For a century, the art world was relatively the same – artists sold their work through galleries. Then, online sales provided artists a direct link to collectors. Now – we have the NFT.
Put simply, NFT art is digital art, versus painted or printed or sculpted art in the physical sense.
NFT stands for non-fungible token.
Fungible comes from a Latin phrase meaning “to serve in place of” so – if something is fungible, it means it can be exchanged for something else equal to it. If it’s non-fungible, it means it’s something unique, irreplaceable, non – interchangeable.
For example, money as we know it, and cryptocurrencies, are “fungible,” meaning they can be traded or exchanged for one another – one dollar is always worth another dollar; one Bitcoin is always equal to another Bitcoin.
NFTs are different. Each has a ‘digital signature’ that makes it unique.
An original painting is non-fungible, in the same way. It is a unique thing that only one person can own at any given time.
It matters because it is better for the artist.
The ‘secondary market’ refers to any sale that happens after the initial purchase – any time when art is re-sold to another collector. A strong secondary market means that an artist’s work continues to appreciate in value over time. Art (hopefully) doesn’t become ‘used’ like an old car – it becomes ‘collected’ like a treasure.
In the traditional secondary market, artists get zero compensation.
All of the profit is made by the gallery or auction house.
If an artist becomes popular, and their art is sold for huge amounts at auction, the only payment they get is notoriety.
The digital signature in an NFT work of art ensures that the artist is compensated EVERY time that piece of art is sold. Detailed instructions can be embedded within it, for a royalty – kind of how the music world works…musicians are compensated every time their work is played, not only the first time.
This is a game-changer for the secondary art market.
Remember, art has value because people think it has value. NFT’s are following the same path.
NFTs can be performance art as well. CJ Hendry – an uber talented self-taught artist who creates realistic drawings – was forced to destroy one because someone felt it was copyright infringement. (That’s a story for another day, but personally I disagree.) So – she made lemonade!
The most famous digital art sale to date was created over nearly 14 years by Mike Winklemann, better known as “Beeple”. It is a composite of 5,000 daily drawings called, “EVERYDAYS: The First 5000 Days,” which sold at Christie’s for a record-breaking $69.3 million.
Canadian artist Mad Dog Jones is among the top selling NFT artists. He combines digital drawings and music together to create work like this :
It’s all about the bragging rights, and sense of pride in ownership, and being an early adopter.
An NFT allows the buyer to own the original item. It contains built-in authentication, which serves as proof of ownership. Imagine owning a real $100k+ Andy Warhol versus the dorm-room poster.
Collectors can value “digital bragging rights” almost more than the item itself – read more at Forbes.com about how NFTs are stored and how to buy one. This article explains more about the emotional reasons people by art of any kind.
Traditional art critics can be quick to dismiss NFT art, and yes, it’s a bit of a media craze right now, and yes, it started in an underrepresented ‘fringe’ group, however, as NFTs go mainstream, traditional (and famous) artists are joining the movement. NFTs been around since 2014 and are gaining ground as a new way to buy and sell digital artwork. An incredible $174 million and counting has been spent on NFTs since November 2017.
If you want to join in on the fun, first, you need to set up a Digital Wallet, which will allow you to use cryptocurrencies. You then convert some of your dollars into a cryptocurrency. Then, you can purchase an NFT with your digital wallet, much the same way as you use your credit card to shop online (remember, credit cards and online shopping would seem preposterous to us 50 years ago!)
And then, you can set up your own online gallery, like Mark Cuban has done on his platform lazy.com.
This is all still pretty new, so you’ll want to pay attention to fees for various wallets and exchanges; also, the tax implications and copyright law are evolving. Approach NFTs as you would any investment – research and assess the risk.
In my opinion, NFTs provide another opportunity to invest in the pleasure of ownership and enjoyment of artwork.
I always tell my clients not to focus on whether the art will appreciate financially, but to focus on whether you will appreciate having it in your life for years to come.