. NFTs and the blockchain systems behind them are incredibly energy-hungry. Thus, they contribute to a high level of carbon emissions. Artist Joanie Lemercier determined that the amount of electricity consumed to sell the six Crypto Art pieces they had previously released was higher than the amount of electricity used to power their studio over the previous two years. Even if these numbers are not completely accurate, it tells a story that is deeply concerning for environmentally-conscious artists. At least with the current way Crypto Art trading works, it’s doing more harm than good for the environment. There are some counterarguments about how the energy is being converted into currency, and that mining for gold is also detrimental to the environment. It is a nuanced issue, but something that all artists should keep in mind.
The Final Verdict
As a digital artist, you should definitely try selling your art as NFTs. At the very least, it’s a fun experiment. And it has the potential to be profitable, as you take home royalties on sales in the thousands or even millions of dollars. Digital content has had value for decades at this point, and this blockchain evolution puts a lot more resources and money into the hands of artists and creators, while opening up many possibilities for collectors – both wealthy and not wealthy. Is it a bubble? Maybe. It’s too soon to tell. Theoretically, all of these digital assets could be worth nothing tomorrow. But for now, NFTs are strong and have a lot of demand and a solid trajectory forward. Only time will tell, so make sure you start selling your art now!