Non Fungible Tokens Create a Hot New Market for Digital Art
Investors seem starved for investment/gambling opportunities. The stock market is at record heights. Meme stocks are routinely sent soaring thanks to social media-generated hype. Cryptocurrencies are trading at record highs as well.
What’s the common element? None of these valuations, and only some of these phenomena, are completely understood.
Now we can add one more to the mix: “non-fungible tokens,” or NFTs. The concept itself can be explained, but that doesn’t make the phenomenon any more explainable.
NFTs are a piece of code on a blockchain. Nearly any kind of property can be tokenized in this way, including real property like land, a classic car, or a pair of sneakers, as well as intellectual property (IP) like a song, a video clip, an image, or an historic Tweet.
The big news these days has been about NFTs that are tied to digital art pieces, a development we’ll try to get our hands around in this article.
What do You Own?
Digital art NFT holders own something … but what? That’s where things get a little fuzzy. Some describe the NFT ownership as having a stake in the art piece itself. In some instances that’s true, but not usually.
In most cases, holding an NFT shouldn’t be confused with having a certificate of ownership in the intellectual property. NFTs are sometimes described as certificates of sponsorship or certificates of appreciation. I also think of digital art NFTs as bragging rights – a way to express the fact that you’re familiar with, and appreciate the work of, a certain new-age, obscure artist.
The intellectual property asset and the NFT co-exist independently. NFTs are assets and can be bought and sold in their own right using cryptocurrency, most often Ethereum. Thus, they have a monetary value that’s based on the market’s supply and demand for that NFT, which in turn can be influenced by social media.
Support Your Digital Artist
By nature, digital art is legally copyable. Whether it’s created in a jpeg, a pdf, or another program, once it’s put out on the Internet, anyone can download it free of charge if it’s not copyright protected in some way as in the case of some stock image outlets. And the downloaded version is as high quality as the original.
But now the average digital artist finally has another significant forum to monetize their art – and they don’t even have to give up ownership of the piece to do it! They benefit from the sale of an original NFT and then arrange to receive ongoing royalties in the form of a small percentage of each subsequent transaction for that NFT.
The Environmental Impact
To put it mildly, blockchain technology – the dispersed servers running these underlying software programs – requires a lot of electricity. A single Ethereum transaction can use as much electricity as a typical household uses in one day, according to one estimate. Some environmental watchdogs are saying that a single popular NFT could, in just a few months, add hundreds of tons of carbon to the atmosphere, and significantly contribute to pollution.
Experts are working to create more efficient blockchain programs, but until they do, the impact on electricity production and consumption from NFT transactions could prevent us from reaching global climate goals.
Other Future-Related Issues
Digital art may be one of the most significant art forms of the future. It’s a fantastic medium and people can create some truly incredible images using tech art tools. And if digital art is an artform of the future, does that mean NFTs represent the future of art ownership?
As we noted above, owning an NFT connected to an image doesn’t give a person any special rights to use that underlying image in any way for personal gain. For example, only the photographer can authorize or sell the rights for their work to Shutterstock and only the digital artist can authorize a corporation to use their creation in a marketing campaign.
Further, owning an NFT doesn’t come with the psychic satisfaction of saying “this art piece is mine.” There’s only the satisfaction of supporting the artist, making a statement about yourself, or speculating on it as investment.
I like the analogy of being an art patron, though. In the Middle Ages and the Renaissance, patrons would commission work from a favorite artist. But patronage also included supporting the artist financially in other ways – providing a studio for example or introducing them to others. I see a parallel patron-like benefit to the purchase of NFTs. This supportive arrangement could offer the same or even more psychic benefit as the purchase of the asset itself.
NFTs are here to stay. They’ll prove to be no more a fad than bitcoins and blockchain technology. For some, NFTs will always just be a speculative investment, at least until too many bubbles burst on them. In the broader sense, though, NFTs give artists and the average creative person the opportunity to monetize things they otherwise couldn’t. And best of all, it will spur art appreciation and new interpretations of art.