A little disclaimer before we go any further. In this article I will share my experience and my views on NFTs, try to explain what it is the best I can and why this holds so much value right now. This article is in no way intended to influence you in joining crypto or the NFT market. You are free and responsible to make your own choices. Please, before proceeding to opening a crypto wallet and to buy or mint an NFT, make your own research on the matter. Beware of scams too.
I’m sure most of you already know what NFTs are or at least heard about it. For those who lived in a cavern so far, here is a recap. A year ago, for the first time in history, a digital artwork created by Beeple was sold for $ 69 000 000 dollars. That’s when everyone started to take NFTs seriously.
You’ve also probably heard about the Cryptopunks and the Bored Apes Yacht Club.
A lot of people are fascinated but most don’t quite understand it. I can read a lot of baffled comments online, wondering “how might someone be able to spend this much money on a jpeg”?
Well, NFTs are not as simple as Jpegs. Right now you can right click and save tons of images on the internet and hold it on your computer. You might even want to print it and hang it on your wall. But this has no rarity value because it can be duplicated as many times as we want to.
NFT stands for Non Fungible Token. These are cryptographic digital assets that exist on a blockchain and cannot be replicated.
Ho wait. What is a blockchain? The best definition I can find is that blockchain is a safe and decentralized record of transactions, shared and encrypted among the nodes of a computer network. All the data is stored in a block. When a block of data is full, a new block is created and chained to the previous one, hence the blockchain. This blockchain is shared and each block in the chain holds an exact time stamp when it is added to the chain. This data is shared in a decentralized manner with the holders of a wallet on the blockchain, which makes it impossible to be falsified. As opposed to a centralized approach with a company or a third party of any kind holding data on a centralized server with total control over it. The revolution stands in that decentralization principle where the data is shared among all users. If you try to erase a transaction, the network can compare with the nodes of the other users to find out whether you are trying to erase or fake data.
So because of the increasing number of users and the complexity of the data encryption, blockchain is a decentralized and safe technology to guarantee transactions without the need of a third party involved, such as a bank for example.
Now, when you trade a bitcoin on the blockchain, one bitcoin is exchangeable with any other bitcoin. A bitcoin is not a unique token, it is a currency, we say it is fungible. Whereas the NFT is a token with a unique ID. Most of the NFTs are “minted” on the Ethereum blockchain, using the ERC-721 protocol. This allows for a unique ID but also a smart contract that basically is similar to a certificate of authenticity for what you buy. But there is more to it! The smart contract can also hold copyrights and royalties. Some NFTs allow the owner to use them for commercial purposes, some others don’t. The royalties enable the creator to earn a rate each time the art is re-sold on the secondary market! This is definitely a great feature for the artists looking for a new source of income.
Is it only a financial bubble based on speculation? Is it just a trend for a quick money grab that will collapse soon?
Lots of people opposed to me that NFTs are useless and don’t bring anything new for digital artists, because nowadays you can already support artists by buying their art with commissions or prints on their online shops. But what about Motion Designers? You unfortunately cannot print an animation. You can also support by giving donations or subscribing to a patreon. This is true, but then why such an added value to the NFT? In the case of you buying an artist print, this has no true rarity value, because just like in the example of the jpeg, the digital art can be printed on demand. Only limited prints signed by the hand of the artist have an increased value, because of their rarity. There will only be a limited amount of signed prints by the hand of the artist during his or her lifetime. So we get it, rarity creates value. But not only rarity. Also the fact that we are witnessing something really new and specific to the revolution of blockchain: the existence of digital assets which can hold value, smart contracts, transaction history and can be resold. If you think like an investor, when you send money over to an artist, you won’t get any return on investment other than the satisfaction of helping out and maybe getting a couple of perks from the artist. But after some time, you will never get a substantial financial return on your investment from this. And that’s ok, you are probably not interested in art that way. Only the art matters to you and that is just perfect. I am not saying here that you should approach the value of art like an investor. All I’m trying to do is explain how investors think and why we see such large amounts of money being invested right now in the NFT market. Because for the first time in the history of internet, NFT is a cryptographic digital asset. Some big investors really take it seriously and want to be pioneers. And I believe the amount of money invested is basically correlated with the tremendous gains that people earned in crypto at the early stages of the Bitcoin and the Ethereum.
My expertise stops here on the financial side of things. But when it comes to art I can have a little more insights. Basically we witness two main trends with the NFTs. What I would call digital fine art on one hand, and collectibles or “meta projects” on the other hand. Because of the ability to attach smart contracts to an NFT, some collectibles have more value than others. Some collectibles also hold value in their “utility”, for instance using it in the metaverse, as an avatar for example. This is all linked to a new kind of virtual world economy, in the likes of the movie “Ready Player One”. I will admit I am not an expert in that category. In the case of the Bored Ape Yacht club, the owners are granted access to an actual super exclusive Club only open to the holders of the NFTs.
As an art lover, my heart goes to the first category: digital fine art. If you want to know more about this, you can follow artists who sell on platforms such as Nifty Getaway (where the historical sale of Beeple happened). In the list of the top and trustworthy platforms you can also check Makersplace, Superrare, Foundation or Knownorigin. These platforms do not let any artists join freely, you need to apply first and be invited to the platform. In the case of Foundation you can be invited in by another artist, so the collections are kind of curated by artists themselves. Curation is a common thing in art. Historical art gallery Sotheby is creating Curated NFT sales. The newest platform LaCollection partnered with the British museum. Fumigene NFT Marketplace is an art gallery offering various curated projects. If you are all about motion design only, Motion Plus Design curated a very exquisite collection. That's some of the reasons why those platforms hold the highest value for collectors. Curation in art brings validation and precedents to an artist's body of work. This builds trust in the eye of art lovers and collectors who can relate to the gallery's choice and taste. This is like a seal of approval that you are not just buying some random crap (pardon my french).
I am sure there are way more platforms online and more to come in the future. But these are perfect examples of how NFT can support digital fine arts. In the case of motion design this is a real breakthrough because like I said, it’s really difficult to bring a motion piece into the real world. NFT now gives value to 100% digital assets.
Sometimes it seems like all the major platforms are already full of talented artists who joined early and you cannot just get in like that unless your art is noticed. So is it already too late now to get into NFT? Only history will say it but after the historical sale of Beeple a year ago, it feels like this technology is here to stay. But is it the NFT making the value, or the art itself? A lot of people are subject to FOMO and rush in. They want to create collections no matter what and go to Rarible, Mintable or Opensea hoping to become rich. I’m afraid that’s not how it works, otherwise all digital artists would be millionaires by now. First of all, we see a lot of scams and fake artists profiles on Opensea, so be very careful as a collector if you hope to find a good deal that you could resell for a million. The trained and expert collectors know how blockchain works and it’s very easy to verify a crypto address and see if the art was indeed minted by the original artist or not. You will also see a lot of "pump and dump" schemes. They build up the hype with help of influencers or an aggressive marketing on a project and raise a lot of money from the sales but the project is then dumped and you never get what you paid for. A huge roadmap with tons of promises is usually a red flag. Projects need to be realistic.
So as I said in my introductory disclaimer, do a lot of research and make sure you are comfortable with the basic notions of blockchain and the world of NFTs.
Look up to great artists who made history.
So if you're interested in NFTs, you can always try to advertise your own collection on a platform like Rarible for example. But you need to understand there is a difference between NFTs used for collectibles, and NFTs used as certificates for digital fine art.
If what matters the most to you is art, then focus on your art. NFT is only a new mean.
If your art is not relevant, no collector will ever be interested, especially now that the market is being saturated. It is urgent to tune out the noise and focus on the essentials. Wonder why you want to make art in the first place, the NFT will come second.
I hope this helps.
Side note: I'm on twitter now so you can follow me there (@Niftyxav)