NFTs Are Disrupting the Art Market, but Will CryptoArt Ever be Mainstream?
How tokenisation could completely revolutionise intellectual property, and give creatives real ownership of their work
When I think of asset tokenisation the first things that spring to mind are financial instruments; equities, funds, cryptocurrencies and the like.
As a designer working in fintech I have sat through countless workshops discussing blockchain technology and its applications within finance. However, I had never made the jump between tokenisation and other types of asset, such as art.
My first encounter with non-fungible tokens (NFTs) was back in 2018, when I helped to brand a gamer token startup. The concept revolved around tokenised trading cards, and other in-game assets such as player modifications. At the time, I found the idea interesting but a little absurd. My first thought was “surely you can’t make that much money from trading cards?”. I clearly didn’t understand the gaming and collectables markets.
Fast forward a couple of years and I heard the term NFT springing up again, but this time in relation to art.
What is a Non-Fungible Token?
To understand how NFTs can be applied to art you first have to understand what they actually are, and how they differ to cryptocurrencies.
In the words of Wikipedia;
A non-fungible token (NFT) is a special type of cryptographic token which represents something unique; non-fungible tokens are thus not mutually interchangeable. This is in contrast to cryptocurrencies like bitcoin, and many network or utility tokens that are fungible in nature.
This means that my Bitcoin is the same as your Bitcoin. If I give my Bitcoin away, then I can replace it with another identical Bitcoin.
NFTs on the other hand are one of a kind.
Let’s take the example of a Pokemon card. If issued as a token they might seem the same on the surface, but each card has its own unique attributes and significance to the owner. For example, the 1st card issued will hold a different value to the 10th, and the rarer cards will hold a higher value.
How can NFTs be applied to art?
With NFTs, artwork can exist and be sold on the blockchain in the form of a token. This means the artwork is digitally native; it can be created, editioned, bought, and sold completely digitally.
When I first heard of NFT artwork (also known as CryptoArt) — just like back in 2018 — I found the idea absurd. My first instinct was;
“Why would anyone buy artwork that they weren’t able to hang on their walls?”
But then I realised that people buy art for more than just decorative reasons. Some buy art as a form of investment. Others buy art as a symbol of wealth. But one of the biggest use-cases for buying art is for people to showcase their personal style and taste — a form of self-expression.
We already express ourselves with our carefully curated Instagram and Tumblr feeds. Buying and displaying digital artwork seems like a natural extension of that. Platforms already exist where you can exhibit your personal NFT collection in your own digital gallery, and explore these galleries in a full VR environment.
Buying NFT artwork also enables true ownership. I could take a photograph of the Mona Lisa and post it on my Instagram feed. But does that mean I own it? No.
When a collector buys an NFT, they’re buying the unique token representing the artwork, and ownership is recorded in a tamper-proof way by the token. Owning the work doesn’t restrict how the work can be seen or shared — someone could still screenshot the artwork — but they will never truly own it unless they hold the token. In theory, the more widely a piece of art is seen and shared the more likely the original artwork will increase in value, which actually works in the token owners favour.
Royalties for creators
CryptoArt exists on decentralised infrastructure, which means that there are no middlemen between a prospective buyer or seller. Since there aren’t any middlemen, it means that less money is lost to commissions during sales.
When a piece of NFT artwork is “minted” — the process of publishing— the piece is indefinitely linked to its creator. When it is sold, the creator is paid. If it’s then re-sold, unlike in the traditional art world, the artist will still be compensated with a cut of the value.
Earning money for each secondary sale is hugely beneficial to artists and creators, and means that as their artwork accrues in value they don’t miss out.
The future of NFTs
The art community is embracing NFTs. Tomorrow, Christie’s will be the first major auction house to auction CryptoArt and to accept cryptocurrency as a form of payment, in this case Ether. I think we’re entering a new art movement that will only continue to boom in the coming years.
It’s clear to see the use cases for NFTs in art and gaming, but another clear cut use case is music. In recent years there have been cries from recording artists to democratise the music industry, and many artists don’t even own their record masters.
In the now infamous Taylor Swift masters controversy, Swift (at the age of 15) signed a deal giving her new record label the rights to her first six albums in exchange for a cash advance. These albums received 32x platinum certifications and 1x diamond certification, yet as a creator Swift has never owned these albums or been given an opportunity to buy them, and she didn’t benefit from either of their $300 million* catalogue sales.
The use of NFTs would allow recording artists to retain royalties from any future sales of their masters.
They could also be used in ticket sales, which could help to prevent ticket-touts from selling fraudulent tickets or re-selling originals for hugely inflated prices.
Another use case for NFTs is with real world consumer goods, to verify their authenticity. They would help prevent counterfeit goods being sold, as the NFT will always be traceable back to its original creator.
There are so many other possible uses; from web domains and social media handles, to deeds of ownership, warranties and software licenses. The future is uncertain, but one thing I’m sure of is that this is only just the beginning for NFTs.
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