Articles on non-fungible tokens (NFTs, sometimes referred to as “Nifties”) have dominated tech headlines in recent months. What might this mean opportunity-wise for nonprofit and public sector fundraising?
Below, I’ll offer a brief summary of what NFTs are, using artwork as an example (including links to additional reading). Then I’ll jump into a hypothetical NFT-based fundraising scenario involving an art museum. I’m choosing art museums as my subject primarily because they’re prime examples of immense NFT profit potential.
Recently, I was discussing the New York Times article “The World Knows Her as ‘Disaster Girl.’ She Just Made $500,000 Off the Meme” with some successful working artists and musicians. Their responses ranged from (1) a few being “infuriated” (to quote one musician expressing anger at a digital asset being perceived as more valuable than the art itself), to (2) others struggling to understand why anyone would spend money on these (not that I can blame them), to (3) what I’d deem cautious interest from the rest.
All were valid and understandable responses. We have to remember that what we’re talking about is absolutely new. Percentage-wise, the number of people who truly have their heads around NFTs is still extremely low. Yes, we’ve had crypto and blockchain and digital content (artwork, music, and other files) for many years, but the idea of combining those things to create digital originals is still gaining acceptance in the grander scheme.
But with NFTs being so hot and growing, dismissing this still emergent trend as insignificant could mean a major missed opportunity for investors and organizations. As of this writing:
- The top 10 crypto artists, alone, have sold more than $320 million in NFT art;
- The total value of NFT art stands at $773 million;
- Virtually all of this activity has happened since the beginning of 2021.
The iron, so to speak, is red hot; it’s time for everyone to get serious about NFTs, especially for organizations in a position to potentially benefit from them.
Digital Originals: Explaining NFTs (Briefly)
To start, we need some sort of digital asset. It could be almost anything digital you can think of — a photo, a GIF or JPG, a PDF, an MP3, a video. And, while all of those are represented by files, other more conceptual digital “things” have been turned into NFTs. For example, Twitter’s founder Jack Dorsey sold his first tweet for $2.9 million. (If you can get your head around that one, you can skip this section and scroll directly to “Art Museum NFT Fundraising Scenario” below.)
Keeping this art-centric, let’s use some art here as our discussion piece. I’m not a visual artist myself, but I made a quick digital painting of my daughter’s dog, Lupin, to serve as an example. Here it is:
So that’s my digital item (not yet an NFT). As you can see, it now already exists in various places:
- It’s in my Photoshop file still;
- It’s in the screengrab graphic I posted here.
- It’s now a part of Medium.com (this publishing platform), which means Medium’s CDN (which caches multiple copies of the pic across the globe so that content loads quickly everywhere) also has copies.
- As you’re reading this now, it’s also temporarily stored on your device in the cache.
- And visitors may easily copy and save it from here, if they wanted to.
The point is that once a digital artist puts something like this out into the world, it automatically replicates like wildfire. However, this can’t happen with tangible art. If I’d done this as a physical piece (i.e., made the above as a painting), there would only be the one (well, unless I made prints or a limited edition). With that physical artwork, it would be generally obvious what constitutes an original. And this used to be the difference between physical / tangible art and digital art.
Then NFTs came along. Interestingly enough, they were conceptualized way back in 2014 by a a tech guy and an artist — Anil Dash and Kevin McCoy (story here in The Atlantic) — specifically as a way to help artists. So, for any artists miffed by this particular cultural phenomenon (which can appear to value the investment over the art itself), know that the roots are indeed noble.
With an NFT, the artist declares that THIS ONE particular copy, registered as the NFT, is the one considered the original. (And, for crypto experts out there, I intended that statement as a simplification, as there are tech aspects related to where NFTs actually “live.” For that discussion, see “Yes, Your NFTs Can Go Missing — Here’s What You Can Do About It” on Decrypt.co.)
Transforming an Artwork into an NFT
I’m going to keep this section super-short, as this article is not meant as a guide for creating (aka “minting”) NFTs. The short version is that numerous platforms exist on which one might mint NFTs. Three leading ones are:
These sites allow users to buy, mint, and sell NFTs. To mint and sell, the user must first setup an account (which can range from moderately easy to rather confusing if you’re not well acquainted with crypto and wallets). From there, it’s largely straightforward on all sites, though most users will run into a few questions along the way.
I’ve tested OpenSea and Mintable so far. They’re fairly similar, though I’d say Mintable’s UX seems a bit more intuitive. OpenSea has a few more hoops to jump through before you can get to creating, so for our purposes here, I simply chose Mintable. (Note that, for the art museum example below, the choice of platform would be approached differently, taking into account the full tech functionality available as well as the quality of the UX for donors / buyers.)
And, long-story-short, I had my NFT created and listed for sale in a matter of a few minutes. If you’d like to see how that looks, here’s a link to it. Note that it appears as a normal ecommerce page, with a price tag of $1,000, and the ability for anyone to purchase it using crypto currency or a credit card.
Art Museum NFT Fundraising Scenario
A few weeks ago, I visited the St. Louis Art Museum and, like so many others, took a snapshot of some favorites. Among them was Van Gogh’s “Vineyards at Auvers” painted in June 1890 (just a month before he committed suicide).
I chose this one to talk about today because, even on the St. Louis Art Museum’s web page about this painting, it notes that the painting is in the public domain. (I should note here that the photo they use on their web site isn’t necessarily public domain. See the difference? That’s because a photographer presumably took that particular photo of the work, and copyright law gets a little complicated sometimes. A painting can be public domain, but not all photos of it are necessarily so. Only those taken and then offered up expressly as public domain are in fact public domain.)
But, for argument’s sake, let’s focus on the work itself being in the public domain. As such, anyone could therefore take their own photo of it and proceed to do whatever they wished with it — use it on a book cover, make fabric out of it, put it in an art calendar, sell framed prints of it, make use of it as a website background, etc.
If that’s the case, then where’s the value for the museum?
This is the exciting part: The value for the museum is that the museum is in the unique position to offer up the official museum-sanctioned version of the NFT. So, let’s compare two Van Gogh NFT scenarios to illustrate this:
Scenario one: Bob Jones walks into the STL Art Museum, snaps essentially the same picture shown above, and turns it into a “Van Gogh NFT”. He pops it for sale for .25 ETH (around $1,000 currently).
Scenario one value: Basically nothing. Bob Jones (a random guy on vacation in St. Louis) adds no value to this. It’s something that literally anyone could create. (The only possible exception might be if Bob Jones were instead someone super famous. If Banksy decided to post a Polaroid version of this Van Gogh that he snapped while visiting, no doubt people would collect it.)
Scenario two: The museum creates an official, authorized, sanctioned, approved (call it what you will) version of this painting. (The details of this need not be restricted to a simple photo, as shown here. Perhaps the frame is shown, as well, perhaps with text. There are no rules here.) It then perhaps pairs this with other value-added amenities that only the museum itself could ever add. We can use our imaginations here, but for example, that could include:
- Packaging the NFT with real-world amenities such as lifetime passes, tickets to benefactor events, or even real-world merchandise as additional thank-you gifts. There are no limits to this, though such things need to be setup carefully and consider whether future sales of the same NFT would receive such perks. (Just like any other asset, NFTs can be resold by buyers. We’ll discuss this more below.)
- Incorporation into the museum’s database for public display on its web site. For example, the site now displays information on this painting’s page like so:
But, what if it looked like this?
- Or, perhaps for any NFT that surpasses some quite serious level, NFT milestones might be displayed in the physical museum itself, next to the painting on the actual label. (I’ll leave that as merely an idea, as I’m sure something like that could be perceived as gauche if overdone. Although, if one ever brought in $69 million, as in the Beeple example given above, that would be a monumental milestone for any museum, likely worthy of such an unconventional mention.)
These are just a few off-the-cuff possibilities. But, they’re limited only by the marketing and fundraising imaginations of the teams bringing such a thing to life. One thing I love about the simple database integration idea mentioned above is that it’s discreet, yet also gamifies the fundraising process. Casual or academic web visitors may gloss over such details, but for those interested in the NFT side, obtaining that painting’s NFT (among, likely, a collection of similar holdings) could well become a quest.
Now, I’ve never been on a museum board, but I spent a number of years on the board for another big attraction, the Pittsburgh Botanic Garden, and even acted as Finance Committee Chair during a $30 million capital campaign. Donor cultivation was a hot topic then, and remains so. (The phrase “donor cultivation” returns 7.1 million results on Google at the moment.)
Ergo, the above point about gamifying fundraising speaks to one of the major benefits of such a program — cultivating a completely new and not-necessarily-local crop of donors for a museum. And not only new donors, but likely a number of younger and crypto-rich ones to boot. A lot of these tech people are sitting on crypto fortunes, and are looking for things to do with them. (And that’s not merely speculation, as clearly shown above.) They can’t own a real Van Gogh, but there’s now quite a lot of sashay at the prospect of owning a digital one if the original holding museum ever decides to issue it as an NFT.
Unprecedented PR Exposure
Gaining widespread coverage can be tough, even for a museum. But a fundraising program like this would constitute international news — especially now, as no museums have yet tried such a thing. (As I said, I’ve been on boards, and understand that there’s usually a conservative side to them that, at a minimum, likes to let someone else set the precedent. So, when such a program is being considered, the board needs to weigh the allure of significant financial and PR potential with the admittedly justified fear of the unknown. More about that, though, below.)
Residual Fundraising Dollars
One aspect of NFTs that make them so enticing is the possibility for royalties. When an NFT is minted, the identity of the original issuer is noted in what’s called the blockchain contract. This makes it possible to stipulate that a percentage of any future sales of the NFT must be sent to the originator. Indeed, this was part of the original idea of NFTs — to offer the artist a means of benefitting from resales.
When selling and pricing NFTs, there are many options — auction style sales, drop dates, and minimum prices. Let’s say, for starters, that the museum holds an auction-style event and offers up the official museum-sanctioned NFT of this Van Gogh, complete with any of the perks mentioned, and the minimum opening bid is $10,000. (This would be, presumably, during an event that would offer many, many other NFTs from the museum’s permanent collection as well.)
Hopefully, it would bring in some absurdly high sum. But, even if it does not, let’s say here that the NFT sells for $10,000. (Maybe it’s not the breakout $69 million phenomenon that Christie’s had.) And, joined with the other NFTs sold by the museum that night, hopefully the program was an overall success bringing in a tidy sum for museum’s operating and capital budgets.
As time goes on, though, those NFTs never go away. As I mentioned, they can be resold to other NFT collectors. So, imagine that in years to come, other museums follow suit and start issuing their own NFTs. And suddenly, you have a situation where a collector might own official museum-edition Van Gogh NFTs from various other museums, and is looking to expand her collection to include our example above. Maybe that lackluster (not that such a word should ever be used in connection with a Van Gogh!) sale is now resold to our second collector for $150,000.
Well, with NFTs, you can set a royalty percentage. So, if resale royalties are 10% to the original originator, some financial officer with the STL Art Museum would come to work one day and there’d be $15k in Ethereum (crypto currency) sitting in the museum’s wallet. (Or what if it sells for $1,500,000 and the person sees a surprise $150k there? Again, this scenario, alone, brings up many questions and problems — but hopefully all good problems. And we’ll discuss some of those below.)
As a creative technology company, mine is hardly the only one thinking of issues and opportunities like this. So, I wanted to share some recent supporting materials now, and then will discuss some further details.
Art-World NFT News
- Via Artnet (March 10, 2021): “The Surging Demand for Digital Collectibles Could Offer a Lifeline for Cash-Strapped Museums — Here’s How” (A similar thought to this article, actually, though in more broad terms.)
- Via Fortune (April 13, 2021): “Crypto millionaires’ love of NFTs is a boon for the aging art market — but galleries may miss out” (A good article that speaks to the potential for donor cultivation, noting that Christie’s historic $69 million sale of a “Beeple” NFT brought in an “entirely new category of buyers.”)
- Via Artnet (March 22, 2021): “A Collective Made NFTs of Masterpieces Without Telling the Museums That Owned the Originals. Was It a Digital Art Heist or Fair Game?” (A story about how a company listed NFTs from artworks at the Rijksmuseum, the Art Institute of Chicago, the Birmingham Museums, and the Cleveland Museum of Art (all without permission). While somewhat shocking, I would assert that this is great news for museums, as museums are in a position to offer the public “officially sanctioned” versions, which would arguably be more valuable than a public-domain approach.)
- Via MuseumNext: (March 13, 2021): “NFT “Art Heist” sees famous artworks sold online” (Essentially the same story as above, but more from a museum’s perspective. It concludes with “NFTs offer museums the opportunity to earn revenue and a new medium to explore … but doing so will require imagination and creativity.”)
Proposed Next Steps for Larger Private and Public Art Museums: “Discovery”
Hopefully, the entirety of this piece serves to build out at least a general vision of extant possibilities. I used a single Van Gogh painting as an example, but would envision offering multiple NFTs during a formalized fundraising event like this. But, how many, exactly?
Well, that’s but one of perhaps hundreds of questions that an organization may be asking. It’s one thing for a tech creative like myself to whip up an NFT and list it for sale in 10 minutes in order to write about it; it’s wholly another for a respected institution to build a fundraising program around NFTs.
What’s required is a discovery project — a dedicated, 100% customized study on the viability of such an idea. Such a thing would seek clarity on numerous questions (some of which are included here) that will inevitably arise for a project of this magnitude. (Note below that many issues require various combinations of cross-team cooperation to work out.) Below these, I’ll offer a solution to managing all of this:
- EXECUTIVE & BOARD: Is this the right thing to do, all things considered? What would a realistic financial range or goal for such an effort look like? Is there a downside? What would be the purpose of the funds received (operations, capital, endowment)? How much time do we need to plan and execute this? Who’ll be involved, and what will it take to manage this both initially and as an ongoing program if it takes off? What might a go-live date be, realistically? What outside resources should we loop in for opinions?
- LEGAL and IP: What issues should we be discussing? Are we in the clear copyright-wise, even for public-domain works? Are there any risks down the line with respect to possible liabilities? What about accessibility issues with respect to the auction platforms? How can we ensure resale rights in the future if the NFTs move to other platforms? What legal disclosures and policies should we include on the auction / sales pages? (For example, see the “Special Notice” policy appearing on Christie’s famous $69 million Beeple NFT sale page.)
- FINANCE: What financial controls should be implemented here? For example, if people pay with Ether (ETH), would the ETH balance held by the museum be converted wholly or in part to USD? If so, at what point would that happen? How do we account for pricing fluctuations (up or down) in the period between receiving payment and converting payment to USD? How will this income be classified / treated? To what budget(s) would any funds be allocated? Who will require access to our crypto wallet(s)? How do we approach security and confidentiality around that? Can we, as a nonprofit or public sector entity, hold crypto? What’s our policy with respect to that, and does it work here?
- TECH: What platform will we use to mint and sell NFTs? What types of payment policies would we need to enforce? (See above under legal.) How will be people be able to buy — ETH only, or CC, if desired? Who’ll create the NFTs and setup the listings? What will the format be (auction-style, fixed minimum price, etc.)? What are the risks to having significant funds in a crypto wallet, and how may we responsibly mitigate those risks? How will passwords, backups, and contact information be managed to ensure long-term use and prevent any possibly loss of access to systems or wallets?
- MARKETING & DEVELOPMENT: What would the digital NFTs look like? What photos would we use (and are those photos wholly owned by the museum without possible ties to any photographers)? Would we show the painting frames, or just the images? Would we include text and any other information? What would the design be, and would we be able to make a consistent-looking NFT for numerous paintings, both now and in the future? Would the NFTs come with any real-world benefits (as mentioned above, for example)? What about digital benefits (e.g., tie-in with the web site, as mentioned/shown above)? What could a large NFT event look like? Would it be entirely virtual? Could it be paired with an in-person gala? Should we conduct a focus group here for any reason? What membership outreach do we need to do here? Can we make this exciting for members as well (e.g., NFT prizes / giveaways along with the overall event)?
- PR and COMMUNICATIONS: To what extent should existing general concerns / perceptions about crypto (e.g, environmental issues) inform our platform choice? Are there any negative PR concerns here, and how might we preemptively mitigate them? How do we communicate tech instructions to interested bidders/buyers? How will we communicate results to the public and to news outlets?
- OVERALL PROJECT MANAGEMENT: Who’s going to serve as team leader here, taking charge of managing the numerous and wide-ranging aspects of this project and seeing it through to a successful launch and beyond?
As for that final question, you can take this ball and run with it yourself, if you like. (I offered numerous examples, ideas, and considerations above, to offer significant value to anyone reading this.) Or…
As it happens, I’ve given the above quite a lot of thought already and have solid direction on much of that, with the balance depending on individual preferences within your organization. Ergo, I’ll end with this small piece of self-promotion: As a creative web developer and consultant for 15 years, as a crypto enthusiast, as a financial services marketer for 10+ years (including a two-year stint in marketing and business development at Deloitte), as an experienced nonprofit tech and marketing manager with a background in major events, and as an experienced nonprofit board member … I’d love to be the point person to shepherd your museum through such a significant, potentially highly lucrative, high-profile fundraising event or program. Call me at (503) 902-HTML and let’s explore the possibilities.
✍🏻 Jim Dee runs Array Web Development in St. Louis and Portland. He maintains three blogs and contributes to various Medium publications. He’s been writing about crypto occasionally over the years (e.g., strongly suggesting that nonprofits accept crypto donations in this Jan 2018 article). In 2013, Jim offered to accept Bitcoin for web development work. At the time, a typical $5k small business site would’ve cost around 50 BTC. As of this writing, 50BTC would be worth around $2.7 million. (No one ever actually paid that way, though.) His server admin around that time had 792 BTC built up, which would be worth roughly $45 million today! (But, that person sold it well before it skyrocketed.) Also noteworthy is that Jim’s 2019 novel CHROO (a guaranteed good read!) may well have been the first published fictional work to incorporate an actual crypto address within the text! For feedback or questions, comment here or reach out via email anytime: Jim [at] ArrayWebDevelopment.com.
Thanks for reading! -Jim
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