NFT is short for Non-fungible tokens, but what exactly does that mean?
Published on Source: Agora Gallery
Within the last two years, the concept of “NFT,” has burst into the art world in an unprecedented way. Technology has been waiting for years to properly disrupt the art market and it finally has through this new medium. In truth, the technology of cryptocurrency has been on the rise for some time, but NFTs are a very new and authentic thing. In the past 6-9 months, NFT talk has literally broken the internet. From platforms like TikTok and Twitter to CNN News, the trending topic has left millions of artists wondering, what it is and how can it work for the artist, the collector, and more.
What is an NFT?
NFT is short for Non-fungible tokens. So, what exactly does that mean? The best way to think of it is as a monetary asset: a fungible token is a mutually exchangeable asset or one that can be exchanged with another of the exact same value. For example, a 100-dollar bill is a fungible token, as it can be exchanged for five 20-dollar bills and still hold the same value. So how does it then become a non-fungible token? Well, let’s say the same 100-dollar bill is signed by Banksy. It has become a totally unique product whose value is much harder to determine, as it’s no longer simply worth five 20-dollar bills. This means a Non Fungible Token (NFT) cannot be swapped for an equivalent value. It also means that, like any investment, its value can increase or decrease in the future depending on the circumstances. However, NFTs are not tangible items, they exist completely in the digital universe. So, if that $100 bill is in the form of cryptocurrency, such as Ethereum, the Banksy bill would be considered CryptoArt.
So, what does this mean?
1. The Ownership of Digital Art
While you can’t touch an NFT, you can own one, and it can be almost any type of digital file or media-based technology – from digital artworks to music and beyond. The digital file exists with a unique identifier known as a blockchain. The most actively used blockchain in CryptoArt is Ethereum (a decentralized, open-source blockchain with smart contract functionality). Ethereum is the preferred blockchain for NFT Art, while BitCoin is preferred for currency. The blockchain allows for the transfer of this asset to have a permanent, recorded history representing its ownership, and it ensures that the NFT can never be modified or copied.
2. A Benefit to Artists & new artistic royalties
Ultimately, NFT art is intended to benefit artists and collectors. The process should allow digital artists to gain formal recognition for their work, similarly to how a painter is credited their work. Blockchains have contracts in place to support the legalities of minting and copyrighting cryptoart.
NFT art is a totally new way of categorizing digital artwork and it ultimately enables designers to monetize their work. Smart NFT artists will build in royalty allotments to their blockchains, which means that the artist can receive 8-10% of all future sales. This depends upon which platform the artist is using; Zora, for instance, is an NFT platform with the “Creative Share” option, meaning users can buy and trade artworks immediately. There is no chasing clients for payment or having to track 2nd and 3rd hand sales with contracts and lawyers. It is an immediate transaction.
However, while it might be intended to function this way, artists have already come forward with the news that they have had their work fraudulently minted and sold by scammers. Without relevant protection by the law or any pre-existing legislation on this blockchain sales, it remains speculative as to what these artists will be able to do about this in the future.
3. NFTs need physical art – they can never replace it
Another thing that’s affecting the art industry hugely by the outbreak of NFTs is value. How do you value a physical artwork in comparison to a virtual artwork? The value of NFTs and CryptoArt is solely based on the value of Cryptocurrency. NFTs are sold on the basis of Ethereum, and that’s translated into monetary value. For example, an NFT sells for 2 Ethereum, which is translated to us as about $2,255 USD. But if the value of Ethereum were to drop, so does the value of the artwork: its value is continually dependent upon the cryptocoin. The only thing maintaining the value of Ethereum is digital media and digital art – which would have no value without the existence of physical art and the artists creating it. The same is true across all creative industries: the existence of monetary assets is wholly dependent on the existence and market of physical assets.
In economic terms, what this means is a signal towards an alternative way of thinking about commerce. The objective of NFT is to create opportunities for content developers, giving them more power over the chain of control concerning assets. Major art collectors and investors are diving into the cryptoart world headfirst and sellers are finding major advantages, surely. But without the market for tangible art, or the market for live, physical experiences, none of this would or could survive. This is quite possibly the most comforting component to understand: NFTs are here to stay, but they can never replace physical art or its markets.
4. New revenue streams for Museums and Previously Overlooked Artists
This is a fantastic aspect of NFTs. The Uffizi Gallery in Florence, Italy just sold a Michelangelo NFT for $170,000 and is minting more and more pieces from its collection. Museums around the world are following suit, potentially generating the much-needed money to maintain the physical art that they hold. There is no downside to this – it is a fantastic resource that we should all hope to see more of.
Additionally, NFTs allow for new, disruptive artists like Beeple, who is known as the anti-artist. His work would have been irrelevant to the art world unless it was monetized through blockchain. And yet, this year, Beeple’s NFT “Every day—The First 5000 Days,” sold at Christie’s for $69 Million. Established artists like Damien Hirst have new avenues to explore and expand the NFT Medium. For example, Hirst’s “The Currency Project” sold artworks on the platform Palm, which was developed by Ethereum Co-founder Joe Lubin, with the intention of creating a blockchain that is 99% more environmentally sustainable. Hirst is, therefore, able to generate revenue for a company that’s entire mission is to counteract the environmental effects of BOTH the NFT and traditional art worlds.
In summary, the selling of crypto or NFT art holds the potential to transform the entire creative industry; its emergence is only the beginning of something that’ll feel mundane to future generations. There are issues to work out – such as the environmental impact, the potential for fraud, and hacking – but these will play out in the public eye over time. We are excited to be a part of this historical shift in the art world and can’t wait to find our place within it. One thing we do know is that while this early world NFT art fails to stand up as a reliable, inclusive environment to sell digital art upon – that aspect of the emerging medium will soon shift to truly benefit the artists and designers it was intended for.
From the side of physical art to digital art, it is clear that there are still pros and cons at its core. Every artist, collector, and the institution must decide what works best for them. NFTs perhaps just offer a new perspective on how we view and understand art. Is it so unlike the impact of Duchamp’s Fountain?
What is apparent is that no matter the case, there is still work to be done in creating sustainable artworks, whether tangible or virtual. We want to hear from our audience: what do you think of NFTs and the future of the art market?