NFT art explained, so you don’t have to try to figure it out! This week I attempt to dissect the hype around this new technology and whether it is worth your time and money as a digital artist.
The digital art piece, Everydays, the First 5000 Days by Beeple sold in an online auction for 69.3 million with fees as sold by Christie’s. The price was a new high for artwork that exists digitally, beating records of physical paintings by great artists such as J.M.W. Turner, Georges Seurat and Francisco Goya.
For years digital artists have hoped for the day that their medium of choice is respected as much as traditional art. It has been considered inferior because of the many shortcuts that artists can use. Not to mention the fact that it is infinitely copiable and scaleable. So far, digital art has not had the same appreciation as traditional art as it could not be owned and collected in the same way.
But what if I told you that there is a new system where you can possess true ownership of a digital piece of artwork? It doesn’t matter if it can be shared or downloaded by anyone online, but only a select few can own or trade it.
The future has arrived!
We can finally get the paycheck our art deserves even if it is digital.
But the question is… how can you take advantage of this new system? How can you make your million dollars?
Let’s break down some of the heavy jargon to understand it better.
So… you might be wondering what is an NFT?
Fungible means a good or service that can be freely exchanged or replaced for another of like nature or kind.
For example, If I were to offer you 50 dollars in exchange for five 10-dollar bills, the value exchange is identical as both you and I have retained the original value agreed upon.
Non-fungible, therefore, has opposite characteristics to that definition. They are unique, irreplaceable and non-interchangeable. Consequently, items such as photos, digital artwork, music, writing, collectibles, videos etc. whose value is unique and invaluable are non-fungible.
A non-fungible token (NFT) is a unit of data stored on a digital ledger, called a blockchain, that certifies a digital asset to be unique and therefore, not interchangeable, as defined by Wikipedia.
Non-fungible tokens (NFTs) are proof of ownership of a digital item the same way that people can own cryptocurrency. Cryptographic tokens are being used to sell ownership of digital artwork as it certifies its originality and can trace it back to the artist who created it. NFTs are digital assets whose ownership is recorded on a blockchain.
This might sound tricky but stick with me.
What is a blockchain? … let’s try to simplify it!
Blockchain is a publicly accessible record system of who owns what in an online ledger on a network that is impossible to change or hack. These digital transactions are duplicated and distributed across an entire network of computer systems that are secure, anonymous and decentralised. Each transaction is a block in the chain of activities to a participant’s ledger.
Each transaction is linked using cryptographic blocks to record and store data in a way that is hard to decipher. The blockchain is a system of secure information and communication that is derived from mathematical concepts to transform messages. Each data block has a unique hash number and a link to the previous block. Once a block of information is recorded it cannot be altered without the alteration of all subsequent blocks which makes it resistant to modification.
Consolidation of information on authenticity and all transactions are recorded on the blockchain which removes manual documentation required for attestation of an artwork.
Blockchain was initially devised to support fungible assets like cryptocurrencies but it has evolved to include non-fungible crypto assets that can be proved to be unique. So, the digital art that you make could be like a Van Gogh or Monet, where this is only one unique version or like trading cards, where there are limited editions to several copies of a piece of work.
An artist can upload a piece of digital artwork to the blockchain and create an unlimited number of licensing rights and tokens, including fractional ownership interests for a piece of artwork. By tying smart contracts to a token of an art piece the artist can secure a royalty fee every time an NFT is transferred to another client.
The vast majority of NFTs were built using the Ethereum blockchain. Ethereum was built to be more than a medium of exchange or value stored.
How does Ethereum Work?
Another new, strange word… I hope you have been paying attention so far.
Like all cryptocurrencies, Ethereum is a decentralised network that isn’t managed or operated by any centralised entity but managed by distributed ledger holders. Specialised computers are used to ‘mine’ or solve complex mathematical equations that confirm a transaction on the network and add new blocks to the blockchain for every transaction.
Ethereum blockchain uses a Proof-of-Work system that is an energy-intensive computer function. Specialist ‘mining’ computers solve complex digital locks that add a block to the chain and the computer that correctly resolves the combination wins a cryptocurrency called Ether.
CryptoArt is booming because it uses the blockchain to track sales and bids of digital artwork. The blockchain allows these transactions to be distributed, decentralised and stored across many nodes while remaining secure. The speculative craze has also fueled the CryptoArt market.
So, you want to make a million dollars?
Congratulations dear artist you got through art school and you are on your way to making your first million bucks selling digital art as NFTs! You can get all those people who asked you to consider a different profession to shut up.
What is exciting about NFTs is that it makes digital art valuable by:
- Reducing art forgeries due to authentication
- Giving you the ability to collect royalties for future sales
- Giving collectors the ability to own a fractional percentage of an art piece
- Allowing you to sell a limited series of artwork, and
- Generating sustainable income for digital artists on a purely digital platform
Several marketplaces have risen around NFTs such as OpenSea, SuperRare, Nifty Gateway, Rarible, etc.
Take a peek if you want to make your first sale. But you need the money to pay for your gas. On Ethereum blockchain, gas is the cost necessary to perform a transaction. These fees are made by users to pay for the computing energy required to validate transactions on the Ethereum blockchain.
So far it all seems so exciting, we finally get recognition for our hard work and the value of digital art is rising. But… there is a catch!
Wait… selling and trading my art could accelerate climate change?
I started reading about NFTs only because I was excited about the potential of what this technology could have for digital artists such as myself and the potential of generating sustainable income from it. However, one major concern seemed to be coming up repeatedly? The environmental impact!
While this new technology is promising for artists and investors, blockchain mining was designed to be compute-intensive. As mentioned earlier, Ethereum uses a consensus algorithm known as Proof-of-Work that allows information to be distributed across many nodes in a decentralised and secure manner.
NFTs are ‘minted’ by ‘mining’ computers that compete against each other in a computational race to earn ETH. While this makes Ethereum highly secure it also is very energy intensive.
Many people have jumped onto the NFT bandwagon but have not realised the amount of raw computing power that is needed.
The following calculations are based on a blog post by computational artist Memo Akten who examined the carbon footprint of NFT Art to educate fellow artists.
A single ETH transaction by only one mouse click assigned to mining farms around the world generates 20 KgCO2. In comparison, sending an email is only a few grams. This is an average ETH transaction. Based on the complexity of the transaction, the carbon footprint might be higher or lower.
A single NFT includes minting, bidding, sales, transfer of ownership and/or cancelling that can push up the carbon footprint to 211 KgCO2 which is equivalent to an EU resident’s electricity consumption for 1 month or using a laptop for 3 years.
The average footprint of an artist’s NFTs on SuperRare was calculated to be 6 tCO2 which is equivalent to an EU resident’s electricity consumption for 3 years or using a laptop for 83 years.
These calculations exclude the energy used in the actual production of the art piece, storing of the work online and the energy consumption of the website. Make sure to read the article if you want a more in-depth explanation.
While there are carbon emissions associated with creating art, they are low in comparison to the carbon footprint of buying, selling and trading NFTs. We need systems that embrace the needs of the times. These figures are a drop in the ocean of emissions that we need to curb if we are to move to lower our footprint on this planet. Given the urgency of the climate crisis, we need to change our existing habits and demand the development of platforms to move with the needs of the times.
There are alternative methods that blockchain is built around such as the Proof-of-Stake model which is a much better alternative and could drop the electricity consumption to almost zero. Ethereum has promised to make that change as it has been in the works for years, but nothing is for certain as to when they will fully switch.
For those who are concerned by the environmental impact of NFTs this sounds like an improvement. There are also private blockchains not backed by Ethereum which avoid some of the issues with cryptocurrencies. There are also guidelines for eco-conscious digital creators on Github on creating eco-friendly NFTs.
My takeaway after researching about NFTs
I think that the hype around NFTs might lead to unrealistic expectations from artists. In my research, it seems like artists who already have a huge fanbase are the ones reaping the benefits. Even if I did put up my work on one of these marketplaces I stand to get lost in a pile of talented artists.
As artists, we are constrained by the media and culture and economy of the times we live in. Art has always been exclusive and controlled by many intermediaries. Most of the hype around jumping on board seems to come from marketplaces that sell them, people who have invested in them and artists who have created NFTs. I am yet to understand how the blockchain has eliminated the need for an intermediary when we see that Christie’s has auctioned the most ‘valued’ digital art.
Unfortunately, where there is money so are the scams. If an NFT has been ‘minted’ it can be bought even if the creator was not the one to put it up for sale. These systems are yet to be designed to protect artists from copyright issues.
Let’s not forget that we still have to pay ‘gas’ for the computing energy required to validate and process these transactions on the blockchain. To me, this seems like a brick wall before many artists can jump right in. Those who already understand the crypto world and have surplus money to invest seem to be able to profit off it, while the rest of us are still wrapping our heads around it.
So, if you choose to ride the wave, I suggest educating yourself well before falling prey to a scam. This post is by no means a replacement for technical advice, so do your own research too!
I hope this post helps us start a productive conversation on new commercial platforms and the need to strive for better with values that take us into the future as artists.
This article was not meant to shame any artists who have chosen to use this method to make some money.
As a fellow artist, I am honestly just sitting on the edge of my seat for a day when I think it would be viable for all artists. The potentials of this new way of trading art seem so exciting and filled with new possibilities. In the meantime, I plan to do the work, hone my art skills, build my art business and keep learning about crypto art.
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