What's Up With The NFT Craze? – A Deep Dive
NFTs, otherwise known as non-fungible tokens, have taken the art world by storm in the past weeks. A brand new market for collectibles of the digital era, they seem to be the art world’s answer to collecting just like Bitcoin was hailed as the answer to digital currencies. And while many are boasting the incredible figures they earn from ‘selling’ their art online (like the Gucci Ghost Yellow Aqua #27/45 that sold for 3,600$), there is definitely much more to them that meets the eye.
“Gucci Ghost” by Trevor Andrew via Nifty Gateway
Let’s start with the basics:
So, they’re non-fungible tokens. This basically means that they are part of the Ethereum Blockchain (the second-largest cryptocurrency in the world, after Bitcoin). The tokens represent the ownership of a unique item; according to the Ethereum website “they can only have one official owner at a time and they're secured by the Ethereum blockchain – no one can modify the record of ownership or copy/paste a new NFT into existence”. While the digital files can be infinitely reproducible (I just copied the same ghost that was sold for 3k), NFTs basically give you clout — the proof of ownership of the work lies with the buyer while the artist can retain copyrights. It’s like owning a fine art print vs. an original Picasso. Other cryptocurrencies have also started to implement their own versions of NFTs, such as the crypto TRON.
These NFTs can basically be anything, from a gif to a digital painting, to even a ‘signed’ tweet, which was the case for Jack Dorsey, the co-founder and CEO of Twitter, that attempted to sell his first ever tweet and its highest offer stood at $2.5 million on March 6th.
Jack Dorsey’s first tweet
Some artists are really seeing the benefits of selling their art in this way where they previously struggled to get a true income from their practice. While they may have previously needed the exposure of social media without seeing any profits, they can now handle the ownership of their content and see the funds go directly into their account.
NFTs also have a feature that allow artists to obtain a percentage of royalties every time their work is sold to another buyer, giving them a pretty constant revenue stream and capitalizing on the popularity of the work that makes the prices skyrocket. Creators are also not limited to a specific geographical region or area, they can sell their work anywhere and get access to a global market without having to worry about shipping costs or costly insurance. But it is the creator that is able to decide the scarcity of their asset; they may decide to create completely different and unique works or many many replicas.
Even celebrities are getting into the craze; musician Grimes famously sold around $6 million worth of digital artworks after they went on sale at the popular site Nifty Gateway. Buyers can therefore support artists, while getting a few things in return as well. They may not be able to physically display their purchases in their homes, but they may get bragging rights from being able to say that the purchased a unique work from a famous artist such as Grimes.
“Newborn 4” By Grimes x Mac via Nifty Gateway
So, what’s been happening lately?
NFTs are currently being touted as an evolution to fine art collecting, even spilling over into real world auctions. A digital artwork called "Everydays - The First 5000 Days” by an American artist known as Beeple, sold for nearly $70 million at Christie’s and made it the first ever sale by a major auction house of a piece of art that doesn’t physically exist. According to Christie’s, it made Beeple one of the 3 most valuable artists at the moment. While it is absurd to begin to compare such works to traditionally defined works of fine art, an upside of this disruption of the art world means a breakdown of the gatekeeping that often haunts it. It truly seems that the hierarchies that have been so strictly maintained in these institutions are starting to break down, no longer will ‘traditional works’ hold the center stage, and outsider artists are no longer seen as less valuable or appealing.
"Everydays - The First 5000 Days” by Beeple
But all of this excitement doesn’t come without its downsides. Regarding the high energy consumption associated with blockchain transactions, the purchase and sale of NFTs has caused more and more controversy. In recent years, there have been many academic reports that have cited the high power consumption that is associated with the Bitcoin and Ethereum networks. Like most cryptocurrencies, they are built on a system that is insanely power hungry. It is estimated that the annual greenhouse gas emissions associated with NTFs can rise to hundreds of megatons, which is comparable to the yearly emissions of a country like Sweden.
Moving forward
“DISNEY PLUS CONTENT GENERATION” by Beeple