You might not know how they work, but there’s a good chance you’ve heard about non-fungible tokens, or NFTs. They’ve become extremely popular over the past year or two since a digital artist named Beeple sold one online for $69.3 million.
In this guide, we will explain what crypto art is and where to buy and sell NFTs.
What Is an NFT?
An NFT is a token that represents a digital asset such as artwork. You buy and sell NFTs like you would other collectibles — only in this case, you own the tokens that represents ownership of the collectibles but you don’t own the collectibles themselves.
These tokens are considered non-fungible because you cannot exchange one NFT for another identical one. For instance, if you have one bitcoin, you can exchange it for another bitcoin and still have one bitcoin that is functionally identical to the first. Thus, bitcoin is a fungible token.
NFTs, on the other hand, aren’t interchangeable. Each has a unique digital signature, so no two are exactly alike.
How Do NFTs Work?
NFTs are present on a blockchain, usually Ethereum, and are “minted,” or created, from digital objects that can represent intangible or tangible assets, such as:
- Video highlights
- Sports highlights
- Designer sneakers
- Real estate
- Video game skins or virtual avatars
Even legendary tweets can be sold as NFTs. For instance, Jack Dorsey, the founder of Twitter, sold his first-ever tweet as an NFT for $2.9 million.
Crypto Art as Proof of Concept
Before NFTs came to the surface, it was hard to cash in on making digital art. No one believed that digital artists could earn millions of dollars for a single artwork.
However, as NFTs became more mainstream, arthouses and artists started seeing the untapped potential of the digital art market. Sotheby’s, Christie’s and other fine art auction houses have opened their doors to digital art and held NFT exhibitions. Sotheby’s first NFT auction, which was held in April 2021 and featured work by the digital artist Pak, took in $16.8 million over three days.
Mike Winklemann, commonly known as Beeple and the seller of the historic $69.3 million NFT discussed earlier, explained it in a School of Motion podcast: “The value is the scarcity, and other people want it. That’s it. If nobody wanted it, there would be no value.”
What Do You Get When You Buy an NFT?
When you buy an NFT, you receive a unique token that represents ownership of an underlying asset. The token exists on the blockchain, and the sale is tracked on the blockchain so that nobody else can claim ownership of the NFT.
Metadata describes what the NFT includes, such as a digital signature by the artist, and contains the transaction history. Each minted token comes with a unique identifier linked to an address hosted on a blockchain, such as Ethereum.
You can either hold the NFT in your wallet forever or sell it down the road. In some cases, the original creator of the NFT will get royalties from the resale.
What Does This Mean for Artists and Collectors?
For artists, this means they can expand their source of income by tokenizing their work, whether it be digital art, memes, videos or music.
Artists can leverage smart contracts to ensure consistent income. A smart contract refers to a digital contract set in code, which can be programmed to execute automatically if certain predefined conditions are met.
How Crypto Art Is Minted
Crypto art is minted via smart contracts that then assign ownership to the creator and manage transferability. When you mint an NFT, you execute the code in a smart contract. Smart contracts must comply with specific standards, like the ERC-721.
As a result, the information gets added to the blockchain managing the NFT. The creator’s public key becomes a permanent part of that token’s history. That makes it possible for the original artist to receive royalties every time the NFT is sold.
For instance, platforms such as Zora and Foundation give royalties to the artists — 10% on resales, in the case of Foundation. Euler Beats Originals’ original owners get an 8% royalty whenever the NFT is resold.
Providing Artists a Different Place To Display Their Work
Traditionally, artists rely on an intermediary to make their work available to the public: galleries, record labels and publishers, for example.
For selling NFTs, artists can use different NFT marketplaces and platforms, such as SuperRare, Foundation VIV3, OpenSea, NFT ShowRoom and Axie Marketplace.
For art collectors, NFTs are a means of making profits. You can buy an NFT in the hope it will increase in value a few years down the line. Then you can resell it for a profit.
Crypto Art Scene
The first experiment in crypto art was carried out by Anil Dash and Kevin McCoy, who wanted to create “monetized graphics.” The idea was born when people were sharing media on Tumblr without any compensation or attribution, leaving artists high and dry when it came to capitalizing on their work, even if the work was very successful.
McCoy and Dash managed to create the first blockchain-backed method of asserting ownership over a digital artwork, and they did not patent this idea. They believe technology should enable artists to control their work so that others cannot appropriate it without their permission.
By creating monetized graphics, the duo wanted to prevent the technology from becoming another method of exploiting artists. Dash believes that their vision to empower artists has not come true, although it has created a lot of “commercially exploitable hype.”
After them, John Watkinson and Matt Hall made a set of pixelated head collectible characters. They made 10,000 of these CryptoPunks and sold 9,000, keeping the rest to themselves and hoping they would increase in value with time.
Initially, this project did not get much hype. But when Mashable wrote an article about CryptoPunks’ influence on digital art, the Punks sold out in just a day. Some go for incredible sums these days. The highest-priced so far has been CryptoPunk #5822, which sold for $23.7 million in February.
NFTs and Sports
NFTs have also made a big splash in the sports world. Many people around the world watch sports, and many of those are die-hard fans who would pay thousands for their favorite player’s autographs or a signed item.
NBA Top Shot pioneered sports NFTs by allowing fans to bid on digital highlight reels. The highlights were called “moments,” and the buyers could keep them in their online wallets.
With over a million users, NBA Top Shot is among the most successful NFT projects. By February 2021, $230 million had been spent on the platform trading and buying digital collectibles.
The crypto market overheated during 2019, and by the following year, the prices of crypto art pieces were through the roof. As cryptocurrencies like ethereum and bitcoin saw a price increase, the value of NFTs also rose. The most expensive to date is The Merge, by Pak. It sold for $91.8 million.
What Does the Future Hold for NFTs?
As for the future, NFTs seem to be going strong despite the pandemic and changes in the crypto market. Mintable, an NFT marketplace backed by the billionaire Mark Cuban, raised $13 million in its Series A round.
Cuban was not the only renowned investor involved with the project. Other investors, such as Expedia Group, 640 Oxford Ventures, Spark Digital Capital and Digital Finance Group, also participated in the event.
Where To Buy NFT Art?
You can buy NFT art from several marketplaces, including:
- Nifty Gateway
- Async Art
All these platforms have different kinds of art pieces, such as music, digital paintings, images, PDFs and more.
Alternatively, you can buy NFT art from arthouse auctions, such as the ones at Sotheby’s or Christie’s.
Where To Sell NFT Art?
If you are an artist and want to know where to sell NFT art, you can check out the following platforms:
- Enjin Marketplace
Another way to sell your NFT art is to auction it at an arthouse. Even younger artists are getting in on the action at major auction houses. Eighteen-year-old FEWOCiOUS is the youngest featured artist at Christie’s, his digital art selling for an impressive $2.1 million.
The NFT marketplace Portion.io lets artist conduct their own auctions.
NFTs are extremely popular and earn artists millions. While not everyone who mints an NFT will become a crypto art millionaire, NFTs have debunked the myth that digital art is unprofitable.
Daria Uhlig contributed to the reporting for this article.