How NFTs Have Changed Digital Art Forever
NFTs are demolishing the limiting paradigms of the art world.
"Artists only get rich after they're dead" is an old axiom that could be about to change. Non-fungible tokens (NFTs) provide artists, musicians, photographers and other content creators with digital protection and a platform to profit from their work. NFTs — also often called crypto-collectables — function as legally binding contracts that are traded over the blockchain. They authenticate digital and physical assets and allow artists, musicians, writers, photographers and other owners of intellectual property to protect and sell their work.
A variety of digital assets have already been minted as NFTs, and the market has witnessed exponential growth in the last year. Over $25 billion worth of digitally-stamped assets were traded in 2021, including music, photography, videos, games skins, sports collectables and memes.
Kings of Leon launched the first NFT-enabled album When You See Yourself in September 2021, and news outlets including Quartz and The New York Times have sold articles as NFTs.
But artists are experiencing the most joy. Digital-art sales account for around a quarter of NFTs sale volume. According to NonFungible, digital art has generated over $1.9 billion. Digital artists Bored Ape Yacht Club, Doodles and Art Blocks rank among the top five selling projects.
NFTs are demolishing the limiting paradigms of the art world and will change digital art forever. As a matter of fact, it has been predicted that crypto-collectables will transform the entire physical art market in the next five years.
The art of NFT
Application encoded with digital ownership increases the potential earnings for creatives and entrepreneurs. There is still the small matter of marketing and hitting the sweet spot that enables you to capitalize on the market, but digital tokens completely eliminate one-time earnings and copyright infringement.
Each non-fungible token has a unique identification code that assigns it to an individual or business. Because digital assets exchanged via the blockchain cannot be modified, NFT tokens stamp artwork and other types of intellectual property with a certificate of authenticity and unequivocally establish the identity of the original creator.
The creator of an NFT-enabled digital asset can determine how many copies of his or her work can be distributed and downloaded before he or she makes it available to the public. A buyer becomes the owner of the NFT but not the owner of the intellectual property.
Owners have the right to sell the NFT to other buyers for whatever price they choose. The key ingredient for creators here is that a piece of code written in the digital asset names them as the original owner.
This incorruptible piece of code is where creatives and entrepreneurs earn their due over the course of a lifetime. The vast majority of NFTs are exchanged through the Ethereum blockchain, which uses smart contracts to record the type of assets and the transaction that has occurred.
Creators can include royalties in a smart contract. This means that every time an owner sells an NFT, the original creator receives a percentage of the proceeds. Transaction records stored on the blockchain — a distributed public ledger that records all types of exchanges between two or more parties — cannot be altered or fraudulently created. The data is maintained by a network of “nodes."
Ethereum describes smart contracts as irreversible interactions between users that cannot be deleted. More importantly, they are not controlled by the users, but do allow transactions to “execute a function defined on the smart contract.”
In the existing art market, artists receive a one-time payment. The bulk of the proceeds go to the owner — usually an auction house or business that sells the artwork. NFTs enable artists to make continuous profits for their entire life.
The proverbial “struggling artist” may still only get rich in the afterlife, but NFTs and the blockchain at least provide a platform to monetize masterpieces so they can earn a sustainable living in this life.
Buyers can pay for NFTs using either credit cards or a cryptocurrency like Ethereum. Because NFTs can be traded directly with consumers, artists with an entrepreneurial spirit and a knack for promoting themselves can even cut out the middleman and retain the majority of the proceeds.
A universal space for digital art
The first crypto-collectables emerged in 2012. They remained a somewhat niche trading tool for almost a decade before the market exploded in 2021.
According to Time, NFTs were fueled by art collectors and speculators. Artwork sells for millions because of its scarcity, and since NFTs mean original paintings cannot be duplicated, authentic pieces are forever protected. Forgeries are believed to account for at least 40% of the art market.
NFTs started gaining momentum around 2018, but they witnessed exponential growth in 2020 after a piece of digital artwork — Everydays - The First 5000 Days by 39-year-old graphic designer Mike Winkelmann — sold for almost $70 million at Christie’s. It was the first time digital art was sold via a major auction house.
This turning point for crypto collectables triggered exponential growth. The highest recorded sales of NFTs came in the final three quarters of 2021. NonFungible reported that average sales were $10-$20 million a week.
A prime example of how NFT-mania can generate rags to riches stories is Loaded Lions, the first collection of profile-picture NFTs minted by a crypto exchange. The pieces were initially minted by crypto.com with a price of $200 apiece but soon received much higher bids. Loaded Lion 1969 — the Mars Astronaut — went for a cool $1 million.
Creatives from outside the art world are also looking to seize on market opportunities. The Associated Press recently announced a marketplace that will host the work of photojournalists.
AP has teamed up with Xooa to create an “environmentally-friendly” online shopping window on the Polygon blockchain. The collection includes the news agency’s “award-winning contemporary and historic photojournalism." The first collection of photos will launch on Jan. 31 2022.
The explosion of the NFT market over the last year is not expected to last — at least not in terms of multi-million-dollar sales. We are in the midst of a bubble that is already showing signs of popping.
However, NFTs and blockchain certification enable artists, creatives and entrepreneurs to enter the marketplace safe in the knowledge that their intellectual property will be protected from copyright theft and forgery.
Entrepreneur Editors' Picks
Zooey Deschanel Embraces the Word 'Quirky' and Thinks Businesses Should Too
A Simple (But Not Easy) Guide to Achieving Almost Any Dream
Making Time to Be 'Useless' Is a Vital Part of Creating Anything Valuable
A Billionaire Who Operates More Than 2,400 Franchises Knows These Types of Franchisees Make the Most Money
How Relentless Optimism Fuels Success for Hilary Schneider, CEO of Shutterfly
The Paradox of Celebrity Tequila
Social Media Was Draining Me, So I Gave It Up. My Business Has Never Been Stronger.