NFTs: what are they anyway?
Lately it feels like you cannot read an article or listen to a technology podcast without hearing about NFTs (non fungible tokens). Working in the art world, I received many messages asking if we were going to pivot into NFTs and what I saw the long term value of them being. It’s a tough thing to predict, but there are certain fundamentals related to NFTs that indicate they are not going anywhere. However, this rise in popularity might not be as explosive as it is predicted to be. To me, the question has more to do with how long it will take before they become more prevalent (and if it will even extend into mainstream consumption).
Let’s take a step back and go over what an NFT is. NFT stands for non — fungible token, which effectively means it is something that can never change. Each token is unique, so it is automatically a collectible. Token refers to the asset form and its presence on the block chain. The world of crypto can be extremely confusing, especially given the various types that have emerged over the past few years. However, understanding this space is necessary if you want to get into NFTs because that is the exchange system and value driver for the digital asset that is housed on the exchange.
“A unit of data stored on a digital ledger called a blockchain, that certifies a digital asset to be unique and therefore not interchangeable. NFTs can be used to represent items such as photos, videos, audio, and other types of digital files.”
Digital art has been a bit controversial for many years — NFTs are not new and neither are digital artists. There have been many questions around the true artistic nature of digital art, the ways to showcase it, and how to manage it. The ability to create art using technology or presenting physical art digitally presents its own challenges. Often, galleries and auction houses don’t offer digital art because it requires a different infrastructure to manage. However the larger players in art are now moving into managing this because it has become a vertical that cannot be ignored. Just look at the headlines for the latest few sales around NFT prices at auctions this year alone.
The main areas of NFTs are related to:
Viability
Cost
Accessibility
Environmental impact
Artistic freedom
I put viability first because when considering new areas of art or any type of investment, sustainability comes to mind. Cost seems self explanatory — we still need to better understand the cost to create, sell and purchase NFTs especially for those who have never traded in this type of currency before. But it can be a more affordable way to get into the art market despite requiring separate registration and transformation of traditional money into the crypto currency of the platform being used.
This brings me to the third factor, accessibility or the level of education required. How long will it take a newbie to understand and then make the jump into NFTs? There are many barriers to adoption here. And it seems on the artist’s side, one of these is the environmental impact of producing for the NFT platform. That is a topic in and of itself, and if you are curious to read more you can check out this piece here.
The final point and what I see to be the most important bedrock of the NFT appeal, is artistic freedom. True freedom for artists comes from knowing that their rights are protected; that their production is authentically theirs. By having a digital signature attached to every future representation of their artwork, they are protected and will always maintain ownership (and therefore be able to realize future royalty payments). This is a critical piece of ensuring that artists maintain the ability to benefit now and in the future.
One factor that I did not mention in the list is the role of the influencer. NFTs, specifically those related to sports players, memorabilia or collectibles, and music are the ones that are taking off. Like baseball cards, owning a piece of your favorite athletes’ star moment or career highlight is part of the entire experience of paying homage and showing your passion for the subject. Will it be difficult for those who do not already have a following to garner attention in the NFT world? This remains to be seen. But from what we can tell so far, many of the problems unknown artists faced in traditional art seem to be carrying over to this world as well.