The Rise and Rise of NFTs

Recently, the NFT phenomenon has taken over the digital art world. Artists, authors and musicians alike are monetising this opportunity, however, is it a contemporary fad or here to stay?

The rise and significant popularity of cryptocurrencies like Bitcoin and Ethereum has been surprisingly well received. Even the most skeptical financial institutions have now embraced the crypto world and within the world of art, the emergence of NFT’s has seen similar reception.

These non-fungible tokens (NFTs) are certificates of authenticity that use blockchain technology to prove ownership and scarcity of digital assets. “Fungible” is essentially a good or a commodity wherein the individual units remain the same. Similar examples of this are Euros, Dollars or even bitcoins, as each of these share the same value and are interchangeable (even though bitcoins possess a unique code).  Therefore, “non-fungible” is not only unique, but scarce. In the world of digital art, an artist could release an image, perhaps even 150 editions of it, nevertheless, each image will still remain unique.

They can also be described as computer files that ensure authenticity and proof of ownership. Similar to the existence of cryptocurrencies like Bitcoin, they exist on a blockchain. Like the Euro, these cryptocurrencies are “fungible”, wherein the value of one bitcoin will be exactly the same as any other.

Contrastingly, NFTs inherit their valuation set by the highest bidder, similar to the auctioning process behind any Picassos or Van Goghs. The digital artists sign up with a marketplace and then “mint” these digital tokens by uploading their information on  blockchain (like Ethereum). After they pay the costs incurred, they are eligible to auction off their piece on the chosen NFT marketplace.

The Big-Bang moment

Various artists, collectors, speculators and businessmen have spent hundreds of millions of dollars on NFT artwork, famous memes and GIFs within the past month alone. One of the most famous digital artists- Mike Winkelmann, also known as Beeple, sold a piece for a record $69 million at Christie’s on 11 March, third highest price ever fetched by any current living artist (after Jeff Koons and David Hockney).

While this may be dismissed as yet another bubble (or a fad), art connoisseurs and collectors have churned out thousands and even millions of dollars for these artworks that are often available and accessible online, free of cost. Amidst this, amongst the lucrative opportunities for artists and collectors, many speculators are reaping the rewards off this latest trend. Consequently, there is an argument to be made for many digital artists, wherein the sluggish progress of their creative content on big tech platforms like Instagram, Pinterest and Facebook has incentivised them to divert their attention towards these lucrative NFT marketplaces.

Painters, graphic designers, authors, musicians and even filmmakers- envision NFTs transforming the general creative outlook and the true valuation of an art piece, wherein it is now possible to legally and truly own digital art.

Additionally, the historical undervaluation of digital art has fuelled independent artists to create and handle financial valuations for their creative works. Similar to the world of fine art, collectors actively want and look for authenticity hence, NFTs are serving as this crucial link. Conclusively, this further enables the artworks’ “scarcity”- similar to the buying and selling of rare sneakers, jerseys or even antiquities, the scarcity aspect of the process adds to the jaw-dropping valuation of some of these NFTs.

Contrastingly, physical collectibles occupy real physical space, so it is perhaps easier to understand why they are sought after. Therefore, it can be challenging to grasp the ideals of pricing digital art that solely exists online.

Another underpinning to this theory can be attributed towards the actual labor cost incurred by the digital artists wherein the NFT phenomenon tries to economically legitimise the aforementioned art form. The movement has also been supplemented with intense generation of creative content throughout the coronavirus pandemic, as most of us have spent the year working digitally. Henceforth, if our current world remains virtual, it makes sense to spend money on virtual objects and art pieces.

Historical Significance

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The initial foundations of the NFT movement can be traced back to 2017, with the launch of CryptoKitties, as reported by the Time Magazine in March 2021. Loyal fans spent an estimated $32 million on collection, mining and trading images of vibrant cartoon cats. Moreover, video games like Fortnite saw even more cash generated through in-game purchases and virtual add ons—further mainstreaming the idea of spending real-world money on digital goods.

Similarly, cryptocurrencies and NFTs have also been supported by celebrity businessmen like Elon Musk and Mark Cuban. Furthermore, Twitter founder Jack Dorsey, auctioned off his first-ever tweet as an NFT, and sold it for a mouth-watering $2.9 million.

The Instagram generation has seen multiple non-traditional artists receiving massive amounts of interest from NFT connoisseurs, wherein, their street-style, hyper-referential artwork has gained significant popularity. Consequently, other artists working in thought-provoking controversial styles have further popularised the new artform, wherein, vibrant 3-D renderings inspired from street art and animated cartoons.

These Internet-fuelled aesthetics are grabbing the attention of both a younger generation raised on social media and a rabble-rousing crypto clientele. These developments have left many in the conventional art world agape.

With or without the establishment’s support, a new wave of digital artists is banding together in tight-knit NFT communities, echoing past generations of artists across disciplines and genres hanging out and influencing one another’s thinking, approach and output.

Art, art and art

The impact of NFTs on the art world has been significant. Most of these digital transactions draw parallels with actual physical transactions of buying and selling of an artwork, wherein, the “provenance” is paramount. Significant questions like “Who is the current owner?”, “What is the purchase history?”, “How many copies of this exist?”.

Therein lies the value of NFTs where these criteria’s along with proof of “ownership” are representative of a unique commodity. Moreover, the terminology (i.e. provenance) is directly linked to the world of museology wherein, artworks and artefacts require a certain degree of provenance in order to authenticate its history, ownership and true value.

The digital artwork’s provenance has a dual purpose. Academically, it aids in identifying the authenticity of the item (for example, a Van Gogh) whereas commercially, it appreciates the overall monetary value of the commodity. It may even allow them to become objects of fetishisation that now hold immense value, at least to collectors. Conclusively, the lack of provenance depreciates the value of the artwork and causes it to be less appealing to buyers and collectors alike.

Drawbacks

As the NFT phenomenon takes over the realms of our digital world, it does come with its eventual drawbacks. For example, one of the primary examples of this is its sheer exclusivity. The major barrier to entry is the initial cost of money and technological prowess required to sell an NFT—which, consequently, could prevent many creators from engaging in the platform. Another example of this is multicultural artists being left out, as they have similarly been marginalised in the “traditional” aspects of the art world.

Moreover, many legal analysts have had to re-think existing copyright laws that are now in a symbiotic relationship with this emerging technology. Various artists have had their artworks sold and copied without their authorisation. Lastly, there are significant environmental concerns as creation of NFTs results in significant amount of computing power, and many of the server farms who provide this power use enormous amounts of fossil fuels. Recent example of this is Tesla’s discontinuation of accepting Bitcoins as payment due to the environmental damage and significant usage of precious resources.

Theoretically, environmentally conscious artists could make use of an alternative blockchain platform that has a lesser environmental impact. For example, many artists are now getting compensated every time their work is resold, similar to receiving a royalty check.

Bitmark, a Taiwanese startup, has further initiated an NFT inspired platform in order to give rights and royalties to music producers and artists who join NFT-based social media sites, can now receive fractional ownership in the platform and direct compensation for their work, something that they could not do on Facebook, Twitter and Instagram.

In conclusion, for tech-enthusiasts, the rise of cryptocurrencies and NFTs is proof enough of the value technology brings to change and impact the world in many ways. Therefore, the upcoming months or even years will be crucial for the consistent advancement of the crypto world, which needless to say, needs to amend itself critically in order to accommodate and practice inclusivity.