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Yes, the astounding news that a digital art piece has been sold for US$69 million has now made headlines in every major newspaper, reinvigorating an industry that was disparaged by many as yielding “value and fame only after the death of the artist”.
Just like the hype over cryptocurrencies brought about by Bitcoin, Beeple’s “Everydays – The First 5000 Days” has popularised the term ‘Non-Fungible Tokens”, a new phenomenon that is disrupting the art industry. Other NFTs like “Cryptopunks” and “Crossroads” have also been sold for millions of dollars. (although none of their prices came near to Beeple’s).
The advent of technology has gifted humanity the World Wide Web, and from there, the demand for digital artists commensurate with the rise of industries like film production, digital advertising, and video games. Despite this, none had the money-making potential tantamount to what NFTs can provide.
So how is NFT changing the industry? Are they just another fad that’s going to come crashing into a bottomless chasm where everyone will forget about them the next day?
What NFTs Are and How They Make Art Pieces So Valuable
What makes NFTs special is that it is a digital item that has no duplicates and cannot be duplicated, which is exactly why it’s defined as “non-fungible”. It’s basically a certification of authenticity for a digital asset, and can be tokenised versions of any art or media like photos, animation, videos, music, games, and more. They are traded on blockchain platforms like Ethereum, Polygon, Flow, Tezos, ImmutableX, etc, on NFT marketplaces with the biggest one being OpenSea.
Like cryptocurrencies, blockchains are utilised in this case to record art transactions on the digital ledger. Your ownership of an NFT upon purchase and its authenticity will be “hard-coded” in the blockchain’s system, as proof that you are the one and only owner of a particular piece of original digital art.
This exclusivity is exactly what propels the value of the digital relic. Think of it as the same logic surrounding every famous magnum opus you’ve ever heard, from Mona Lisa to Salvador Mundi. They are priceless assets simply because of their originality, and duplicates of them aren’t worth anything.
As the sole owner of an NFT, this sort of gives you the “bragging rights”. Conversely, simply right-clicking and saving art off Google Images is equivalent to printing “The Scream” from your printer – its value is nothing.
The Rise of NFTs
The very first NFT was created in 2014 by Kevin McCoy and Anil Dash, who successfully utilised blockchain technology to assert ownership over a digital piece of art, named “monetised graphics”. The very first NFT had thus been birthed, and it was showcased to the public at the New Museum of Contemporary Art in New York City.
Then came the rise of “counterparty”, one of the earliest peer-to-peer financial platforms that are constructed on top of the Bitcoin blockchain, to facilitate currency and asset trading. This was where memes like rare Pepe directories became wildly popular and were traded online as collectibles.
How NFTs are Changing the Lives of Many
With the rapid digitalisation of our economies, technology has long begun to disrupt the finance industry and even conservative ones like the law industry. So it wasn’t surprising that the art industry was not spared from this “ordeal”. After all, this is in line with the theory of “creative destruction” coined by economist Joseph Schumpeter. As new industries rise, old industries die.
How are NFTs bringing about tangible benefits for artists? Well firstly, crypto art is democratic in that it can be bought by anyone, regardless of religion, race, and creed because computer algorithms can’t discriminate against people. The blockchain acts as a third-party intermediary, it’s not controlled by art dealers nor censorship. Artists have the freedom to express their political standing and their thoughts on contentious issues.
Second, NFTs are transforming the industry and the job as an artist a lot more marketable, and artists get the due credit for their art pieces. The blockchain makes it impossible to create counterfeits of the same art pieces, ensuring unprecedented, robust intellectual property rights for artists.
NFTs are changing the lives of regular as well. In the Philippines, a group of gamers aided in improving the lives of those adversely affected by Covid-19, by creatively asking people to ‘farm’ for a cryptocurrency SLP (Smooth Love Potion) by playing the mobile game Axie Infinity. This can then be exchanged for real money, helping many unemployed individuals pass their time during the lockdown while making some income – for a short few months, some players even earned several times their usual monthly income! Utilising NFTs can actually resolve some real-world issues at the same time as well.
Still, NFTs May Not Bring You to the Moon
Undeniably, the future of NFTs doesn’t deviate very far from the future of Cryptocurrencies: its future hinges on the future of blockchain technology. Like crypto, celebrities like Snoop Dogg and Logan Paul wasted no time jumping into the bandwagon and started promoting their own NFTs, as means to earn quick cash.
Does this craze simply make the rich get richer? Will the NFT market be overvalued? It’s perhaps a worrying trend that NFTs will be just another bubble after the hype dies down. Investing in NFTs is just as risky as crypto, or even riskier. What happens if people decide that NFTs aren’t worth as much? Prices of NFTs having been falling the past weeks at the time of this writing, so things aren’t exactly all sunshine and rainbows for the future of NFTs.
The Future of NFTs?
Just like cryptocurrencies, the NFT markets will face their own series of ups and downs. NFTs have guaranteed the continued financial support for artists, with smart contracts keeping both parties bound to a certain set of agreements.
It’s important to note that the art industry will never diminish. Even if the craze dies down, art remains an indispensable emotional escape for every one of us. Transaction and appreciation of art will continue until the end of time, and technology only helps us to better preserve it.
Think about it – from Web 1.0 to Web 2.0 to now the beginnings of Web 3.0, it wasn’t too long ago that people scoffed at the idea of buying anything, let alone groceries online, thinking – how difficult would going to the nearest supermarket could be, and brush off the ever-improving security, marketing, and convenience factors.
So let’s give this niche market a little bit more time. After all, Leonardo Da Vinci has been dead for more than half a millennia, but people are still bidding through the roof for his priceless works.
Folks in Singapore still new to cryptocurrency might be interested in our own journey dipping our toes into buying cryptocurrency can have a read here. Slightly more experienced individuals can check out our article detailing the differences between crypto exchanges.