NFTs: a game-changer for artists, or merely the latest exuberant tech craze?

Andrei Mihai

Mike Winkelmann, a digital artist known as Beeple was used to selling his work for peanuts. Here or there, he’d make $50 or even $100, but that was mostly it. But that all changed in October 2020. He sold a series of non-fungible tokens, NFTs, that landed him $3.5 million, including a pair that sold for $66,666.66, which were later resold for $6.6 million.

Beeple swiftly became one of the richest artists in the world. He didn’t sell physical art, he didn’t even sell digital art. He sold… well… it’s complicated.

Wait, what’s an NFT?

Glad you asked. NFTs are essentially a way to claim ownership of a digital piece of art, whether it’s a drawing, a song, or any type of digital file. It doesn’t confer copyright of any sort, nor does it prevent other people from downloading or sharing the artwork. In a sense, it’s bragging rights — you own an asset but can’t do anything with it, other than resell it.

The technology behind NFTs will probably sound pretty familiar: it’s based on blockchain, the same technology behind Bitcoin. This blockchain (a digital ledger consisting of records) can prove that you are the “owner” of the piece of art; you can demonstrate this to other people. But you can’t really “do” anything with it.

There is one major difference between Bitcoin and NFTs though. Things like currency and cryptocurrency are made by fungible units — units that are perfectly swappable. My one dollar or one bitcoin is worth exactly the same as yours. Meanwhile, NFTs are non-fungible — unique and indivisible.

If Bitcoin is cryptocurrency, then NFTs are, let’s say, cryptoart. But why would people pay millions for cryptoart, getting symbolic ownership of what’s essentially a JPEG?

It seems bizarre (to put it lightly). You’re paying millions of dollars for a symbolic ownership — you essentially get a link to a digital image that already has millions of copies around the web. So… why?

Yes, Elon Musk actually tweeted this. Meanwhile, Grimes (Musk’s wife) made $5.8 million in 20 minutes by selling NFTs. Reality is weird sometimes.

So, it’s just internet bragging rights?

Well, yes and no.

Most things don’t really have an intrinsic value, they just have the value we give them. Gold is useful, but its market value is given by the value we assign it, not by what it can be used for. Similarly, green pieces of paper we call money aren’t really valuable in and of themselves — it’s what they mean to us that give them value.

A lot of the time, the money you see in your bank account doesn’t even exist physically, it’s just a digital representation of what you technically own. The same can be said for Bitcoin or other cryptocurrencies: in a sense, they’re no different, they’re just worth whatever people say they’re worth.

NFTs are kind of like that. The concept itself isn’t that unique, it’s just that the medium is novel. But there are some analogies that can help.

You know how people sometimes collect football or baseball player cards? Think of NFTs are that sort of collectible cards, but in a digital format. In fact, NFTs are (in a way) the new trading cards on the block — sometimes, quite literally. In February 2021, a LeBron James slam dunk NFT card in digital format sold for $208,000.

But NFTs are offering some people an unexpected opportunity to cash out on their internet fame. The people behind some of the first internet memes (people like “Bad luck Brian” or “Disaster Girl“) were able to sell NFTs for life-changing amounts. Laina Morris, who became known as the “Overly Attached Girlfriend”, landed 200 ether in cryptocurrency — the equivalent of almost $750,000, while Bad Luck Brian had to settle for more than ten times less (classic Bad Luck Brian, after all).

In other words, NFTs make sense for people who want to leverage their internet fame. They can also offer a potential solution to a long-lasting problem for digital artists: monetizing their work.

Let’s say you made some really cool art on your computer — whether it’s drawing in paint or a thousand fantastic and elaborate sketches. How do you go about monetizing it? You could sell prints or t-shirts, but that’s already dipping into different territory. Truth be told, there are few ways for a digital artist to get their name across and make some money, and while some are netting five, six, or even seven-figure sums, most NFTs actually sell for tens or hundreds of dollars.

Art is also inherently social, and it only makes sense for this social aspect to also be carried out in the digital environment. Besides, many would argue that physical copies of art are also massively overpriced. The same principle applies here: objects have the value people assign them.

So wait, NFTs are actually valuable?

The question of “why” exactly did people decide that NFTs are valuable remains a very good question. There’s definitely a Silicon-Valley-gone-mad type of air around NFTs, and the hype already seems to be mellowing down somewhat. After a period in which NFTs sold like hotcakes, the buzz is starting to tarnish.

Daily trading volumes for NFTs dropped to about $3 million, down from a peak of $19 million. Still, sellers are making hefty profits.

Some are heralding NFTs as a new age for art, a way to catalyze a whole new market and help artists around the world. Others (as in the tweet above) look at the absurdity of the situation, expecting the bubble to burst.

It’s possible to see both sides, and it’s safe to say no one really knows how things will pan out. But there is one very tangible problem worth considering.

Blockchains, especially some used for NFTs are very bad for the climate because they require computations that use large amounts of energy. Already, Bitcoin is producing the emissions equivalent of a medium country — regardless of what happens to NFTs or digital art, that’s one problem we shouldn’t want to deal with in the future.

The post NFTs: a game-changer for artists, or merely the latest exuberant tech craze? originally appeared on the HLFF SciLogs blog.