Whenever NFTs are mentioned in the headlines, it’s usually along with complicated crypto jargon for those with blockchain knowledge. For someone not yet in the loop, it can be quite daunting. If you’re looking further into the meaning of Web3, including what NFT or Crypto Art really is, this beginner’s guide is for you.
Firstly, What Does NFT Mean?
The literal meaning of ‘NFT’ is ‘Non-Fungible Token’. Still confused? Let us break it down for you:
Fungible means interchangeable. To illustrate, fiat currencies and cryptocurrencies are fungible. Good examples include Dollars, Ether, or Bitcoin. One dollar is the same as any other dollar. A Bitcoin in your crypto wallet is identical to any other Bitcoin in the world. This means you can easily trade one for another.
Conversely, Non-fungible means non-interchangeable. That is to say, the NFTs are wholly unique. And just like Bitcoin or Ether, NFTs are stored on a digital ledger called a blockchain.
What makes a digital asset an NFT
NFTs provide digital certification of asset ownership. In essence, NFTs provide people with a way to provably own and trade digital assets, supported by an immutable, decentralized blockchain. Up until now, we’ve seen massive economies spring out of people paying for digital assets – like video game items, for example – that they didn’t actually own.
Now, this blockchain-enabled system of asset custody is what sets NFTs apart from other kinds of digital assets.
The use of blockchain technology means that historical ownership of NFTs can be traced back to the original creator. Thus, NFTs can be authenticated without the need for an external third party. Since ownership is traceable, verifiable and accessible, authenticity and scarcity can easily be proven.
In essence, you can use NFTs to represent any asset virtually. This could be a house, a yacht, a bottle of luxury alcohol, and, of course, digital media files. Although, unlike physical items, you can actually store files on the blockchain. That includes files containing NFT art.
What is NFT Art?
Significantly, digital art and collectibles were really the first areas to bring widespread interest in NFT technology. Of course, given how many different forms digital art can take, NFT art can mean so many different things. In any case, we’ll be focusing on visual art NFTs, as that’s been the biggest area of interest for the NFT community so far.
The NFT community loves Crypto Art and unique 1-of-1 artwork
While many industries stand to benefit from NFTs, few have enjoyed as seamless a transition as visual art. Indeed, traditional fine art shares many similarities with unique 1-of-1 NFT art. In contrast to fine art, however, NFTs make the process of buying art and verifying ownership relatively straightforward.
Notably, 1-of-1 art NFTs dominate the lists of the highest individual NFT sales to date. To be sure, as with traditional art, there is definitely a large gap between the sales prices of the top artists in the space and newer or lesser-known artists.
To illustrate, the single NFT art piece that receives the most credit for breaking through to the mainstream belongs to that list. That work of course is the historic Everydays: The First 5000 Days by the artist, Beeple. And since that landmark moment, many more artists have followed suit, closing high-priced auctions for 1-of-1 NFT and becoming household names in the space.
To list just some of the biggest names in NFT Art there are fellow top-selling artists XCOPY, Tyler Hobbs, Hackatao, and Pak.
Although there is no shortage of traditional artists entering NFTs, digital artists have arguably gained the most from the NFT revolution. Before NFTs, digital art was somewhat of a niche, and selling digital art was not a feasible option for the vast majority of creators.
NFTs have somewhat flipped the script, with digital artists, illustrators, generative artists, and photographers being the most-sought after NFT art creators.
To learn more about some of the names defining NFT art, check out our guide on the best-selling NFT artists of all time.
Generative collections, collectibles, and NFT-gated members clubs
The other major side of NFT art is generative art collections. In fact, it’s fair to say that NFT PFP avatars have driven the mainstream exposure to NFTs more than any other subsection of NFTs until now. Projects like Bored Ape Yacht Club, World of Women, Doodles, and Azuki have become leaders of this exploding field of generative NFT art.
Generative collections combine aspects of computer-generated digital art, trading cards and other physical collectibles, with community forming. This potent mix has led to countless large-scale collections of thousands of NFTs which share common art, style, and aesthetics, and promise a sense of community between NFT holders.
By the same token, it also adds to a sense of competition between different holder communities. Indeed, holders often use their high floor prices and major partnerships as bragging rights over other project communities.
Partially as a reaction to complaints about the speculative nature of NFT collectibles, utility has become a crucial part of this kind of NFT art. Indeed, collectibles are often looked at differently than 1-of-1 NFT art. Mainly in the sense that those NFT owners expect to receive perks from holding those NFTs in one way or another.
Why Are People Buying and Selling NFTs
Royalties are a vital part of the growth of NFT art. To sum up, NFT creators can very easily receive royalties on every single sale of their work in perpetuity. Besides establishing a source of recurring income for artists, secondary royalties have made some NFT artists very rich indeed.
Lack of middlemen
For the entire history of creative industries, artists have relied on intermediaries to distribute their work. For example, a record label needs to produce the song before an artist earns a portion of the sales. Similarly, platforms like YouTube host content and pay the creators. In traditional art, galleries often play the role of middleman and gatekeeper. All of these services take a portion of the artist’s profit.
With NFTs, the artists become their own distribution channel. Moreover, they enjoy the full monetary benefits of their NFT Sales. Especially for creators in major creative industries like film and music, there are plenty of artists charging forward and changing the narrative outlook on their creative careers.
Potential profit for collectors
The other side of the equation is the collectors patronizing and buying the NFTs. It goes without saying that the financial aspect of NFT collectibles is fundamental to their popularity. The success of the most expensive NFT collections has led to a frenzy of speculation-driven NFT art creation and buying. As a result, NFTs work like any other speculative asset: Collectors buy them in the hope that their value will increase and they can sell them for profit.
With all that said, it’s worth noting that this financial aspect creates potential pitfalls for NFT art. As much as the chance at profiting off NFTs has brought many collectors to the space, the speculative part of things has created an unsustainable market. As a result, the current rate of NFT production and the high prices of NFTs – collectibles in particular – have many people sounding the alarm that this is a bubble ready to burst sooner or later.
The public nature of the blockchain also brings along many benefits for NFT art creators and collectors alike. For creators, it’s easy to reward fans and collectors thanks to the record of transactions. Similarly, collectors have an easy way to look at the history of NFT artists before they buy their work. This also makes it easier for collectors to evaluate what a fair market price is for a given work. Thus they can make more informed buying decisions.
All in all, the field of NFT art is still young and developing in many interesting ways. Since investors are still pouring money into NFT projects, we can surmise that NFT art, along with other NFT use cases, will still grow and evolve. One thing’s for sure – art may have been the first significant target of NFT disruption, but it certainly won’t be the last.