Here’s how NFT-based technologies could impact the development of the art industry.
When Beeple’s digital collage of pictures named “EVERYDAYS: THE FIRST 5000 DAYS” was sold for 69.3 million dollars, even premier auction houses wanted to hop in on the new trend. Today, the NFT-based artwork is auctioned off for millions of dollars. Could the art industry benefit from blockchain technology? How could NFTs impact the art industry as a whole? Let’s find out.
Beeple’s “EVERYDAYS: THE FIRST 5000 DAYS” // Image by Beeple via Christies
NFTs: key dates
2021 was the year of NFTs. In fact, the word itself topped the list of the most used words last year. The term ‘non-fungible token’ means that the artwork rendered into the blockchain is impossible to replace. The process of rendering, or adding, NFTs into the blockchain is called minting. In 2021, NFTs went mainstream, with the demand being triggered by the rising popularity of Metaverses.
However, the concept of NFTs was introduced long before 2021. Back in December 2012, Meni Rosenfeld came up with ‘Colored Coins’ — Bitcoins marked with an ownership stamp.
Colored Coins were supposed to run on the Bitcoin blockchain, but the project was never realized due to some blockchain restrictions.
Despite the fact that the majority of NFTs are built on Ethereum, in 2021 the list of possible options expanded with such big players as Solana and Cardano being added to the group.
The first NFT was minted on the Namecoin blockchain. On May 3rd, 2014, Kevin McCoy minted an NFT called Quantum, representing “an ongoing, abstract cycle of birth, death, and rebirth”.
Quantum // Image by Kevin McCoy via Jennifer and Kevin McCoy
N.B. Check out GetBlock’s guide on how to create an NFT collection
NFTs: impact on the art industry
The latest blockchain technology allows for the data regarding the artwork to be stored on the decentralized blockchain. The information includes the name of the artwork’s creator, previous and current owners — anything and everything that could be of interest to a potential collector.
The art industry is keen on adopting the new technology due to two main reasons: NFTs provide ownership and scarcity. Besides, the trading is done on a public ledger with traceable and unforgeable tokens. Hence why the technology is fully decentralized and inclusive.
You could be thinking “Why do we even need to pay millions of dollars to prove the authenticity of a digital art piece? Let’s say I want to take a screenshot of some art I found online and post it on my social media. Can’t I just do that?”. The answer is simple — yes, you can always download a .jpg file for free. To NFT buyers, however, the idea of owning an original piece of digital art is what stores the value.
Some critics believe that the current NFT craze is just a fad with no future prospects. While that could be true, what’s undeniable is that the world keeps talking about NFTs. Let’s discuss some pros and cons of using the new NFT technology in the context of art.
How does the art industry benefit from NFTs?
NFTs are developing at a bizarre rate, with the value of some NFT collections going through the roof. Despite the criticism, there are multiple reasons why the art industry could benefit from NFTs.
- Proof of ownership
The NFT marketplace provides proof of ownership over digital art, which prohibits the artwork from being sold on secondary markets. NFTs also protect the artwork from being imitated and duplicated, resulting in driving up the value.
- Stable income
Artists get the chance to receive 8–10% royalties as a form of financial profit. What’s more, the traditional art market is owned by an all-powerful centralized authority, which means that creators may not always have the ability to monetize their work simply because of the market’s biased nature. NFTs could be a much more democratic way of establishing your own name without having to get approval from a third party.
- Worldwide recognition
Posting your art on the NFT market is a great opportunity for creators to gain international recognition. Global buyers now have access to your artwork, thanks to the widespread social media and mass adoption of blockchain technology.
- Poor quality
The NFT market has been heavily criticized for its lack of quality. Some experts believe that NFTs and real-life paintings cannot be compared, thus the tokenized artwork brings nothing to the table, except for the bragging rights. Some analysts believe that NFTs can be easily copied with no credit given to the original creator.
- Not eco-friendly
NFT minting is dangerously damaging to the environment. The process is reliant on using massive amounts of energy, which triggers global warming. Now, more than ever, it is important to make NFT minting as eco-friendly as possible.
- Susceptible to hacks
NFT markets attract large numbers of spammers and hackers. For example, one of the biggest NFT marketplaces — OpenSea — was hacked in early 2022. It was reported that at least 32 users lost $1.7 million worth of their digital assets.
Similar to cryptocurrencies, NFT-based artwork can be volatile. Due to some characteristics of the market, there is currently no way of controlling or predicting the exact price of an asset. Price manipulation is also not a surprising phenomenon. Naturally, this could lead to the artwork losing value in a short span of time.