If you’ve spent even just a small amount of time listening to the press over these past few months, chances are, you’ve heard about NFT art. The concept to many sounds totally alien, and trying to wrap your head around this can be confusing to the extreme.
Want to better understand the oddities that exist within this crazy new industry?
Then you are in the right place. Without jargon and nonsense, this guide will help you to understand what NFT Art is, and why you should care.
Before we go any further, let us answer the most important question:
What are NFTs?
NFT is the term used for Non-Fungible Tokens.
As part of the massive blockchain industry, NFTs are essentially totally unique, non-interchangeable, non-adjustable units of data which are stored within a digital ledger. By using blockchain technology, it is easy for someone to show that they are the 100% sole owner of this particular item.
It’s important to know that what you’re hearing about in the news specifically refers to NFT art. But not all NFTs are art. NFTs are essentially digital tokens of ownership and verification, which can be used for anything from verifying concert tickets to contracts. Imagine in the future being able to transfer a house or car title in seconds across the world, with verified ownership.
In other words, NFTs themselves go far beyond art and has many real-world utility use cases.
In this article, though, we’re going to address art specifically in the NFT space.
NFT art are assets in the same way as holding a physical card or a pair of sneakers would be.
For some, NFT art is the perfect way to hold access to something they care about.
They do not take up any physical space, so they cannot become damaged by things like wear and tear. And thanks to the unique nature of the data storage, it is impossible for someone to claim ownership of your NFT; you have the proof stored via digital ledger. You own this. This is your item.
So, are NFTs the same thing as cryptocurrency?
For most people, the concept of NFTs and the wider NFT art industry can be quite confusing. When you hear the above, you might assume that since they are on the blockchain they must be cryptocurrency, right?
Actually, they aren’t the same thing. While cryptocurrencies can be traded like-for-like, you cannot trade NFTs in the same way. That is where the non-fungible section of the name comes in.
This is a unique, one of a kind item that only you own. You cannot exchange your NFT art of, say, LeBron James slam dunking a basketball, for the same photo of LeBron. It does not exist. You are the sole owner of that NFT.
Really, for some people, NFTs are above what we could consider normal currency.
However, you pay for NFTs using cryptocurrency.
So, do you own the actual NFT art?
This is where things can be confusing to people. If you own NFT art, you do not own the rights to that picture (unless the collection specifically says this).
Someone could go on Google Images, say, and find that exact image you own as NFT art. They can still use that JPEG, PNG, or whatever image file it is. What you are buying, then, is not the rights to that image in its entirety; you are buying the unique NFT that proves you own the original copy.
So, if anyone could save the image to their computer without buying, what’s the point?
Well, let’s think about The Mona Lisa: Would a copied print be more worthwhile than the original?
How about a knockoff designer purse?
Even though there are knockoffs out there of many items, people still find a lot of value in holding a verified original. In this world, verification is clear and simple.
You aren’t buying a physical item that you now own, really, you are paying for proof that you are the owner of the original copy. The identity of the owner is verified by using the blockchain ledger.
This is a non-spoofable, non-corruptible place where the ownership of anything – an MP3 file, an image, a video, or anything else digital really – can be verified.
If you buy NFT art, within that ledger will be totally verifiable proof that you are the sole owner of this item.
Most also come with some form of license to help you prove the ownership of this asset.
However, keep in mind that the copyright owner of the original file can still use that file, they can still reproduce that file, and they can still use it – you simply own the NFT of this. You gain no royalties from the ownership, just as you would gain no royalties by owning a rare baseball card.
How is NFT art priced?
Typically, like any other collectible, it is priced by market demand. Take the craze around Pokémon cards as an example. Go back to the early 2000s, and you could pick up packs for a few bucks from many local stores.
At the time, during the height of the craze, the value of the card was in the people who were lucky enough to pull one out of the pack. Today, though, with older editions no longer on sale people can skyrocket the price for older, now rare, cards.
The price is set by the demand of the market. If many people wish to own that NFT art piece, then the price could skyrocket. If you’re the only one who wants to buy it, though, the price is going to be much more minimal.
Think of it like this – if you have a $100 bill, you could trade that to someone for another $100 bill, or five $20 bills. However, if you were to get that $100 bill signed by a celebrity, it becomes worth something else. Money is fungible, collection items are non-fungible because it is unique, you cannot trade it like-for-like.
This means that the owner can then set the price that they wish to sell for, or more accurately a buyer can entice them to sell with a price. The price of trading a $100 bill is just that – $100. However, the price of trading an NFT art is different as the price comes down to what the buyer is willing to offer versus what the seller is willing to accept.
The value can increase or decrease depending on the situation. For example, if an athlete were to retire then the NFT art showing them on their debut might soon balloon in price.
NFT art is priced by the seller, and the price is determined by who is willing to pay it. Unlike having a retail price, NFT art is a collectible. The price is set by the owner, not by a set retail value or economic value.
Is NFT art unique?
So, this is the confusing part to some – if you buy an NFT, you are buying the original image. This means that you own the first image.
A popular example is that of “side eye Chloe,” the young blonde-haired girl who went viral for her rather unimpressed face sitting in her baby seat. The original rights to that image eventually went on sale as an NFT art piece, and someone was able to buy up the original rights to that.
Since this is one-of-a-kind asset, someone else could take photos of that same image. They could use it, they could reproduce it, it could be worked with in so many ways. However, you are the sole owner of the original – there is only one original of that, and you now own it.
Think of it almost like owning the original vinyl record of a song. You own the very first copy of it, and that is a very rare and special thing to own. But you owning it does not mean you could now demand royalties for it being played, nor does it mean that you can stop others from listening to that song.
However, in the world of NFT art, it is about ownership of something special as opposed to trying to claim you are the creator. Owning the original copy of something is a very exciting thing to own. NFT art, then, allows you to do that with ease.
How are NFTs validated?
One of the main starting discussions when talking about this thriving industry with people is the validation process. As we mentioned, you could own the NFT of a photo of LeBron James scoring a dunk. But others can view that image online, they could use it in their blogs, and they could use that image in any way they original copyright license allows. You cannot stop them from doing that.
What you can do, though, is prove to others you are the owner of this original file.
The creation of a digital certificate stored in a digital ledger that cannot be tampered with means you always have unarguable proof of your ownership.
There are many copies of the Mona Lisa hanging up in art galleries, commercial venues, and houses around the world: there is, though, only one Mona Lisa.
Since the ledger is maintained and worked on by thousands of computers worldwide, it is almost impossible for someone to edit and fake ownership.
Why do artists sell NFT art?
NFT art can be sold and then resold, and many artists are keen to have their work sold in this way.
Why? Because they can often agree to get a cut, a share of the purchase price, in return for allowing it to be bought in the first place. Since the price is set by demand, a single NFT could see an artist make a pretty hefty sum of money on top if their work becomes in-demand enough.
For example, the musician Grimes was able to raise over $6m by selling some of her digital art. She was willing to give away the original ownership to make millions, and she did.
So, who owns the art in that case?
It depends. Some artists sell the NFT with the purpose of the buyer owning the entire rights, including the ability to reproduce and sell that art again.
The simplest comparison is probably to compare buying NFT art to buying an autographed image.
That image is out there, potentially millions of people own it and see it themselves, but you – and only you – own this particular copy with that exact signature. In that case, it is unique – even if the image itself is not.
Indeed, there is often nothing to stop the artist from reproducing and selling that work again in different forms and methods. It can be used, shared, and even copied by others who do not own the NFT.
Many cases even see the artist retain full ownership of the artwork so they can keep making money off it elsewhere.
The NFT, though, proves you are the owner of the original. You are the owner of what is now deemed the “first” edition – you don’t always own the rights, but you own the privilege of saying you own the original copy.
Why do people get involved with NFT art?
So, the next question that most people want to ask about NFT art is why?
Why do people care about owning something like this? What is the payoff for the owner, exactly?
In addition to appealing to the collector mentality, another big reason why people love NFT art is the community aspect. Today, many of us want to be part of something that we can enjoy and converse about with others. Well, what better place to start than by going down the route of NFT art?
It is a simple way to help people enjoy being part of a collection industry.
Really, in many ways it is no different to being part of a community that trades things like collectible cards, or stamps. It is a place where people have a passion for collecting items, and being able to speak about it with others is always quite liberating.
The community, then, is a major reason why many people enjoy the aspect of NFT art. Being able to be the sole owner of something within that community affords you status.
However, this is not just about status; it’s about sharing a meaningful connection with new people on a topic you all share a common interest in can be quite liberating.
Simply put, the community behind each collection is unlike any other. It’s strong and tight-knit. Also, it’s the most overlooked factor when it comes to understanding this subject.
However, there isn’t just one huge NFT art community.
You get communities based on the actual purpose of the art.
For example, people collecting NFT from sports games will be split into sub-communities depending on the sport, league, or even team.
These groups are very visible on social media, usually holding a strong Twitter presence, which helps to bring in more people to the community and expand numbers.
In addition, many successful collections also have Discord groups where people can chat with each other – and the theme of each collection is unique, so you’ll often find like-minded people.
Chats about NFT art communities tend to take place on popular and secure chat platforms like Discord, too. So, one of the main reasons to get involved is to meet people who share this common interest with you – at least in some level or another.
NFT art, then, is a unique way for people to own original digital editions of things that mean a lot to them. It also gives an artist valuable control and agency over their own work. They can choose to rent it out, sell it on, or display them in any way they wish. They have more control over what happens to their digital artwork.
By being able to own the original copy, then, people get the prestige for themselves and within their community. The artist gets the chance to make money by giving out the “original” ownership whilst typically keeping the copyright.
In many ways, it is like owning the first edition of a comic book. Others can still buy that comic book, others can read it, and the maker of the comic can still sell it.
You, though, own the rights to the original – it gives you status within your chosen NFT community, and it gives you ownership of something you covet.
NFT art can sound confusing at first, but hopefully the above can help you to better understand what you are buying, what you get, and why this has become so popular today.
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