You’ve surely heard about the big buzz over NFTs.. but still, many people seem to be confused in terms of how they work and why artists are making serious bank off of them!
Leaving the artist money-making aside, why are art collectors and celebrities spending MILLIONS of dollars on these digital illustrations/images? If you’re simply curious about how they work, and especially if you’re an artist that would like to learn about understanding NFTs sells…you’re in the right place, my friend.
For Starters, NFTs Are All About the Crypto World! Sort of…
In the art world, an NFT can be present in the form of a digital illustration, however this asset has to be purchased through ''crypto''.
A cryptocurrency, crypto-currency, or crypto is a tradable digital asset or digital form of money, designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it.
SO, WHAT IS AN NFT?
The acronym (NFT) stands for non-fungible token. In order to understand its definition, let’s start with the fact that a fungible item can be replaced by an identical item. So think about a nickel…a nickel will always be worth 5 cents as all the rest of the physical nickels in circulation. On the other hand, a non-fungible item is unique, one of a kind and it can’t be replaced or copied.
Fungible examples can extend from items to experiences:
Van Gogh Starry Night Painting = Non fungible item
Attending to Michael Jackson's last concert = Non fungible experience.
Sure, digital illustrations can be copied and posted on social media; but NFTs have the peculiar characteristic of the original digital image’s ownership being able to be retained exclusively for the NFT buyer because it's authenticity resides in a ''blockchain technology'' - which is designed to make it difficult or impossible to hack.
So replicating or in other words, screenshooting or copying and pasting an NFT is worth nothing. It's like taking a picture of the Mona Lisa and hanging it on your wall! - It's never gonna hold the authentic characteristics of The Mona Lisa and it won't ever be as valuable.
Ref. 1: Mona Lisa @ Musée du Louvre
Making Sense: A Further Explanation of a Blockchain and Bitcoin
The blockchain is the platform that enables the existence of cryptocurrency (among other things). A blockchain is basically a decentralized and distributed server that manages transactions.
In the blockchain, decentralization refers to the transfer of control and decision-making from a centralized entity (individual, organization, or group thereof) to a distributed network.
Decentralized networks strive to reduce the level of trust that participants must place in one another, and deter their ability to exert authority or control over one another in ways that degrade the functionality of the network. Alternatively, a blockchain server inhabits in thousands of different computers.
Ultimately, NFTs are stored in different servers functioning in a decentralized ecosystem which makes it impressively secure and un-hackable.
On the other hand, it's relevant just knowing that ''Bitcoin'' is the name of the best known cryptocurrency. So one bitcoin is worth the same as any other bitcoin circulating.. remember the nickel example? In this case we can relate it, but here comes the twist! The crypto world revolving around NFTs moves and resides in this so-called ''blockchain technology''...
FROM the ''NF'' -to the T!
To be clear a Non Fungible Token is a crypto asset that resides on a blockchain, and there are many kinds! Additionally, there are also different blockchain servers.
To give you a little bit more context, Ethereum is the most popular blockchain pltaform for NFTs that is best known for its cryptocurrency, ETH. This blockchain’s popularity relies in the fact that Etherum was specifically created to enable creative developers to build projects... so there are thousands of decentralized applications that are running on the Etherum blockchain.
By these means, NFTs can be digital illustrations- assets worth ''X'' amount of ETH. However, NFTs can be purchased with other crypto currencies as well, like bitcoin. Additionally, there are NFT projects worth ''X'' amount of crypto.
Lastly, it's very important to mention that NFTs contain a code called smart contract, a computer program stored on the blockchain, running all transactions and conditions on each NFT asset- recording every transaction in a shared, encrypted accounting ledger. This leaves a trail and a record of the ownership of every single NFT in the blockchain (ex. Etherum).
SO WHAT's HOT?
There is an NFT project (amongst many), called ''Bored Ape Yacht Club''. This NFT project contains 10,000 different illustrations- of course, each one of them is different from one another and that is exactly what gives them their worth. Limited items, exclusivity!
Ref. 2: Bored Ape Yacht Club
The Bored Ape tokens are a collection of profile pictures and cartoon apes generated by an algorithm. The project launched in April 2021, and by 2022 it is considered one of the most popular NFT projects. Famous celebrities like Justin Bieber and Jimmy Fallon have purchased these, and in this case, their NFT grants each owner access to an exclusive online club and private events, aside from owning the property rights of their asset.
A moment of silence: The Bored Ape Yacht Club has totaled over 1 billion US dollars by 2022.
Back to Technicalities…
What happens with NFT projects, is that blockchains are limited in storage space since everything that enters the blockchain remains in it eternally.
Still, the digital asset (image) itself is not in the blockchain floating around as a complete file. The images and digital assets are normally stored elsewhere; networks like the Interplanetary File System (IPFS) is one of the most popular storage options due to its decentralized protocol. Nevertheless, there are some NFTs that are fully stored on the blockchain.
More Successful Stories, Porfavor!
Let's talk about ''CryptoPunks'' (another collection of images like the Bored Ape). This NFT project contains 10,000 pixelated characters that are selling at a minimum price of 62 ETH…$201,894.95 US Dollars!!!
Actually, Cryptopunks are one of the first NFT projects to ever arise and that makes them one of the most sought after by NFT collectors.
Ref. 3: CryptoPunk 3100
Just to freak you out, I’ll tell you how much this digital asset is worth. It is the highest ever sold at 4,200 ETH. ( You may pop out your calculator and do the math…not!) = $7.58 MILLION US DOLLARS!
Why Would NFTs be Relevant and Crucial for Creators and Businesses?
Remember the “Smart Contracts” coding we previously talked about? (the one that keeps records)... Well, in NFT art collections, royalties can be programmed into each illustration through these smart contracts. These are typically circling at 10%.
Every time a determined NFT is sold, an agreed percentage of that sale is programmed to be sent directly into the original creator’s wallet. This is the only way creators are always going to be linked to their projects, the concept is called ''provenance'', granting creators the ability to continue to share their work as it becomes more popular!
Now, finally returning to a more traditional art topic in regards to all this NFT talk..
Digital provenance has basically blown old school art collectors’ brains off! Fine Art and Antique Art collectors had to rely on authenticity experts to be able to determine if an artwork is actually the real deal or not. And this is a well-known fact! There are multiple theories on this, but there is an estimated amount to up to 20% of art pieces owned by museums that could most certainly not be the real deal.
In the NFT world, inauthenticity will never be a problem.
The record of provenance residing in the blockchain is completely immutable and verifiable. As said earlier, everything being uploaded to the blockchain, will leave a trace and remain there in perpetuity.
Another way real business is made throughout NFTs, is that creators often grant full commercial licensing rights to whomever owns their NFTs!
As a matter of fact, there are two craft brew companies using the famous Bored Ape NFTs artwork on their beer cans!
Ref 4: Alternate Ending Beer Co.'s Beer Can ft. Bored Ape Yacht Club
Alternate Ending Beer Co.’s limited-edition “Drink Your Peas” beer can featuring Bored Ape #3500.
NFTs, Visual Art & Other Usage
We’ve basically summed down what visual digital artworks can do and how they move in the NFT world. The ones mentioned are without a doubt, the most popular and expensive type of NFT project a collector could buy...
Regardless, there have been musical NFTs that have gained quite a crowd. For example, the band ''Kings of Leon'' literally sold lifetime access to VIP seats at their concerts. The greatest thing about this is that they are doing this while still maintaining the rights of their own music.
Gary Vaynerchuk, entrepreneur and co-founder of Resy and Empathy Wines, founded Flyfish Club- This is a private dining club located at a new sushi restaurant in New York City where NFT owners of Flyfish Club will have full-access to the restaurant and exclusive culinary/cultural/social experiences. You might be thinking this could not get better but it does…NFT owners will be able to sell their access to other people who want to make a reservation.
Imagine if Yoko Ono was still getting royalties from the “War is Over!” design she made with John Lennon. We just wanted to put this out here so that you can really imagine the extent and power of owning popular images that could have been an NFT!
''The more I dig into the NFT rabbit hole, the more I grasp towards how impactful they can be! Especially in the 21st century, when our lives are somehow becoming more tied to our online identities as time passes by..'' Ana Karen Morales, Artist & Blogger.
To conclude this complex topic, it is important to add that it is impossible to predict all the ways people will utilize NFTs and their innovative elemental ''smart contract'' in the future.
Many people strongly believe that NFTs will be used for tracking ownership on real estate and even professional licenses- contracts that currently live on physical pieces of paper.
Only time and our imagination will tell, but NFTs might actually be one of the few boundless things in this technology-driven world.
This blog was brought to you by VIII Art Co.
To preview original artwork by Visual Artist, VIII
''NFTS For Beginners and Visual Artists'' 2022, written by artist and author Ana Karen Morales Q., Editor- Publisher, Valeria Llamosa, aka VIII (No.8).
S, Reyburn. What the Mona Lisa tells us about Art in the Instagram Era. New York Times. https://www.nytimes.com/2018/04/27/arts/design/mona-lisa-instagram-art.html.
D, Van Boom. Bored Ape Yacht Club NFTs: Everything You Need To Know. https://www.cnet.com/culture/internet/bored-ape-yacht-club-nfts-everything-you-need-to-know/.
CryptoPunk 3100, One of 9 Alien punks. Larva Labs. https://www.larvalabs.com/cryptopunks/details/3100.
Alternate Ending Co. Craft Brewing Business. https://www.craftbrewingbusiness.com/news/alternate-ending-beer-co-licenses-bored-ape-yacht-nft-for-limited-release-can/