The NFT boom, the rapidly growing technology and digital art market may not revolutionize the culture, but they will certainly have a significant impact on the algorithms by which today’s art scene operates. Galleries, museums, artists and the whole “traditional” world of art are being transformed, adapting more and more to new digital realities, so it is not surprising that many have the idea to try themselves in something as unknown and attractive at first glance as NFT.
However, you should not blindly join this collective NFT fever – first of all you need to understand how this niche is arranged.
Delineation of NFT
The latter is due to the fact that one artwork will never be equal to another artwork, unlike, for example, five dollars, which are always equal to another five dollars.
In the context of art, NFT also enforces copyright and authenticity to a digital artworks – each artwork, like a physical one, has its own digital signature, confirming its origin and making it impossible to exchange NFT. The token is a confirmation that a certain copy of digital work is original. And, just as art reproductions of paintings are created, you can create a digital copy of NFT. Verification of the origin of the copy is carried out using blockchain technology.
Blockchain uses cryptography to link blocks to a growing list of records. Each such block is closed by a cryptographic hash or string of characters that identifies a specific data set. Blockchain transactions are stored in a special data structure – the hash tree. Each participant in the transaction receives a pair of crypto-keys: for the buyer it serves as a confirmation of the right to own a copy, and for the author – a certificate of authenticity of a digital work. Most blockchains support the ERC-721 token standard.
To put it simply, a blockchain is a fragmented and continuous chain of blocks based on mathematical cryptography. Cryptography helps to protect the confidentiality of information by encrypting messages and making their content clear only to recipients. The already mentioned pair of crypto-keys – public and private – allow you to manipulate messages, which, in addition to authentication, also ensure the anonymity of transactions.
Another advantage of selling digital works using blockchain is the author’s automated royalties, which are regulated by a smart-contract.
The value component of NFT
When talking about NFT, questions like “how do people pay millions for what can be downloaded on the Internet?” are often asked. Such considerations are a side effect of using platforms such as Instagram or Pinterest, which provide free and instant copying of images and graphics. Successful in its transparency and liquidity, the blockchain democratizes the mechanisms for buying and selling digital art, offering a fair business model for artists and emphasizing the importance of ownership of a digital art object.
NFT brings us back to the important idea that a digital image that is easy to reproduce also has its value. The philosopher Walter Benjamin pondered this question at the beginning of the last century – at a time when the active spread of artistic reproductions and the development of easily reproducible photography and cinema questioned the existence of originality and uniqueness. In order to preserve the original aura of the works, the digital artists began to limit photo printing to specific publications and issue certificates of authenticity along with original works. NFT now works on a similar principle.
Let’s draw a parallel: you can’t buy a poster with the image of “The Persistence of Memory” and say that you own the original Dalí’s work; the same logic applies to digital artworks. However, in the second case, the difference between the original and the copy is visually invisible, so NFT is a way to identify and authenticate the original work using blockchain technology. It is also important that NFT breaks the image of the eternally hungry and poor artist – they, as well a representative of any other industry, have the right to make money by selling their artworks.
However, the value of NFT works is highly dependent on supply and demand and is speculative and quite conditional. There are no clear criteria for determining the value of a digital art object, so they are actually worth as much as the buyer is willing to pay for them.
«Everydays: the First 5000 Days» by Mike Winkelmann (Beeple) that was sold for $69.3 million
(Non) availability of NFT
NFT technology partially destroys the “traditional” hierarchy, which creates unequal conditions in a fairly centralized art market: your success is often determined not by artistic skills, but by a set of factors independent of you, such as gender, race or background.
The world of NFT looks quite encouraging and promising: for the first time, an artist can act independently, which opens up new opportunities for many talented painters who have not been able to hire an art dealer; they receive royalties from the sale of each of their works and always remain the sole owners of the originals; the global NFT market covers the whole world and geography no longer hinders the authors.
Although the decentralization of NFT is often questioned, because this niche is not entirely independent of traditional art market leaders. The NFT market often requires institutional intervention, and closed NFT platforms, which can only be accessed through pre-selection, clearly follow the policy of art galleries. In addition, sometimes the artist’s reputation and their connections with prestigious institutions also affect their success in the NFT arena.
Success, but not access to it. Just the availability of NFT platforms played a nasty joke on them, causing a large influx of people who are only interested in potential profits. Many artists and amateurs have begun to create artworks specifically for the NFT market, closely following its digital art trends and consciously imitating successful authors. Such an unethical desire for quick profit destroys the landscape of the entire art market. In addition, due to the high overload of this niche with low-quality works, many can hear the opinion that NFT-art is not art at all, because almost everyone has access to it, and a large arsenal of tools greatly simplifies the process of creating digital work.
Algorithm of creation and platforms
Creating NFT is not a complicated process – you just need to upload a digital file to a special platform. Such a platform “tokenizes” a digital artifact and, thanks to decentralized blockchain technology, allows the author to store it safely.
NFT can be applied to virtually any type of tangible or intangible object, such as illustrations, virtual objects in video games, music, and real tokenized assets.
There are about fifty NFT platforms: Binance Smart Chain, Flow by Dapper Labs, Tron, EOS, Polkadot, Nifty Gateway, Tezos, Cosmos, WAX. Their advantage is that the author can sell their works without the assistance of a curator or gallery, and, on the other hand, it is quite easy to get lost among such diversity. Some platforms require usage fees, while others, such as OpenSea, are free. In addition, there are a number of platforms that can only be accessed with a special invitation. Typically, the user of the NFT platform pays a “gas fee” – that is, he simply reimburses the cost of gas required for the transaction. This cost is not fixed – it varies depending on network traffic. The most common NFT platform today is Ethereum.
To “mint” works, a new user also needs to create a digital wallet and allocate about $ 100 on ethereum (ETH). The token itself is not insured against theft, so to maximize its security, you should create a hardware wallet – an accumulative device, which is considered safer because it can not be hacked offline.
The NFT market is growing rapidly, so it is natural that new solutions in this area are gradually being generated and implemented. Whereas most NFT platforms used to be marketplaces, in recent years value-oriented platforms have emerged that professionalize crypto-art positioning, distribution, and sales mechanisms and build the industry’s intellectual infrastructure. For example, the Ukrainian startup V-Art is a platform curated by experts with experience in the creative industries, which exhibits, sells and collects digital art. The platform offers an NFT+ solution: a licensing system that provides greater commercial flexibility and e-certification that secures the user. In addition, V-Art collaborates with “traditional” artists, digitizing their artworks and integrating them into the virtual art space, thus helping to build links between the digital and physical arts markets.
Risks and prospects
Anyone who decides to join the NFT field should remember that every medal has two sides. For example, the simple minting of NFT does not give a 100% guarantee of legal control. And while some platforms are actively working to improve these mechanisms, most NFT platforms offer not so much real protection as a simple high-tech certificate that confirms your ownership of a particular digital artifact. It is also worth mentioning that recently more than one artist found their works placed on the NFT-platform without their knowledge and consent. In such an anarchic environment as the Internet, it remains difficult to keep track of where and in what quantities the originals of your works are sold.
Also, the most common smart contract Ethereum, in addition to great prospects has many disadvantages. Today, it does not offer resale and redistribution components, so if an artist wants to take advantage of a resale, they will first have to obtain a contract from a technical lawyer. In addition, it is unknown whether a smart contract will be considered valid during a traditional lawsuit – there have been no such cases yet.
So is NFT an ambitious niche that matures and develops, or a short-lived hype bubble that is about to burst? Will it create favorable conditions for artists to become aesthetically and economically independent, or will it only nourish the dominant traditional hierarchy? The first scenario is more likely: most argue that the NFT market will continue to grow, as virtually any digital information can be easily converted to NFT, one of the most highly efficient ways to manage digital assets. By the way, to better understand the direction in which the NFT market is moving, you can look back at the history of photography, which went through similar stages during its formation.
What should one pay attention to
Know your rights
Remember that when you sell NFT, you are not selling the original work that always stays with you. In addition, the buyer does not receive the right to reproduce the main work only if the author themself has not given written consent. However, some NFT sites by default receive a perpetual and free license, which allows them to play copies of work posted on the platform.
Look for your own niche
In order to stand out or at least keep up with the competitors, you should learn the language and tools of the NFT industry as soon as possible and find experts to turn to for advice. Experiment with the format: try to create a completely new digital work and supplement the existing one; change mediums.
Don’t count on a quick income
Few people make millions in the first step, so you should not invest large sums in this niche in the beginning.
Find opportunities to communicate with both more experienced NFT market players and your audience. Successfully establishing a personal connection with like-minded people and potential buyers solves a lot.
Find the answers to the following questions: which platform will you choose and why; which crypto-wallet you decide to use; do you want the content to be unlocked after purchasing an artwork; what starting price you want to choose; what royalties you want to receive from the resale of works, etc. Having made at least an approximate strategy, it becomes much easier to move forward.
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