Have you heard the new buzzword, NFT? Are you feeling confused about this revolution in the world of art and collecting? With so many different facets and products being created, you need to know how they work and what is going on.
We cut through and tell you why NFT art is not just a passing phase. Read on for 10 reasons why NFT art is the next big thing.
The NFT meaning derives from the term non-fungible token. A non-fungible token is unlike any other form of digital currency such as Bitcoin, as it is unique. They gain value independently, buoyed by a collectors market instead of one based on stock and shares.
When the creator of a piece of NFT art mints an NFT token for the item, they decide how many of these to create. Replicating them is not possible. That is, they can not be copied and duplicated as people previously did with images and audio files.
This makes the item you buy totally unique, almost like a title deed to the original. This has brought ownership back into the hands of the artist and the collector. Think of how damaging the ability to share and stream music has been to the music artist, and how important this could be to take the industry back to a semblance of how it used to operate.
The definition of fungible is something that is duplicated or replicated. We use fungible assets every day to live our everyday lives. Non-fungible assets, ones that are unique, tend to have more value and worth.
Let's take physical art for example. If you buy a one-off piece from a gallery, you are buying a non-fungible asset. Yes, it can get copied to some extent, but you own the original, of which others would be fraudulent and fake.
If you bought a piece of art from a major furniture store to hang on your wall, you are buying one of many pieces. You have a fungible asset and in this way, NFTs replicate how the consumption of art in the real world, though they have some big differences.
Products of digital ownership have been around for a long time. Game skins are one example, where players can purchase an item that makes their digital character look unique. However, this model has had two major problems.
The first is that these were not wholly unique. It is very rare that a cap on how many available was on them. They were there for anyone who wanted to spend the money, making them open to everyone.
Secondly, these items only existed and had value in the world of the game. You could not trade skins with friends outside of the game world. You had them, and that was where they stayed.
NFT art allows for an open space, tradable NFT marketplace. Storage for items can be in wallets, then sales can be made on eBay-style auctions. These spaces, such as Rarible and Opensea, are already in use and seeing huge levels of visitors.
NFT artwork gets traded and purchased on a marketplace. These marketplaces have both new and secondhand areas. This means that people can buy new pieces of NFT art, or trade and auction off ones that they already own.
When an artist creates a piece of art, they can get a percentage rate of what they will incur from secondhand sales. So for example, if you sell artwork and set your rate as 20%, whenever that artwork is sold on a secondhand marketplace, you will get a 20% cut. You will get a recurring royalty rate.
This is a new concept for many artists. Once artwork has been sold physically, it enters private ownership. The only value an artist will gain from any subsequent sales is from the reputation added to their name.
Of course, this then allows them to create more art and demand higher prices for it. But building that reputation takes a long time, and it is not always lucrative or financially stable. Recurring royalties provide artists with financial stability.
Once purchased, a piece of NFT art needs storing somewhere. A digital wallet serves this purpose. While they are primarily for holding digital currencies, many of them allow for NFT artworks and collectible storage.
This is like the old model of an artwork entering the hands of a collector. Once there, ownership is exclusive to them and they choose who views it. However, we also know that this does not always happen with physical artworks.
Very often, works enter galleries and museums. This is so people can view and admire them, while also relieving the owner of the responsibility of upkeep and security. This begs the question, will this begin to happen with NFT art?
Pinata is one company that is attempting to tackle the issue of NFT art storage. They are suggesting using an Interplanetary File System (IPFS) which will allow people to view copies of the original. This would allow people to view the artwork, much the same way we make physical prints, but only one person would retain ownership of the original.
Pieces of art in the traditional sense focus on images and sculpture. However, the digital world of the NFT allows the artist to go into new mediums, pushing the boundaries of what was traditionally considered art.
NFTs are being used for everything from virtual real estate to animation. This can allow artists to go beyond the medium of a canvas, building huge environments and worlds, all of which are up for sale and unique ownership.
Just like the sale of physical artwork, NFT art allows for certain liquidity in the marketplace. The NFT marketplace is a new domain, and it is hard to find out who and what will become popular or valuable. With hardcore traders and amateur buyers all on an equal playing field, it makes for some very interesting purchases.
This will in turn expand the market for NFTs. It will destructure the framework that has been built around 'elitist' art trading, where only those rich enough to purchase art or those in the know can own items of value.
Once a new NFT artwork exists, it does not have to stay on the platform it was originally created on. In fact, it can get transferred inside a number of different providers of wallets, tradable marketplaces, and virtual worlds.
This is because the NFT is built on the premise of open standards. They allow secure and reliable readings of the application programming interface, meaning they can appear wherever you want them to be.
The amount created is totally in the hands of the creator. For example, one artwork could exist only once, being that only one person could buy it. Alternatively, it could have an infinite supply, meaning anyone can purchase it as many times as they wish.
This allows an artist to manipulate the scarcity and rarity of a product. They can choose to create one-off special items, or put out as many as they wish like a common product.
A comparison may be in the world of action figure collecting. When a wave of toys is released and sold in crates, 50% of the figures may be one character, with decreasing percentages for the rest. This makes one type of toy common, while others become rare and sought after.
This market manipulation is something that NFT art creators have the possibility to manipulate. They can dictate what is rare and scarce in their creations by adjusting available amounts.
The NFT collectible market has recently attracted some extremely big-name sponsorship deals. Dapper Labs, creators of the smash-hit NFT collectible game Cryptokitties, have entered a partnership with the NBA. Together, they have created a system named NBA Top Shot, that has attracted huge amounts of money in its relatively short lifespan.
This game is a digital equivalent of a basketball trading card. Bought in packs, each one contains a random selection of famous basketball shots, in video format. A video of Lebron James recently sold on their own second-hand NFT marketplace for $200,000.
This success is due to be replicated with their collaboration with the UFC. As huge sports companies are becoming involved, is it not inevitable that this will come to the art world?
While many Cryptoartists are currently underground, the platform is sure to attract a big-name artist in the near future. Perhaps a Turner Prize winner or a Future Generation Art prize winner could be creating NFT art right very soon.
With so many new and exciting possibilities in the world of NFT art, it can be hard to spot what is and isn't going to be the next big thing. While items with big brand endorsement seem to be a safe bet, perhaps you will spot something no one else does and add it to your art collection for profit. Or perhaps, you may just begin to collect what you like.
If you want to stay ahead of the NFT curve, then Wenfty should be your first stop. We have our finger on the pulse of the NFT world. Visit us today and let us help you stay current in the NFT art world.