In an increasingly digital world, NFTs are the latest cryptocurrencies to get all the attention. Highlighted by several record sales earlier this year, this new form of technology is in the spotlights. Behind this term is a feature that can make thousands, even millions of dollars.
As news travels fast, it didn't take long to intrigue the general public. NFTs quickly became popular.
So what are NFTs?
NFT is the abbreviation of
"Non Fungible Token".
Non-fungible means it cannot be exchanged for something of similar value.
A
token is a digital asset issued by a blockchain. And a
blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system.
In other words, a NFT is nothing more than a unique and secured digital certificate/signature that can be attached to any object, physical or virtual.
Wikipedia explains: A non-fungible token (NFT) is a unit of data stored on a digital ledger, called a blockchain, that certifies a digital asset to be unique and therefore not interchangeable. NFTs can be used to represent items such as photos, videos, audio, and other types of digital files. Access to any copy of the original file, however, is not restricted to the buyer of the NFT. While copies of these digital items are available for anyone to obtain, NFTs are tracked on blockchains to provide the owner with a proof of ownership that is separate from copyright.
A cryptocurrency is a digital asset designed to work as a medium of exchange, it is virtual or digital money, which takes the form of tokens or 'coins.' But NFTs are different from other cryptocurrencies like bitcoins. Indeed, bitcoins are fungible, which means they are interchangeable and of the same value.
NFTs are non-fungible so each unit (token) is unique and cannot be reproduced. It means that we can trace the history of ownership, when or by whom it was purchased and of course who created it in the first place.
Transforming a digital good into a token (tokenizing), gives it a unique value. Each NFT has its own identity, but also its own authenticity and traceability.
NFTs and Photography
NFTs can be used for many things but what literally sparks the craziness behind these tokens is mostly digital art and collectibles. People started to understand that a unique digital object can have a significant monetary value, just like a work of art, because of its uniqueness. They offer a wide range of new possibilities in contemporary art for artists, buyers, and collectors alike.
The NFT marketplace facilitate transactions between all those interested in cryptoart but also in art in general. These online communities give artists the chance to create and sell digital artwork that might not have been noticed otherwise.
With respect to photography, you have the ability to tokenize a photograph and whoever owns this token owns this specific photograph. People can look at it and take pictures of it for example but there is only one owner.
The buyer of an NFT corresponding to a digital work of art has in his possession only the certificate, issued by the creator of this work, certifying that he is the buyer. The work in question can perfectly remain freely accessible online, even recorded and shared by millions of Internet users (like a simple .jpg image).
To give you an example, let's talk about
Vivian Maier.
Vivian Maier is the author of the images, the photographer, but the films are the ownership of John Maloof who bought them at auction. Each image is unique. It comes from a specific roll with a number, for example Kodak Tri-X 8667073. Each image is different on a roll, so if you possess or develop the image number 5, it is different from the image number 6. Each roll, each image is different, it is unique. But anyone can see the work of Vivian Maier in exhibitions, books and of course on the internet. But the owner is still John Maloof.
By offering creators to put a virtual signature on their digital works, NFTs work like a certificate of authenticity since a work sold in the form of NFT cannot be a counterfeit. For photographers, each image becomes unique like a specific image number on a roll of film. Yet, if the photographer is the author/creator, the person who buys the NFT become the owner of the work, that he can resale as he wishes. A digital image or even a print from a film can be duplicated but if it is a limited/numbered edition or in the case of the NFT, unique, then it can take considerable value.
Another interesting feature this system allows, is that photographers can attach royalty agreements to their NFTs. It entitles them to a percentage of the profits made every time ownership of the asset is transferred, in other words the NFT is sold to someone else.
Why NFTs and Photographs work well together
- Nowadays most photographs are digital or are scanned and become digital.
- Photography is most of the time in 2D, meaning flat, so it is easy to reproduce on screens.
- The quality of screens and tools that showcase photographs online are getting better and give you an accurate representation of the work, while it wasn't the case before and it was preferable to see a print to really appreciate the quality of a photograph.
- Tokenization of art on the blockchain is the same as the term editions in photography. It can be open or limited. Physically Rare vs. Digitally Rare. So NFTs allow photographers to decide what edition they want for their work and the buyer to know exactly what is out there. There is a real traceability.
- Photography is a popular art form. There were 3.5 Billion smartphones in the world in 2020, and almost everyone takes pictures with them.
- Social Media platforms showcase a huge amount of digital photographs. So people are familiar with seeing photographs on screens.
The value of an NFT
In a way, many NFTs are just a digital image. A simple right click saves it on your computer. So what is the value of a NFT you might ask? The value of tokenized cryptoart is found in the exclusivity of ownership. While buyers may not hold the copyright of the cryptoart they purchase, they do receive the guarantee of authenticity that comes with owning it. So, collectors rely on the value of rarity or popularity of an artist when investing into such a speculative market.
The industry is changing rapidly, week after week. But the record for the most expensive NFT ever sold until now still goes to American artist
Beeple (Mike Winkelmann). His digital collage, 'Everyday: the First 5.000 Days', an assemblage of drawings and animations produced daily for 5,000 days in a row, found a buyer for
$69.3 million at Christies.
In fact, the success of these NFTs sometimes comes as a surprise to their own salespeople. A reporter for the
New York Times was recently particularly surprised by the enthusiasm generated by the sale, under NFT, of one of the articles in his newspaper. "Make an offer, and you could own the first NFT of this newspaper with 170 years of history", he initially launched on Twitter, without really believing it. Final sale amount: $ 560,000.
How does it work?
NFTs mostly depend on the platform where they are created.
If you want to buy an NFT you will need a currency for whatever blockchain that NFT lives on, so it depends where you buy it and what cryptocurrency this platform uses.
Not all NFT coins are worth millions of dollars, far from it! There are many ways to enter this fascinating market for as little as a few dollars. A brief overview of some options. Just a FYI, they are just for your reference, we don't endorse any of them since we have never used them.
Open Sea
Rarible
SuperRare
Foundation
Nifty Gateway
KnownOrigin
Bitski
Any Internet user can create an NFT. To do this, you have to go through one of the specialized platforms, see above, on which to download the file which will become an NFT. To carry out the operation, you have to pay fees, often less than $ 30 per file.
This commission is to be paid in cryptocurrency, most often Ether, one of the most used with bitcoin. The creator of the NFT can then sell it on these same platforms. He may also set, in advance, the percentage he will receive on all possible resales of this file by other Internet users.
If you are worried about cryptocurrencies, the platform Bitski, allows you to sell NFTs with your bank account, and people can also purchase those NFTs with their credit card.
Why are NFTs popular now?
The NFT market benefits from an absolutely exceptional combination of circumstances:
Record Sales
The crypto market is reaching new highs, which has made many "early investors" rich. There are over 94,000 BTC wallets that hold the equivalent or more than $1M. Some of their profits go back into the crypto art. Where the "ancient" millionaires bought old masters paintings, the new ones buy CryptoPunks.
(CryptoPunks are 24x24 pixel art images inspired by the London punk scene, released in June 2017 as one of the first non-fungible token on the Ethereum blockchain.)
it also gives ideas to artists who can dream of selling their work for $69.3 million!
Artists win
The internet makes it possible to avoid brokers. Art is one of the last niches where physical sales remain predominant and a significant portion of the income generated go into the pockets of intermediaries. Now all you need is a cryptoccurency wallet to start selling your art directly on platforms. In addition, the NFTs solve the problems of counterfeiting which afflict the art world.
COVID-19 reinvented the way we buy and sell art
COVID 19 is forcing auction houses and galleries to reinvent themselves: they now offer NFTs to their customers (Like Christies in the example of Beeple). In 2017, the NFT attracted only crypto millionaires. In 2021, traditional collectors came on board. Nonetheless, the very nature (decentralized and online) of the NFT might jeopardize the future of some galleries...
Legal Void
NFTs benefit from legal vagueness: Bitcoin was created in direct response to central banks flooding financial markets with liquidity. In order to maintain their monopoly on issuing currency, central banks will do everything to try to slow the progress of Bitcoin and other fungible cryptos.
NFT art stands apart, it does not challenge the dominance of the dollar or the euro. It is a more secure (and tax neutral) way to "cash out" your earnings while taking advantage of an ecosystem with a high potential.
The crypto currency taxation around NFTs is blurry to say the least!
NFTs challenge the norms of contemporary art with an approach to creative expression that is entirely digital and certified, it is therefore pushing the art world into a new territory.
Should you invest?
This booming market is arousing the appetite of many investors. In 2020, more than $ 250 million were traded on the NFT market, compared to $ 63 million in 2019, reveals a recent report from Atelier BNP Paribas. The valuation of this market itself jumped 138% between 2019 and 2020, reaching $ 338 million.
The arrival on this market of artists, sports personalities or influencers well known to the general public opens new financial perspectives. (Snoop Dogg, Kate Moss, Tony Hawk, Lindsay Lohan, Grimes...)
The Impact of NFTs in the future
The emergence of NFTs is real, it is a trend that, according to some experts, will profoundly change the art and collectibles market. The physical possession of an object is already less and less important. Some collectors buy art to then store them in a Free Zone or a safe.
What matters is ownership, whether it's digital or not doesn't matter. Art is sometimes just a financial product in a portfolio. The same goes for NFTs. Anyone can take a screenshot of your NFT purchase, but only one person has it: you.
Attempts have been made to connect NFTs to real physical objects. Nike launched CryptoKicks for his shoes, When a person purchases a pair of CryptoKicks, they also receive a digital asset attached to the unique identifier of that pair of shoes.
The British band "Kings of Leon's" new album was released as a NFT and generated $ 2 million in sales.
But it also opens new doors for artists who can sell shares of their works and thereafter receive income when their work are sold.
Buyers could also be interested in owning a share of an artwork they couldn't otherwise afford or as a speculative investment.
Imagine that the buyer of the
most expensive photograph ever sold "The Phantom by Peter Lik", wants to get back part of his $6.5 million investment. He could decide to keep the print in his living room but to sell a fraction of his ownership. Anyone could then buy a fraction/share of the print at a certain value and if the print is sold again, earn part of the profits depending on the amount/value of the shares he has.
In 2018,
Kevin Abosch, put his photograph Forever Rose on the NFT market. But no physical photograph was ever sold. He created a token called "Forever Rose" and that token represented his photograph. He decided to divide it in 10 shares, So 10 people could own a fraction of the original token. And he raised $1 million dollars, that he then gave to charity.
NFTs are consequently changing the way modern artists can earn a living.
Forever Rose © Kevin Abosch
Some people think that cryptocurrency is ' just a speculative bubble in the making' and that it might crash at any time.
NFTs are digital copies of original works, and the original creator will ultimately always have control over how their work is licensed but as we saw earlier there is a legal void and photographers should be wary of what they sell and specify who keeps the copyright. Different marketplaces can have different rules. Read them carefully
Also if someone creates a NFTs with a work they didn’t personally create, it brings up a lot of issues that are not resolved yet.
As a buyer, you should make sure that you invest sums that you can afford to lose as you never know what the market is going to be like when you want/have to sell. Like bitcoins, the price of cryptocurrency takes into account several other parameters that affect the economy.
Cryptocurrency thefts have happened in the past, which means that the security they offer depends on the marketplace who holds them. So don't buy/sell anywhere. Make sure the platform you want to use is legit and secure!
