NFTs: A Digital Artist’s Guide
If you’re a digital creative, you might have heard a lot about NFTs (non-fungible tokens) and how they’re changing the landscape for digital artists.
But some of the concepts behind NFTs and cryptocurrency are hard to explain, even if you’re interested in joining the NFT craze.
This article will give you a brief overview of NFTs, including what they are, how they work, and whether or not creating NFTs from your digital art is the right thing to do.
Ready? Let’s do it.
Table of contents
- What is an NFT?
- How Do NFTs Work? (TL;DR Edition)
- The State of NFTs in 2021
- The (Semi-)Serious Case for NFTs
- The Current Problems With NFTs
- Should Digital Artists Create NFTs?
- Our Opinion
01. What is an NFT?
A non-fungible token (NFT) is a cryptographic token used to represent a single digital item.
If you’re in the loop with cryptocurrency, that definition makes sense. But if you aren’t, it’s confusing. We’ll cover how NFTs work in the next section.
For now, think of NFTs as a one-of-a-kind fingerprint that you can add to your digital art or file. This fingerprint is unique, and it’s easy for computers, online marketplaces and auction houses, and art collectors to identify.
When you attach the NFT to your digital assets, you’re claiming that file as the “digital original” of your artwork and that every other version of that artwork is just a copy.
By doing this, you can treat your digital art just like a printed original by creating one authorized digital copy.
NFTs work by creating exclusivity around digital artwork and aim to make it truly unique.
02. How Do NFTs Work? (TL;DR Edition)
NFTs use a digital ledger (a collection of financial accounts or records) called a blockchain to authenticate your artwork and keep track of any related transactions.
To protect its data and maintain authenticity, blockchains are typically created as decentralized file systems that are spread over many computers.
Every computer keeps its copy of the digital ledger, and transactions are validated against multiple copies of the ledger to make sure that all data is accurate. When a transaction is made, all computers on the network record the transaction into the ledger so that changes can’t be made retroactively.
If a malicious user tried to make changes to one ledger, that ledger would no longer match what all the other computers in the blockchain have on file.
This technology underpins popular cryptocurrencies like Bitcoin and Ethereum, which have gained value as a tradable, real-world currency.
So, why does all of this matter for NFTs?
Most NFTs are bought and sold using modern cryptocurrencies and their associated blockchains.
When you create NFTs, you’re creating a unique item that is recognized by every computer on the network. When you sell NFTs and a buyer purchases your art, they’re also purchasing the NFT attached to it.
All computers in the blockchain record that transaction, which means that there is a chain of ownership from the current owner all the way back to you, the original creator.
As with classic paintings and antiques, that traceable record of ownership matters. As you grow in popularity and your name recognition grows, your art also becomes more valuable.
Thanks to the record of transactions provided by the blockchain, someone who purchased your NFT art can prove that their digital collectible is a true original.
03. The State of NFTs in 2021
So far, we’ve discussed how NFTs use blockchain technology to create a traceable line of ownership from the original artist all the way to the current owner.
So, what’s going on with the NFT market?
The NFT Gold Rush
Right now, the world of crypto art is experiencing something of a gold rush. That’s because a few artists have made it big selling digital art.
Here are a few examples:
- Digital artist Beeple recently sold an artwork collection for $69 million through Christie’s Auction House.
- Chris Torres, creator of Nyan Cat (warning: link contains sound), sold the meme as a .gif digital file for $590k.
- CryptoPunks by Larva Labs has multiple NFT sales in the millions.
- CryptoKitties, a collectibles game based on blockchain technology, regularly generates sales over 100k.
There have even been successful attempts to drive up the price of traditional art by digitizing artwork and then destroying the physical copy.
This recently happened with a piece of fine art from street artist Banksy. After a group of crypto-savvy individuals purchased the physical art, they digitized it and burned the original to create a one of a kind NFT that no longer exists in the physical world.
The tactic was successful, as they managed to sell the piece for $380k — nearly tripling the cost of the original when it was purchased.
NFT Gets . . . Weird
As the market is flooded with new forms of digital art, things have started to get a little weird for NFTs.
- One man sold an audio recording of his fart as an NFT.
- Brands like Charmin and Pringles have started creating digital collectibles of their own products.
- The NBA’s Top Shot series aims to create digital trading cards based on plays made by star athletes on the court.
- Sorare allows players to buy, sell, trade, and manage a virtual soccer team using digital playing cards.
- Twitter’s Jack Dorsey sold his first tweet for $2.9 million while Tesla’s Elon Musk declined a $1.1 million offer to buy one of his tweets.
The massive influx of new art also comes with a lot of low-hanging fruit. Many of the newly minted NFTs posted on OpenSea are downright bizarre as content creators continue searching for the next big craze.
That’s because no rules currently exist to determine what can or can’t be an NFT. Everything from paintings and photographs to digital trading cards, audio recordings, or social media posts are fair game.
And buyers are snapping them up.
04. The (Semi-)Serious Case for NFTs
Right now, interest in NFTs is at an all-time high, but is it a short-term venture or a long-term investment?
And why should creatives looking for a long-term, sustainable business model consider getting involved?
Authenticity Matters (Sometimes)
One of the strongest cases for NFTs is that authenticity matters to some buyers. The idea that a collector can own an authorized original inherently adds value to any piece of art.
After all, there’s only one true “Mona Lisa” or “Starry Night.”
One of the reasons that CryptoKitties, CryptoPunks, and other digital collectibles are so valuable is because they are completely unique. For some buyers, the scarcity created from originality really matters — even if that scarcity is artificial (more on this below).
As an artist, you can take advantage of that by creating digital originals of your art and releasing them for public consumption.
However, just like in other sales opportunities, your success is likely to depend on your fanbase and popularity. Beeple’s art didn’t just sell because it looked amazing. He has a huge fan base and massive following, which translated into value at the time of sale.
By the same token, the larger your fanbase, the greater that authenticity matters.
Much like a first edition print or signed copy of your favorite book: Unless the author has a huge following or some kind of cultural significance, the signature won’t be very valuable.
Cryptocurrency Isn’t Going Away
Bitcoin has been a volatile concept since it first launched in 2009, but that doesn’t mean that it’s going to crash or disappear anytime soon. The Ethereum blockchain is no different.
In particular, Ethereum is a robust system designed to facilitate the creation and sale of smart contracts without the need for a centralized authority like a government or a bank.
That’s important from the perspective of long-term value. While it isn’t immune to market forces, these networks and currencies operate on a global scale.
And these currencies are becoming more accessible for everyday users. While they aren’t mainstream yet, it’s infinitely easier to set up a digital wallet and get started with cryptocurrency — especially compared to a decade ago.
Major financial players like PayPal allow crypto purchases directly. Apps like BitPay enable users to make secure purchases in-store and online using a cryptocurrency-powered MasterCard, Apple Wallet, Google Pay, and others.
If you want to explore this new marketplace, NFTs are one of many ways to offer unique and original content.
Royalties, Royalties, Royalties
NFTs have one major advantage for artists that goes beyond exclusivity, uniqueness, or originality.
NFT creation platforms like Rarible allow content creators to easily set up NFTs and royalty fees for their original art. This is a powerful incentive for many artists because it means that each and every time your art is sold, a portion of that sale will end up in your bank account.
The premise, according to Ethereum.org, is to ensure that artists continue to “retain ownership rights over their work, and can claim resale royalties directly.”
For artists who want to make a living off of their work, royalties and resale may be a big motivator to get involved in NFTs and work to drive up the value of their digital art.
05. The Current Problems With NFTs
It’s true that NFTs present a lot of opportunities for artists, but a deregulated market also comes with several downsides that you should consider before getting involved.
Here’s a quick look at the current challenges facing NFTs, digital art, and crypto in general.
One of the biggest problems surrounding NFTs is the concept of scarcity. Digital files are flexible and, in most cases, indistinguishable from one another.
A single digital copy of your art can be shared with millions of people and they’ll all have the same experience. With your permission, they could even print your art and display it in their home — all without diluting the experience for other fans.
As we mentioned earlier, there is only one true “Mona Lisa” or “Starry Night,” and NFTs try to replicate the originality and uniqueness of physical art by allowing artists to name a file a unique, digital original.
But that analogy breaks down because of the ubiquity of digital files, how we expect them to be used, and how we understand their limitations.
While NFTs do give you the opportunity to say which digital files are “original copies,” this also creates artificial scarcity in the market.
Innately, your fans know that there is no real difference between the NFT-version of your art and a digital file they could find online.
And, because we’re talking about digital files, everyone knows that the file could easily be duplicated at any time.
While some buyers find this exclusivity valuable, others simply won’t see the point.
Verifiability & Theft
Earlier in this article, we talked about blockchain technology and how NFTs are uniquely identified on the network.
Once your digital original is uploaded to the blockchain, a line of ownership can be traced back to the original artist or uploader.
But there are two important distinctions to make here:
- The blockchain isn’t tracking your art. It’s tracking the unique token (NFT) attached to your art.
- The blockchain has no way to verify if the uploader owns the content that they are uploading.
What does this mean for users?
It means that the integrity of the system and the originality of the product are threatened at a fundamental level because stolen art could be uploaded and passed off as authentic.
And this isn’t speculation. It’s already happening!
Thieves can easily steal your artwork and upload it as their own or create their own NFT of your one-of-a-kind piece and try to sell it on their own.
Buyers could check the history of the NFT and try to determine if the piece they want to buy is authentic, but this process isn’t as straightforward as you might think.
A scammer could create online profiles using links to your own social media as proof of authenticity. Buyers, in a rush to bid before an auction closes, meaning they'll miss their opportunity for ownership, may not do their due diligence.
This is an ongoing issue and, because the market isn’t well-regulated, is one that is difficult to address.
Infringement & Illegality
Another major problem for NFTs boils down to marketplace legalities and copyright infringement.
While this does encompass theft (mentioned above) at some level, that is only part of a much larger problem.
Some artwork, like fan art, can’t be legally sold due to existing copyrights. That’s why sites like Redbubble have worked hard to become an authorized platform for fan art sales. It’s also why you can’t sell fan art prints on print-to-order websites like DeviantArt or Society6.
Right now, NFTs of beloved cartoon and comic book characters — clearly in violation of modern copyright laws — are being openly transacted on many marketplaces.
And it’s only a matter of time before big companies get involved.
This is potentially a problem for NFTs because of the legalities involved. NFTs are collectibles backed by real-world currency.
What happens to sellers who sold copyrighted works for a profit and/or buyers who didn’t realize that the work they paid for was illegal or counterfeit?
That’s likely to become a messy (and costly) situation.
Limited Legal Recourse
One major consideration for artists is how the lack of a governing body may impact your ability to seek legal recourse when dealing with fraudulent NFTs.
If a thief sells your art through a popular website, you may be able to petition the website to stop sales, ban accounts, or block the transfer of funds.
While this policy is similar in some ways to websites like Instagram or Facebook, a major difference is that these platforms are NFT marketplaces where the primary goal for users is to buy and sell digital goods.
On top of that, because thieves can easily operate from other companies and transact electronically, it can be extremely difficult for artists to take legal action or even to prevent scammers from stealing again.
Remember: Cryptocurrency is part of a worldwide marketplace, and it runs 24/7. Unlike governments, this system has no boundaries.
FOMO & Market Volatility
Unlike most modern currencies, cryptocurrencies are notoriously volatile.
Since May of 2020, the price of a single Ethereum Coin — the cryptocurrency of the Ethereum blockchain — has risen from around $175 USD to over $1500 USD.
And market prices can fluctuate drastically, with valuations changing by double-digit percentiles on a regular basis.
Some of these changes are driven by the fear of missing out (FOMO) as trends like NFTs have grown in popularity, but the markets are historically unstable and have been no stranger to major corrections in the past.
This means that the value of digital currencies could rapidly shift. NFTs (not cryptocurrency!) could become a thing of the past and see a massive loss in value, or they could continue to increase in value as cryptocurrencies evolve.
Though NFTs aren’t directly at fault when it comes to environmental damage, the growing demand for cryptocurrencies increases demand on the energy infrastructure used to validate user transactions and grow the currency.
Bitcoin, Ethereum, and other digital currencies can generate hundreds of thousands of transactions per day, but all transactions need to be verified and validated by the network.
To do this, these currencies use a process called “mining” to verify those transactions and add them to the ledger. As a reward for this work, miners can earn network currency.
You can read a more detailed explanation of this process here.
What this essentially boils down to is that increased demand on the network increases the total carbon footprint of the currency — that is: How much energy must be invested in order to process transactions and validate the network ledger.
It’s currently estimated that Bitcoin has a carbon footprint that is comparable to Switzerland and that the electrical energy necessary to complete and validate a single Bitcoin transaction could power the average U.S. household for almost a month.
If you’re an environmentally conscious artist, you know that everything you do — from creating art on your computer to posting on social media — increases your personal carbon footprint.
One artist calculated that releasing six NFTs cost more than running his entire art studio for two years!
As we mentioned earlier, NFTs aren’t directly responsible for this environmental impact, but they can increase the value of the cryptocurrency and its overall carbon footprint.
Existing Market Perceptions
Lastly, NFTs suffer from existing market perception caused by the other problems in this section.
To some artists, NFTs can come across as dangerous, complicated, costly, or unethical. Until the market improves and artists can better determine whether or not NFTs will stick around, it’s hard to blame those perceptions.
Though they’ve been around for a while, NFTs and digital collectibles made their way into the mainstream as the market started making overnight millionaires.
Google Trends data demonstrates just how suddenly NFTs were pushed into the spotlight.
It’s understandable that many artists are skeptical. Until steps are taken to address underlying issues around theft, infringement, and legality, that seems unlikely to change.
06. Should Digital Artists Create NFTs?
If you’ve stuck with us this far, then you have a pretty good idea of how NFTs work, why you might want to create them, and the downsides of getting involved with these digital assets.
But none of that answers a very simple question: If you’re a digital artist, should you spend your time and money creating NFTs from your work?
It can be a hard question to answer, so here are a few things you might want to consider:
You Need Crypto To Buy & Sell NFTs
NFTs may be a logical choice if you’re already engaging with cryptocurrency since you’ll have everything you need to jump right in.
If you’re new to crypto and blockchain technology, you’ll need to take several steps in order to get set up to sell. This includes deciding what cryptocurrency you want, getting a digital wallet, purchasing your currency, and then continuing to manage your digital assets over an extended period of time.
This guide from NerdWallet can help you get started with bitcoin, but the process is similar for all other digital currencies trading on the market today.
As a digital artist, this is a necessary first step to selling NFTs, because your crypto art will be bought and sold using these forms of payment — and you need to be able to pay for setup fees, receive funds from your auction, and more.
Creating NFTs Is Easy but Expensive
There are several great marketplaces designed to help you get started when creating NFT artwork.
Each of these platforms has advantages and disadvantages based on what kind of NFT you want to create. For example, SuperRare is known for its social aspect while Nifty Gateway focuses on exclusive content.
But, while the uploading and publishing process is typically straightforward, the cost of creating NFTs can be somewhat deceptive due to transaction fees. For Ethereum users, this is called gas.
These transaction fees fluctuate with supply and demand in the market. Here’s an in-depth explainer, but the basic premise follows:
It costs a lot of computing power to create transactions on the blockchain network, and not all transactions are created equal. Gas and similar transaction fees are there so that the user can cover the operating costs.
Remember the crypto miners that we talked about in the last section? Those miners determine gas fees based on the cost required to process transactions on the network.
When demand is high, you pay more per transaction. When it’s low, you pay less.
If you create your NFT during a peak time, you could end up paying substantially more than if you performed the same task during a low-traffic period.
Crypto Adoption Isn’t Mainstream
From Grimes to Beeple, most of the multi-million dollar sales that we’ve seen in the NFT space come from popular brands and artists with a large fan base.
While it’s possible to get lucky and see huge success in selling NFTs, cryptocurrencies still haven’t gone mainstream. While it’s getting there, true market adoption may still be a long way off.
If your fans aren’t actively using cryptocurrencies, don’t understand it, and don’t want to get involved, then selling exclusive collectibles to your audience may not be successful.
NFTs Could Be a Bubble
Right now, NFTs are a hot commodity, but that could change overnight.
At Team Paperlike, we aren’t financial experts, so we’ll abstain from telling you how to spend your money — but this is something you should strongly consider.
Due to the limited financial regulations surrounding cryptocurrencies, these assets are volatile and prone to fast market shifts and bubbles.
07. Our Opinion
While we believe that cryptocurrencies are here to stay, it’s far too soon to tell how NFTs will truly impact digital art in the long term.
For now, we believe that the market is too far out of reach for many artists and buyers. Unless your audience already uses crypto for other purposes, you may be attempting to sell NFT art to buyers who know nothing about you or your work.
The risks surrounding NFTs and the volatility of cryptocurrency make it difficult to recommend getting involved.
The market is flooded with content, user value is difficult to define, and the state of the market is speculative at best.
If you do choose to give crypto art a shot, be sure to proceed with caution.