This tweet is by Mike Winkelmann, a digital artist who is known in the crypto community as Beeple, right after his digital art, ‘Everydays: The First 5000 Days’ sold for a whopping $ 63.5 million at Christie’s, a famous British auction house.
Welcome to the crazy world of NFTs! Just to set the context, ‘Everydays: The First 5000 Days’ is not an outlier. NFTs selling for millions of dollars is a phenomenon seen very often in this digital art world.
Right from Beeple’s collection of 5000 pieces of art to pixelated CryptoPunks, NFTs and NFT art have taken the world of art and gaming by storm. Every day we come across headlines of how a particular NFT was sold for millions of dollars.
While people are still debating whether NFTs are just a fad or a great way for artists and designers to sell their work and earn a hefty sum with it, it’s good to stay updated with all that’s happening in the world of NFTs.
What are NFTs?
NFT stands for Non-Fungible Token, which means that each piece of art has a unique and non-interchangeable unit of data. This is stored on a digital ledger that uses blockchain technology to establish proof of ownership. Each NFT design is a collectable digital asset that holds value, similar to any physical piece of art in the offline world.
What can be stored as an NFT?
Any kind of digital file like photography, art, music, videos, tweets and even memes can be stored as NFTs. Anything unique that can be stored digitally and holds value can be turned into an NFT. It is similar to a collector’s item, like the Mona Lisa or a vintage action figure. The only difference is you own a digital file instead of a physical item. You are paying for the file and ownership rights over that digital file.
How do they work?
NFTs use blockchain technology to establish ownership. What is blockchain?
Blockchain is a kind of database, where the data is stored in blocks, chained together. These chain links that are created between the blocks, establish a chronological record of data – thus making it easy to trace the original owner. Blockchain data can be centralised or decentralised and in the case of cryptocurrency and NFTs the data is on a decentralised database.
How this works in the case of NFTs is that the blockchain technology makes all transaction records of authorization, ownership and transfer, publicly accessible to anybody. Thus the data is transparent and verified by many users, thus dissuading hackers from gaining entry.
Every time you purchase NFT art or NFT digital art, you hold a unique token for ownership of that asset.
NFTs for designers
Since NFTs combine scarcity of assets with blockchain technology, they are completely changing the relationship between creators and consumers. NFTs are being heralded by influential individuals and even establishments as the most efficient and democratic way to transact assets. Creators get a fair price for their creations, as owners pay a value that matches the true demand for that asset in the market.
To understand how designers earn money using NFTs, we must understand the demand side of the equation. What are the driving factors which lead to sales of millions of dollars worth of digital art?
Benefits of NFT marketplaces for digital artists and creators
In the time before cryptocurrency came to be, consumers were able to freely share digital assets or art like posters, videos, animation etc. They were able to repurpose them and turn them into something else without establishing ownership or even giving credit to the original creator. However with NFT technology, creators can now licence, sell or display their digital art however they choose to.
To be able to sell their artwork as NFT art, digital creators need to get legal ownership of their work. When they create a piece of art, it is minted or tokenised on the blockchain network. This certifies them as the original owner of that asset and gives them recognition for their work.
Another very important benefit of NFTs is that they give artists an accessible and quick way to produce and sell their art. Unlike traditional platforms, an NFT does not lose value if it sells multiple copies. Instead, artists earn a royalty fee every time their artwork is sold on the platform. The fee they earn differs from platform to platform. Thus NFTs are opening up the art space and providing creators more avenues to sell their artwork.
For instance, Jaiden Stipp – a 15 year old kid from Washington, sold his artwork of a digital illustration of a waving, astronaut-like cartoon figure for $30,000. (23.4 Lakh Indian Rupees)
While for mass market NFTs let’s understand which NFTs sell.
Any artist can sell their work and earn a fair fee without requiring any connections and empowering them to earn what they deserve. It also allows creators to assert ownership over their work that is available on the Internet. Consumers will no longer be able to reuse the work of an artist without giving them due credit.
However NFTs have some drawbacks too. They are quite volatile since the technology they are based on is quite unstable. The same decentralised system that guarantees transparency, makes it hard to govern the supply.
Another major drawback is the negative impact it has on the environment. NFTs require a higher consumption of energy, and the more popular they become, the higher this consumption will grow, till a more efficient way to execute them is found.
Since a lot of people don’t fully understand the concept of NFTs, and also that it is changing and expanding on a daily basis makes it extremely hard to keep track of, thus impacting how it is used by digital creators and artists.
NFT technology has a lot of potential in the coming years and it can solve a lot of issues around ownership and the authorized usage of digital assets. However there are still a lot of limitations since the technology continues to evolve and change everyday. To ensure artists and creators and consumers are using this technology effectively, there needs to more transparency around the effects its misuse can have and also talk about the practical ways in which users can benefit from NFTs.
Once more people understand what NFTs are, and how to own them, NFTs would certainly add a lot of value to designers, creators and artists in the ways that they sell and produce their work.