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Over the past year, discourse surrounding NFTs has skyrocketed. If you’re like most people, you might have chosen to tune out most of this noise emanating from all corners of the internet. You may have no idea how NFTs work or how these platforms might help you sell your art to an ever-expanding online market. We’re here to break this complicated technology down simply and highlight the pros and cons of venturing into the digital art market’s wild west.
When you think of NFTs, a few different things might come to mind. A meme selling for hundreds of thousands of dollars? Gorillaz-esque monkeys? The future of intellectual property in the ever-digitizing landscape of art? Regardless of your preconceptions, it couldn’t hurt to brush up on the mechanics of the strange and fascinating technology behind NFTs. The acronym “NFT” stands for “non-fungible token.” “Fungible” is a term taken from economics which means that an item is replaceable by another identical item. For example, when a cashier hands you your change, you don’t care which quarter you have been given — they are all worth twenty-five cents. If something is non-fungible, it cannot be replaced by another identical item. With non-fungible items, it very much does matter which one you own. For example, the finest copy of the Mona Lisa could never actually be the Mona Lisa or hold the same value. NFTs come in many forms — image, audio, video, etc — truly, the only limitation on what can become an NFT is that it must exist in some up-loadable file format. The “tokenization” of these files allows them to be bought and sold securely with cryptocurrency.
Wait a second; don’t we all have a little function called “screenshot” built into our laptops and phones? Now there’s two copies of the NFT, so how does that definition make any sense?
Great question! The original is discernible from copies because of the blockchain. The blockchain is a public ledger, accessible by anybody and everybody, and not controlled by any one entity. When a transaction is made with cryptocurrency, the record of that transaction is stored on the blockchain for all to see. Because of the way it was designed, this record is virtually unalterable. When an NFT is “minted,” a record of the file it represents is stored on the blockchain, digitally engraving the proof of its unique existence and, crucially, who it belongs to into the public record. The owner of the NFT is the only person with the right to sell it. A screenshot, naturally, cannot be traced this way and therefore can never be passed off as the real thing. Your screenshot is an identical copy of the Mona Lisa, not the Mona Lisa itself.
The blockchain allows scarcity to be artificially manufactured in the digital art landscape by providing a way to verify the true ownership of a digital token. Where there is scarcity, there is hype. Where there is hype and scarcity, there is (sometimes truly astronomical) value. Stories circulate about celebrities, from mainstream to niche, turning pieces of their intellectual property into NFTs and making staggering sales. However, the allure of the world of NFTs lies in that it is open to anybody, regardless of celebrity status. The NFT marketplace is designed to circumnavigate the barriers of traditional “real-world” art markets. Independent artists are able to list and sell art directly online, avoiding the risk of being barred from entry by elitist or selective art dealers. Likewise, anybody in the world can buy art as an NFT. By digitally tokenizing your art, you are bringing it to an ever-expanding global market with over two million unique buyers registered to date.
Over the past year, the number of NFT sales has exploded, with over twenty million transactions recorded in 2021 alone. To sweeten the deal, unlike traditional art markets, the seller retains the vast majority of their profits on NFT platforms. Galleries are known to take cuts of 40-50% from artwork sales. Some NFT platforms, on the other hand, only take 10% of primary sales. Furthermore, whenever an NFT is resold, the platform will often only keep 5% commission, while the other 5% goes to the original artist each time. This allows artists to continue profiting off of the same work even after they have initially sold it. For young, up-and-coming artists, the only true limit to the success of your NFT art sales is your imagination.
While the majority of NFTs are associated with works of digital art, NFT platforms are certainly not closed to emerging artists who work in traditional mediums. Artists can feasibly use painting, photography, and even sculpture to create NFTs by taking a high-quality scan or image of the art and minting it as an NFT. There are, however, a few things to keep in mind when tokenizing your physical art. In theory, creating an NFT out of your art gives you the ability to sell the piece, while still keeping the original. However, the NFT you mint is technically tied only to the file that you uploaded, not the physical art itself. This is no problem if you find somebody who wants to purchase the NFT regardless. Though it should be noted that, as with traditional art collecting, much of the appeal for potential buyers in collecting NFTs is the singularity of each token. The existence of the physical copy naturally inhibits the buyer’s ability to claim unique ownership of that work. This is why the group who purchased Banksy’s “Morons” for $100,000 USD and minted it as an NFT was able to sell it for around $380,000 USD only after very publicly destroying the original.
There are creative ways to market your physical art using NFTs. Some artists choose to list their NFTs as a kind of “redeemable” token for the real piece with a promise to send the physical piece to the buyer once the token is purchased. NFTs can also be used to store information about your artwork so that there is never any discrepancy about its authenticity. If such an NFT is included in the art sale, some buyers may be enticed by this added layer of legitimacy in their purchase and in turn may be willing to pay a heftier price.
This being said, it is important to keep in mind the risks involved in listing your art as an NFT. There is no guarantee that your work will fetch the same price in NFT form as the physical piece would in a traditional art market, or on an online art platform such as Bidgala. It’s possible that it could strike just the right niche and end up being a coveted asset in the NFT trading spheres, but it’s also possible it could be passed over in favor of the latest collectible fad. The NFT landscape is still in the process of being charted. Furthermore, the value of your NFT work is dependent upon the value of the cryptocurrency it was purchased with. In recent years, the value of Ethereum has overall climbed astonishingly, but it is still subject to daily fluctuations. This factor adds another element of risk in your art sales.
In addition to these risks, there are a couple significant drawbacks to NFT creation and trading that you should be aware of when making the decision to create one. First of all, the sale of each NFT comes at a cost to you, known as a “gas fee.” Any time an NFT is minted, the process costs money — the amount is also paid in Ethereum, and thus is also constantly fluctuating along with the crypto markets, so the fee can range from $40-120 USD. Some platforms like OpenSea and Rarible allow you to upload your work at no cost by refraining from writing it into the blockchain until somebody actually purchases it. Once it is sold, however, you will need to pay that gas fee. This can pose a financial barrier that may render the whole process more trouble than it’s worth to some smaller independent artists. Finally, it is well documented that despite “existing” digitally, the mining of cryptocurrency produces a significant negative impact on the environment. While it is difficult to know the exact carbon footprint of a single NFT, it is estimated that one transaction produces about 14 times more emissions than mailing an art print — and each time an NFT is resold, that is a new transaction. If sustainable technology and practices in your artwork is near and dear to your identity as an artist, you may have some serious reservations about venturing into the uncharted waters of NFT minting.
Cryptoart is arguably the most significant development in the art world since the introduction of the internet itself. The future of this cutting-edge technology within the art world is hard to predict, but what we have seen so far is enough to warrant taking it seriously. Whether or not you want to try your hand at marketing your work using these new platforms depends on your financial situation, your views towards sustainable practices, and ultimately, your artistic vision and how you determine the value of your art.