NFTs has triggered a digital wave of investment for creatives which is set to grow exponentially in 2022. We find out more.
Despite Collins Dictionary naming ‘NFT’ as its word of the year in 2021, many people are still none the wiser as to its meaning. The acronym stands for ‘non-fungible token’ and means something digital that can be traded.
While the gaming community has been using digital tokens for years, from gifts in social network game FarmVille to boosters in Candy Crush Saga, improvements in technology mean we now have the ability not just to buy items online, but also to resell them, making exclusivity and wealth generation a real possibility in the digital world.
How does an NFT work?
At the heart of the concept is the idea of verification — there’s no more squinting over faded signatures or carefully establishing copyright. Each piece of digital work is considered an asset and is recorded as such in the blockchain — a system that effectively time stamps the piece of work with a record of ownership and can’t be tampered with. It also means that if the owner then wants to sell it on, there’s a record of each transaction in the subsequent chain. What’s more, the original artist can earn a share of each resale, unlike most physical assets.
It’s therefore no surprise that art and music (industries that have drawn criticism from artists for inadequate remuneration) have exploded with digital copies of works. Artist Beeple (real name: Mike Winkelmann) created a piece of digital art that comprised a collage of 5,000 images. Its associated NFT sold at auction for $69.3m (£52.4m) in 2021.
In May 2021, Banksy’s iconic 2005 image, Love is in the Air, featuring a man hurling a bouquet of flowers, sold for $13m (£9.8m). Particle, the company that bought it, stands to make a healthy profit, as it plans on selling 10,000 individual digital parts of the painting as NFTs for around $1,500 (£1,100) each. Those who purchase one will receive a digital collector’s card and the right to ‘call the paintings theirs’. To do so, the company will need to legally ‘destroy’ the physical work.
In some cases, artworks have actually been destroyed, but in this instance the company plans to donate the painting to its own not-for-profit, the Particle Foundation, to remove all value. The role of this organisation is to preserve and tour artworks owned by Particle, but as anyone who buys a piece via an NFT will be an owner of the original, the foundation will allow them to view the now-worthless physical artwork.
While mainstream news around NFTs is largely charitable based right now, with reports of many big names giving back or donating to charities, there’s been a considerable ripple of excitement throughout the creative world over the possibility of verifiable work that promises future royalties to its original owner. Especially as interest in the market is only expected to grow, meaning that in time the works should also appreciate in value.
This brave new virtual art world is growing quickly and traditional auction houses Christie’s and Sotheby’s are already dedicating auctions to NFT works. And while brands, celebrities and established and emerging artists can easily mint and promote their digital collectibles, so can everyone else. From art and photography to music — you just need to be talented (or lucky) enough to create something that will sell.
What’s more, there’s a huge future of possibility when it comes to NFTs. As corporate brands, celebrities, and emerging artists can easily mint and promote their digital collectibles on a thriving, global market. Of course, some in the art world are sceptical of what right now is a virtual art world yet to be proven, but many more believe it to be an investment vehicle filled with potentially significant returns.