“Art is an idea that has found its perfect visual expression.”
As society continues forward, art serves as a monument of each era’s goals, accomplishments, and fears. The subjects and mediums may look different. However, each artist uses their tools – some traditional, some experimental – to communicate their perspective of the human experience.
We are living in the discovery era of a new art medium: NFTs.
What is a NFT?
NFT stands for non-fungible token. It’s like a certificate of authenticity for digital artwork, providing transaction history, provenance, and forgery protection. NFTs could be anything – a piece of digital art, music, a post on Twitter, or any other work that has value.
Each NFT is unique, in both its design and value. The “non-fungible” phrase means one NFT does not hold the exact same value as another NFT. Similarly, Leonardo da Vinci’s Mona Lisa does not have the same value as a toddler’s finger painting simply because they both are paintings. The work and scarcity of each piece determines its value.
The Provenance of NFTs
Every transaction occurs on the blockchain, a digital ledger storing data that nobody can change and everybody can see. When an NFT’s owner sells their art, the transaction is recorded and tracked. One of the greatest benefits that NFTs provide to artists is a new, recurring source of income in the form of resale royalties. Those subsequent sales are also recorded on the blockchain.
Currently, NFTs exist solely as digital artwork displayed on the internet, often included as a brightly-colored GIF illustration in an online article. So what’s prohibiting those who don’t own the NFT from screenshotting the artwork? Well…nothing. But that is simply a saved copy of the art; it is not the actual artwork or NFT.
While you can obtain a copy of Mona Lisa, whether through a blurry photo or official print purchased in the museum gift shop, it is not the actual masterpiece. However, because NFTs are still rather new, most collectors do not have the experience of verifying a piece’s provenance on the blockchain.
The Pros and Cons of Collecting NFTs
NFTs are a new buzzword often included in conversation with words like bitcoin and cryptocurrency. The non-fungible tokens provide certificates of authenticity for various digital artworks, with each transaction recorded on an immutable ledger called the blockchain.
Their value can often cause headlines and excitement among collectors. (Mike Winkelmann’s, known in the NFT art community as Beeple, The First 5000 Days was sold for $69,346,250 through a partnership with Christie’s.) Before you jump onto the bandwagon, consider these pros and cons of collecting NFTs.
NFTs provide a recurring source of income to artists. Even on the secondary market, as NFTs are resold and traded, a commission is paid to the artist.
Transactions are secure. The blockchain maintains each NFT’s provenance, so duplicates and fakes cannot be sold. This ensures the scarcity and value of the digital artwork.
Anyone can create and purchase NFTs. The digital tokens can be transferred quickly between people worldwide, making them fairly accessible.
Most NFT sales happen on the Ethereum blockchain platform, which requires users to use Ethereum’s cryptocurrency. This may not provide a lot of options if a collector wants to purchase a NFT with another currency.
The Ethereum blockchain platform’s energy usage is not environmentally friendly. Its current system requires more energy in a single transaction than a regular home’s daily use.
The value is volatile. While the hype can make the value of some artwork increase significantly, there are plenty of other stories about rapid decreases.
NFTs are a unique way to appreciate digital art. You may want to consider adding NFTs to your portfolio, if you have the resources and interest to do so! However, make sure you understand the risks and drawbacks of investing in this new digital artwork.
Ultimately, here at International Art Acquisitions we recognize the changing digital world, and the possibilities for change that digital tools bring. But the human desire to collect imagery for our walls has been a part of our history for centuries, spanning back to our cave dwelling ancestors. Collecting physical artwork is a time proven means of intrinsic and financial investment.