If you’re wondering what NFTs are, you’re not alone. News outlets have been reporting companies selling their own NFTs or people creating their own art NFTs, and some of them are quite expensive. How can you not be wondering?
So, what is an art NFT?
First, an NFT is a non-fungible token. But what does that mean, you ask? To put it simply, “Non-fungible” means it’s unique and can’t be replaced by something else. For example, pennies are fungible. If we trade pennies, we each still have the same thing. But a one-of-a-kind trading card traded for another card would be completely different.
To be clear, NFTs are unique because they all have a unique token on the blockchain. That means some people can use them for unique art pieces, or again, like trading cards. There may be hundreds of copies out with the same art, but the digital code will be unique to each token.
For some background information, most NFTs are part of the Ethereum blockchain. Think of a cryptocurrency, like bitcoin, and that blockchain supports NFTs, which store information. That makes them different from a coin. The blockchain also keeps track of who has ownership over the file. Other types of blockchains can implement their own versions of NFTs, and many already have.
Some of the key NFT characteristics are:
● Indivisible NFTs can’t be broken down into smaller items. They exist as a whole item.
● Indestructible The NFT tokens all exist and are stored on the blockchain. That means they can’t be replicated, removed, or destroyed. The people who purchase the tokens actually own them, rather than the companies that create them. This is unlike purchasing licenses, where people don’t own what they’re buying. For example, people can purchase the license to listen to music off iTunes, but they don’t actually own the music.
● Verifiable Anything purchased on the blockchain is that anything can be traced back to its original creator. There’s no need for third-party verification since NFTs can easily be authenticated.
● Non-interoperable There are restrictions on what NFTs can work together. Not every NFT can be used interchangeably on every gaming interface.
Art NFT Collecting
NFTs currently apply to any kind of digital file. Any music, drawings, or screenshots can be turned into an NFT, but the popularity surrounding NFTs is about digital art. Some even say it’s part of an evolution of fine art collecting.
Just ask Jack Dorsey, the billionaire co-founder and CEO of Twitter. Even though you can log onto Twitter and see it for free, he recently sold his original tweet for $2.5 million. The NFT is a digital certificate of the tweet, as it’s been signed and verified by the creator.
Since NFTs only apply to digital files, they have a unique meaning for collectors and collectibles. Like collectibles, NFTs are priced by whatever the market will pay.
But unlike physical collectibles, such as a mint condition comic book, NFTs are digital and not something you can hold. When you purchase an art NFT, you download a unique data unit on a blockchain. It goes into your digital wallet. There, you can show off your product, but there’s nothing you can touch.
According to NFT experts, it’s no different than collecting art, comic books, or sports memorabilia. It’s just a different conceptual idea.
Plenty of people are buying into this idea. Since November 2017, $174 million has been spent on NFTs. One of the nuances surrounding NFTs is that you can simply click and download files. Since the files are digital, you can copy a file as many times as you want.
But purchasing an art NFT is different from simply downloading a video or art piece. It gives you ownership of the work, while the artist still retains copyrights and reproduction rights.
How It Can Benefit You
So what is an NFT good for, you ask? They can be mutually beneficial for artists, collectors, and buyers alike.
If you’re an artist, the obvious reason NFTs are good for you is that it gives you another way to monetize your work. New marketplaces are opening up that give you spaces to sell your digital art that didn’t exist before.
Plus, if your art exchanges a lot of hands and gets super popular, you’ll get royalties and commission of sales. Artists don’t normally receive future profits after an item is first sold, so that’s one of the main attractions of creating NFTs.
Besides bragging rights, buyers have another way to financially support their favorite digital artists. One of the other benefits of NFTs rather than downloading digital art is that it gets you some basic usage rights. With these rights, you can post the image online or use it as a profile picture.
If you’re looking at NFTs as an investment, you can buy and sell them like any other asset. You can buy them and sell them later if the value goes up.
Looking Toward the Future
NFTs are new, and there still seems to be some uncertainty about where they’re going in the future. Some people view it more as fine art trading, with high price tags that are only attainable for the wealthy. But there are also art NFTs that are moderately priced and available to anyone.
It’ll be interesting to see what holds true in the coming years. There’s no question that NFTs are going to force collectors to look at the business differently. While some may choose to not invest in NFTs, they are now part of the market as a whole. For now, it seems that NFTs have moved from a unique sub-category to a legitimate form of art collecting.
While people of many ages are embracing NFTs, there is still a generational divide. The true determiners of NFT fate fall into the hands of Millennials, Gen Z, and the next generations.
There are about 2-3 million hardcore gamers, who spend a lot of their time in the digital realm. Some games let you use NFTs as items in their games, and even exchange NFTs within the game.
There are also people in younger generations who invested in cryptocurrency and are crypto-rich. A lot of the NFT art is being paid for in Ethereum or other digital currencies. It’s not totally outlandish to believe this is a place where people are spending their money.
Another thing to keep in mind in regards to NFTs is that bit rot is real. Files won’t open, image quality deteriorates, and people forget passwords to their wallets. But it isn’t dissimilar to physical art in museums, which is very fragile.
Another attractive quality about NFTs is that they’re harder to steal than paintings in a museum because of the unique blockchain storage that records every time an NFT transaction takes place. There will be an official record of who owns each NFT. That being said, cryptocurrencies have been stolen before. So it’s more difficult, but not impossible for someone to steal your NFT.
Does that mean you should buy NFTs? It depends on who you ask. Like any other item on the market, price is driven by what someone is willing to pay. Even though they’re doing very well right now, they may resale less than what you paid. You may not even be able to resell at all if no one wants it.
Keep in mind that NFTs are also subject to capital gains tax, like what you sell stocks at a profit. The IRS hasn’t yet ruled what NFTs are considered for tax purposes, but they may not receive long-term capital gains rates since they’re considered collectibles. If you use cryptocurrencies to purchase NFTs, they may also be taxed if they’ve increased in value since you purchased them. Check with your tax professional before you start investing in NFTs to be certain.
Where to Find NFTs
So are you convinced? Want to purchase your own NFT? First, you need to get your wallet set up and funded. Once you do that, feel free to visit an NFT marketplace. The largest NFT marketplaces are:
On rarible, creators can issue and sell art NFTs. It’s an open marketplace that features RARI tokens issued through the platform. These tokens give holders weigh in on things like community rules and fees.
Foundation is a more exclusive community, where members have to receive upvotes from fellow creators to post their NFTs. Higher caliber art gets pushed to the top because artists have to mint their own NFTs. This site tends to have higher prices, which is good for artists and creators looking to capitalize on their art.
This marketplace offers rare digital items and collectibles. You can discover new artists on this site or search for your favorite creators. All you have to do is create an account to start browsing the NFTs.
If you’re looking to buy NFTs, I recommend doing your own careful research. Even on legitimate websites, some artists have still been scammed by impersonators who have sold their artwork without permission. Some platforms screen more than others as well. For example, OpenSea and Rarible don’t require owner verification for NFT listings. Just like any other item, it’s best practice to be very careful who you purchase from online.
● Art NFT
● What is an NFT
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- “NFTs, Explained.” - https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq
- “The ABCs of NFTs: A Guide to Non-Fungible Tokens, the Cryptomedia Trend Bringing Ownership to the Internet.” - https://www.adweek.com/media/nfts-guide-nonfungible-tokens-cryptomedia-trend-ownership-internet/
- “What Are NFTs and How Do They Work?” - https://www.coindesk.com/tech/2021/02/01/what-are-nfts-and-how-do-they-work/
- “What You Need to Know About Non-Fungible Tokens (NFTs).” - https://www.forbes.com/advisor/investing/nft-non-fungible-token/