Before we start, let me set a few things straight.
1—This article is not saying you SHOULD make or make or buy NFTs or that you SHOULD NOT. It is an issue facing the art world today, and it’s a very confusing topic, so I want folks to understand it and not be scared of it. My goal is to give a little overview from my non-expert understanding and to point those folks who want to learn more towards resources that have helped me get a grasp on this. [EDIT: Let me add here, bc folks are getting it wrong in the comments, the fact that I am writing this article does not mean I or Muddy Colors are advocating for NFTs. I am stating this again, clearer. I want folks to be informed about these things so they can make an educated decision. This article is not to tell you what that decision should be.]
2—Not an expert, so don’t come for me over the details. This is just a simplified overview.
3—This is obviously slanted towards what artists in the fantasy community would be interested in knowing, because, well, we are on Muddy Colors.
4—Whether you are pro-NFT or anti-NFT you can be civil about it. We’ll go into the why’s deeper below, but this is a topic of high feelings and much debate that I’ve seen get downright nasty on social media, to the point that a lot of folks are scared to even type NFT on twitter. So whatever you believe, be nice in the comments. Share opinions, share further resources you like, but Wheaton’s Law applies, ok?
And now, welcome to…
AN INTRO TO NFTs that is as simple as possible from a non-expert meant to clear up some misconceptions and point anyone interested towards more in-depth resources
What is the BLOCKCHAIN, What is Crypto and What is an NFT?
A BLOCKCHAIN is simply a unchangeable chronological record kept by a computer network. Once a piece of data is entered on the blockchain it cannot be changed, but it can be added to and tracked. It is a tool for tracking assets. It is a secure method of tracking business transactions without needing a third party institution like a bank or a government to regulate it. The data is accessible by anyone with the right technology. A “ledger” is the list of transactions tracked on the blockchain.
CRYPTO is short for Cryptocurrency, which is a currency that is not officially regulated by a government and is created (or “mined”) by computer transactions and protected by cryptography. There are many cryptocurrencies, with varying amounts of energy used to created them. Bitcoin is the most well-known, followed by Etherium. There are hundreds, if not thousands, of different cryptocurrencies, and it is important at this point to remind everyone that all currencies (even the big official governmental ones) work because a group of people decide to believe they are worth something. There is no hoard of gold at Fort Knox backing up every American dollar in circulation.
An NFT stands for a Non-Fungible Token. Fungible means interchangeable. Non-fungible is just a fancy word for unique. An NFT is a unique digital token. This can point to a physical object, but there must be a digital component. Most often, this is a piece of unique digital art.
Crypto and NFTs exist because the Blockchain is an unchangeable record of all the transactions around the creation of Crypto and NFTs. It tracks when they are “mined” (crypto) and “minted” (NFTs), who made it, who buys it, and who owns it throughout its life.
What is Positive about these technologies for Artists?
The concept of the Blockchain as we know it has been around since 2008. Many years ago I heard the more tech savvy artists I know talking about the incredible potential of a blockchain to track copyrights both indisputably and automatically. This capability would mean two major things for artists—they could track and defend the copyright of their work much more easily, and they could get a cut of secondary sales automatically, a huge deal to artists who sell to galleries and collectors.
NFTs are ideally a great thing for digital artists — they would finally be able to edition digital art in a way that only artists in the physical mediums could do before, because a digital piece of art could finally be considered and tracked as an original unique piece of art.
Just to be clear, neither of these things are happening in a truly functional way yet. There is a great potential there, like any new technology. It is going to take time for the hype to fade and see what shakes out.
What is Negative about these technologies for Artists?
Well, like any new technology, the scammers are swamping the platforms before most artists even understand the technology. In my opinion this is no different than the wave of scammers that rode in when one-off digital printing became popular. Go look on Redbubble and Society6 — they are full of ripped off art being sold without the artist’s permission or knowledge. This is no different. The big NFT platforms like OpenSea are as lax in policing copyright as Redbubble and Society 6 are. Same old story, sadly. These platforms make money when folks use them, and they make the same amount of money whether that user is legit or not. It costs money and gives no reward to check copyright and defend artist rights, so they’re not motivated to do so.
It is critical to remember that just because someone may make an NFT of your art and sell it, that is not a legal claim and it does not mean they have any rights to your work and it does not mean you could not make a legitimate NFT of the same piece of art and sell it properly if that’s what you wanted to do. This is new technology and many artists I have talked to have been scared that they are getting blocked out of rights to their own work. Trust me, a thousand IP lawyers have been working very hard to build up caseloads protecting Mickey Mouse since the first NFT was minted. Ignore the medium for a second and think about it as if someone was selling a print of your work at a convention. Are they wrong? Yes. Are they stealing from you? Absolutely. Are they going to make a ton of money doing it? Probably not. They don’t have your original files, they don’t have certificates of authenticity. They’re making a copy of a copy of a copy. It’s not good quality. They cannot pose as a truly legit business. They will only be skimming a little low level business at the bottom. It sucks, but it’s nothing new to artists, unfortunately.
What about this stuff I hear about it being bad for the environment?
The original cryptocurrencies take a lot of computing power to create. There are giant server farms dedicated to nothing but mining cryptocurrency 24/7. This uses a lot of electricity, and that’s not great for the environment. However, there are many different cryptocurrency platforms right now, and many NFTs are paid for by cryptocurrencies that either are use less energy or offset their energy usage by using green sources or doing environmental work as part of their creation. I am not going to drill down into a comparison of cryptocurrencies right now. There are alternatives available that do mitigate the environmental impact, and as an artist and/or collector you can choose to use these platforms instead.
Why do people fight about NFTs so much?
Well, let’s remember what we said above — a currency only works if enough people believe in it. So the folks that got into cryptocurrency early need more people to believe in cryptocurrency. It’s not that different than the stock market — a stock is worth more money the more people want it. And if everyone decided tomorrow to pull their money out and cash in their cryptocurrency then the worth of that currency would plummet. This happens in crypto all the time. And this is exactly what happened in the stock market crash in 1929. People got scared and wanted to sell their stocks, which led to those stocks losing money and more folks wanting to sell. This led to folks rushing to banks to pull their cash out — but banks don’t just keep everyone’s money in a vault, they use it on investments — that’s how banks make money. If everyone showed up at once the bank would run out of money AND THEY DID. So now in the US and many countries, there are government agencies that guarantee funds in the bank up to a certain amount, which keeps folks from panicking and pulling all their money out at once.
Crypto is unregulated, which means it isn’t guaranteed by anyone. So if you have a ton of worth in crypto you don’t want to pull it out and cash it in, you want to leave it in the system and convince people that the system is sound so more people add money to the system and it gets stronger and your original investment is worth more money. This is how all financial systems work — there’s just no safeties on this system. If you get scammed out of your crypto, no internet police are going to go get your money back. Crashes in cryptocurrency happen often, and people lose a lot of money. Does that mean you shouldn’t get into it? That’s your call, but if you do it does mean you should be careful and do your research.
Also, this stuff is CONFUSING. I am barely skimming the surface here. Money make a lot of folks squeamish, artists especially. (Trust me, I’m the one negotiating with artists all day.) People don’t understand the system so they don’t want to pay attention to it, and when they’re bombarded by the folks pushing it so hard (see above paragraph) they don’t want to figure it out. So you have the true believer die hards on one side and the finance-avoidant folks on the other and that’s a recipe for fights if I’ve ever seen it. Add in some intense feelings about ownership of your artwork on one side and jealousy of artists on the other and it’s exactly the vicious mess we see on social media every time someone mentions NFTs.
Why are all the most popular NFTs…bad art?
Look, all art is art, so I don’t want to be a jerk to anyone’s creative output. However it is true that the “record breaking” NFTs are not about the art at all, they’re about the hype. Sure the gallery world has gotten into selling NFTs, but a better model for how the NFT industry actually works is…sneakers. I’m not personally into sneaker culture, but it’s very little about aesthetics and almost entirely about exclusivity, celebrity, and hype. The best predictor of how well your NFT will sell is not how beautiful your art is, but how many followers on instagram you have. This will probably change over time, and a lot of serious collectors and galleries are experimenting with platforms that have a physical piece of art attached to an NFT version, but for now, it’s mostly about cool kids buying stuff from other cool kids. The quality of the art attached is mostly irrelevant. Although there are folks in the Fantasy Art Community who are selling NFTs, I haven’t seen any making a significant amount of money from it.
How does this affect me as an artist?
Well, it depends on how you feel about new technology. Are you an early adopter? Do you have an interest in investments and understanding financial systems and have a good handle on e-commerce? Do you make digital art and are intrigued by a way to sell unique originals? Then by all means, make some NFTs. Experiment. Treat it like a game and play with the system. Buy some things first, get a feeling for how it all works. Mint some NFTs. Do a lot of research. Expect to get scammed at least once. I am not about to stand in the way of artists giving folks with money to burn something to spend it on. And there are a LOT of folks in tech with a lot of money in crypto that can’t spend it on a lot of things. That’s why you’re seeing these very high prices for NFTs. Remember, if you want to keep your crypto worth high, you don’t want to take your money out of crypto. (There’s also problems associated with exchanging crypto for dollars, but let’s not go there right now.) And how many things can you buy with crypto? Not a lot. The only thing you can buy is other crypto…or NFTs. I have talked to some artists, especially in the Bay Area, who talk about how many tech bros are walking around crypto rich with nothing to spend it on. That’s why you’re seeing restaurants spring up that only run on cryptocurrency, and NFTs of pizzas. People have money to burn and very little to burn it on. And a lot of folks are happy to give those folks things to spend that crypto on. But unless you already have a following of folks in that area then you’re not going to gain it just by making an NFT.
If that paragraph above sounds like a nightmare scenario and the last thing you want to do is do research on these things, then…don’t! I do believe that advancements in copyright tracking and secondary sales are going to come out of this technology, but that’s going to happen whether you individually participate or not. Remember, the system is as strong as people believe it is, so people who have bought in are going to try to give you FOMO. Ignore it. Go make your art, sell originals and/or prints, take commissions, do your career the way you want to. You don’t need to make NFTs of your work if you don’t want to. You don’t even have to chase scammers trying to rip off your work if you don’t want to. The system works by making you feel like you’re missing out on something. Let me put your anxiety at ease. Go back to doing what you care about and ignore this whole topic for a few years. See what good lessons come out of it on the longer timeline.
How does this affect me as a collector?
Same as above. If everything you’ve read above intrigues you, then dive in, do a bunch of research, and start buying NFTs. RESEARCH EVERYONE BEFORE YOU GIVE THEM ANY MONEY. There are trusted communities to join, platforms that do due diligence and make sure the original artist is involved in everything. It’s really not that different from the gallery world, just a ton more spam. Treat it like a game, and have some fun. Pretend it’s like beanie babies in the 90s. Some folks made a lot of money, but at some point the money moved onto something else (Tickle Me Elmo, as I recall) and the folks left holding the Beanie Babies lost out. Unless they really enjoyed their collection for the joy of it. And if digital art brings you joy, then go for it. Just know you are gambling in an environment even less safe than the stock market.
What about the community aspect?
Since currency is, again, only worth something if a group of people agree that it is, then communities of people spring up around crypto and NFTs that all agree to believe in it and trade together. There’s a lot of groups that exist to check scams and verify good deals. There’s groups of artists who work together to mint NFTs as a group (there are registration costs to get anything put into the Blockchain) just like there are artists who band together to form gallery groups. Every NFT platform has a discord server. A lot of groups now are using new crypto currencies they create to organize group memberships and the currency is not worth money, it’s worth votes in the group. Some of these are what’s called a DAO (Decentralized Autonomous Organization).
There’s a reason all they NFT stuff has come to prominence over the pandemic — we’re all stuck in the house with too much time, too much anxiety, and too little social interaction. Perfect grounds for these communities to grow.
Articles, Resources, Further Reading…
[EDIT: I am adding this video in as well, because a number of folks in the comments are bringing it up. I do not think it fits with the 101 basic info nature of the article’s aim, and it is very much a takedown, but I think it is very well researched (and very long) so I am going to add it here for deeper context, so consider it a 201 level]