How to Wrap Your Head Around NFTs
NFTs: a flash-in-the-pan buzzword or the beginning of a creative revolution? An idea akin to the emperor's new clothes dressed in a fancy tech acronym or a smart, technology-enabled way to solve an actual problem? What you really want to know: is this something you should pay attention to or let it fly through one ear and out the other?
Close your eyes. You're heading back in time, back to when the web was young and wild and free. Here, in this new digital world, you can make and do anything. Put it up and it lives in its own little corner of the internet, every visitor so precious and exciting that a public counter exists to announce each +1.
Fast forward and everything you've ever made, they say it has no value, that it's not real, that it's only purpose and worth is when it's attached to the promotion of something else: a media empire powered by ads, an advertising campaign, or a website built to sell. There's not even a ‘they’. ‘They’ is all of us, trained to view art on a screen as part of an endless stream of ‘content’, the new word given to all the media we consume that isn't creatively subpar, just born in the wrong place for it to have any value beyond a double-tap or at best, a comment (or its too-busy-for-words evolution: an emoji, sometimes a series of them for emphasis).
If only you made ‘real’ art, in the ‘real’ world.
(It sure felt real to you, the exhilaration and vulnerability of creation no less powerful than art made with paint and canvas.)
NFTs hold a hope that all kinds of art matter, plus a few other very important benefits which I'll get to later.
And well, I'm starting to get the picture and the hype. (I had to wade past tons of jargon and simultaneously eye-rolling and awestruck buzz around oh! the millions! they made! with NFTs! these famous rich people!) But every time I think I've made up my mind, I come across a very smart-sounding person calling NFTs stupid or the slightly more tactful version: ‘basically a worthless scam’ (Source: Kotaku). Cue Homer backs into bushes meme.
I try to keep in mind too that there were people who said the internet ‘wouldn't change anything’ and that by 1996, it would ‘catastrophically collapse’. Nope. Still going strong, Mr. I-made-Ethernet Robert Metcalfe.
Maybe you started in the wrong place to make money from art, but now it might be as right a time as any. Set up well by a celebrity-driven boon and a worldwide pandemic that help us attach more significance to the virtual world, it feels like the first time in my lifetime that technology and creative culture have converged at such a frantic pace.
It wasn't that long ago (two articles ago, to be exact) when Reese Witherspoon had just announced her first cryptocurrency purchase. It's now just weeks later and she just announced her first foray into NFTs, only this time it's to the tune of 10x the number of likes. In fact, the number of celebrities leading the NFT boom is increasing every day, and since I started writing this draft, we can now count mega media mogul Martha Stewart, actress Susan Sarandon, and film director Wong Kar-Wai as newly minted NFT creators. And Coinbase, a crypto exchange platform, just passed 2 million pre-launch registrations for their soon-to-launch NFT platform.
But I say, show me the money, and well, NFTs are showing it: so far sales of NFTs have gone up 55% since 2020, with the NFT market expected to reach beyond $1 billion by the end of 2021.
So, let's get to know them and find out for ourselves why so many people believe they're the next big thing.
Now, a fair warning. Your first reaction upon learning about NFTs may go somewhat like mine:
a) What's the point of owning something that can so easily be copied, and
b) Everyone is explaining an NFT as a non-fungible token – am I supposed to know what that means?
We'll come back to question A, but for now, let's get to know what an NFT is.
What exactly is an NFT and how does it work?
NFT stands for Non-Fungible Token, but that doesn't explain a lot about what it is or what it does, and not at all why it's important. Token for what? Fungible, what?
Something that is fungible means that it can be interchanged with something else of the same value.
For example, you could take a $20 bill, and exchange it for two $10 bills, and its value remains the same. That's fungible. Non-fungible, it's opposite, means it can't be. So, you can't take an NFT and exchange it for another NFT, even if they ‘look’ the same; they're not.
A token in the context of crypto represents an asset: something (pretty much anything, not just art) that you want to attach value and ownership to.
Okay, so: ‘un-interchangeable thing that represents an asset’ doesn't have the same ring to it as NFT.
(By the way: cryptocurrency is technically a token too, a fungible token.)
Built on the same blockchain technology as cryptocurrency, an NFT is an asset that can't be interchanged with something else of the same value.
It lives on the blockchain, which means that the asset has a public and verified record of ownership, current and all previous transactions included.
There's a lot of jargon in this whole crypto and Web 3 space, so don't worry if you don't get all of it right away. The most important thing to know is that NFT is really just a fancy acronym to represent the ownership of specific, un-interchangeable things.
Okay, so what else?
What makes NFTs different?
A NFT differentiates between the original asset and its copies
In the digital space, as we all know, it's extremely easy to copy anything. And before NFTs, there hasn't been a way to stake claim of the original and to give it inherent value, which also makes it hard to value and sell digital art. Even if you wanted to support a digital artist, you're thinking: why buy something if it can be copied and there's literally no difference between the original and the second, third, ten thousandth?
NFTs solve that problem by providing a token’ to say "Hey, this is the original and this is who owns it’ (plus a few other details).
Take original artwork. It may not be quite as easy to replicate in real life with probably a bit more effort and skill to copy a Picasso painting than it takes to download a file and upload it somewhere else, but it can be done so that there's no perceivable difference. See: Mr. Bean's replica of Whistler's Mother, the plotline of this late 90s film based on the British sitcom, in which he replaced the original with a print from the art gallery gift shop, and brushed something, I can't remember what, over it to give it a bit of centuries-old texture – then popped it back into the gallery case, good as ‘new’. But of course, if anyone found out, they would've had a fit because copies do not have the same value as the original in the art world, even if the experience is the same.
So to place value on the original, the art world has certificates of authenticity, then sells copies on posters, merch, postcards, etc, for a fraction of the cost. Those certificates of authenticity? They're the real world NFT equivalent.
NFTs are decentralized and executed via code
NFT records are stored on blockchain technology (we dive deeper into this here) and powered by smart contracts, which are details and actions that are hard-coded into the NFT and automatically executed via code.
So, instead of relying on manual work, third party platforms, laws or regulations for the ‘terms’ of the sale, every sale of every NFT is regulated and executed by code, making them secure, public, and verifiable (and also kind of convenient).
Think of it like this: an NFT has a (or many) built-in ‘if this, then that’ conditional statement, without the intermediaries or manual processes traditional purchase processes require. So doesn't that mean they would work great in industries like real estate and insurance where processes are often convoluted? Well, yes.
Not just for digital assets, can apply to physical items
Although the big kerfuffle around NFTs is mainly around digital assets, mostly because physical assets already had their versions of authentication, NFTs can apply to physical items too, such as real estate and designer sneakers.
Although a lot of mainstream media coverage on NFTs has been around art, that's more of a gateway into the big picture value of NFTs, which can apply to basically anything where the use case of records of ownership and smart contracts are applicable.
NFTs are built mostly on Ethereum
NFTs are mostly built on the Ethereum blockchain, just one of many blockchains that exist. NFTs can be built on other blockchains such as Flow by Dapper Labs, Binance, and Iron, as long as the blockchains allow smart contracts. (Bitcoin, the OG cryptocurrency, on the other hand, can't support NFTs.) Since Ethereum is the largest NFT ecosystem at the moment, it's the most commonly associated with NFTs.
Creators and artists own their work (resale royalties too) vs the platforms they’re sold on
This is a big deal for anyone who makes things on the internet (and as we've established by now, in real life too). Prior to NFTs, ownership could be easily forged, easily made worthless, and easily cast to the side as more hands and transactions come into the picture for a piece of the pie.
With NFTs, creators can prove they're the creators, determine the scarcity of their work, earn royalties (even infinitely, if they wanted to), and do this all without being tied to another platform, company, or person – thanks again to the power of smart contracts.
are non-fungible tokens which means they represent un-interchangeable, unique assets
apply to both digital and physical items, but their rise in popularity stems from the possibilities of ownership extending to the digital space for basically the first time ever
are powered by smart contracts, which act like built in if-this-then-that conditional statements that automatically execute terms of a sale based on code
can be purchased in many places including NFT marketplaces like SuperRare, Foundation, Mintable and OpenSea, as well as in-game for game assets, on traditional art auction sites such as Christie's (yes, of the famed $65 million Beeple sale), and on independent websites such as NBA Top Shot, which was built on eCommerce software Shopify.
Okay, but really, what is an NFT?
So now you know what NFTs are, but what are they really? What do they actually look like out in the real, er, digital world? Spoiler: they're much more than (arguably overpriced) pixel art and crypto-kitties.
And it's not just artists and celebrities leading the charge: brands are catching on, fast.
That's because the hype, the fanfare, and the creative possibilities far outweigh the costs, especially when compared to typically more expensive marketing campaigns. Craig Elimeliah, executive creative director at the agency VMLY&R, speaks to the application of NFTs for marketing and brands: ‘It’s not like having to build a website for $100,000 or do a video for $50,000.’
Here are some examples:
Monarchs: a generative art project by artist and creative director Eric Hu, animated by Roy Tatum
Async Art: a marketplace for dynamic and interactive NFTs where changes to the art are automated and programmed into the code.
Paris Hilton's second first NFT: In March 2021, Paris tweeted that she was excited to release her first NFT. She probably forgot that she already released her first one in August 2020, a drawing of her cat. Nonetheless, she is very excited about NFTs.
Bulgari: the jewelry brand hired artist Refik Anadol to create an AI-powered installation that's currently touring around the world. After its last stop, the art will be minted and sold as an NFT.
The (10k+) responses to Reese Witherspoon's tweet calling all women NFT creators.
NBA Top Shot: an online NFT exchange selling video clips of top NBA moments.
Tweets: Jack Dorsey, the co-founder of Twitter, sold his first tweet for $2.9 million in August 2021. (Why though? Think of it like owning an autograph of a celebrity, a piece of digital history. All proceeds went to charity, with Dorsey's NFT sale specifically to Give Directly Africa fund to help with Covid-19 response.)
William Shatner's Trading Cards: 10,000 NFT packs featuring images of Shatner's life and career sold out in nine minutes.
Beats: Stan's Revenge is an original instrumental beat by Eminem, which was bought by fan Tom MacDonald for $100,000 and then used it to make this song (Dear Slim), which now has 12 million views on Youtube.
Fantasy sports: Sorare is a fantasy soccer/football game using NFTs.
Albums: Kings of Leon released their latest album, When You See Yourself, as NFTs.
Tickets: Snoop Dogg sold 1,000 NFT passes for his private Ethereum Metaverse Party (at last count, he holds over $17 million in NFTs).
Domain names: With the rise of crypto, domain names ending in .crypto and .eth are experiencing a surge in popularity and of course, they're being minted as NFTs, with some being sold for over $100,000.
Patent disclosures such as these NFTs for two Nobel Prize-winning inventions, auctioned by the University of California, to fund further research.
Code: the original source code for the world wide web, written by Tim Berners- Lee, was sold for $5.4 million by Sotheby's.
Weddings: ‘Welcome to love in the age of cryptocurrency’, indeed: ‘Unlike their marriage certificate (which was contingent upon government approval), their online relationship status (which Facebook could delete in a heartbeat), or their paper ketubah (which would burn in a house fire), they personally control the NFT. Public, poignant and permanent, it’s the ultimate romantic gesture.’
Blog posts: Mirror is an online publishing platform where blog posts are minted as NFTs.
Poems: Britain's most followed poet on social media, Arch Hades, sold a poem for $75,000, which is the second most expensive poem ever sold at an auction, only behind (a handwritten, non-NFT) poem by Oscar Wilde.
Phew, okay. That was a lot. Get the picture now?
How to make an NFT
The process of creating an NFT on the blockchain is called minting an NFT.
You need your assets, of course.
You need some cryptocurrency (probably Ethereum, but could also be one of the other NFT-supporting blockchains) and a wallet (such as MetaMask) to hold it in. This verifies ownership of the NFT creator since the wallet is linked to you during the minting process, as well as pays for the cost of the network transaction fee required to mint an NFT, which usually ranges from $50-100 USD.
And from there, it depends on where you're looking to sell your NFT. Marketplaces can make the process easier by providing a user-friendly interface to mint your NFT and list it. (For example, here's how to mint an NFT on Foundation.)
You can also mint NFTs using some code and API, as well as create your own platform to sell your NFTs. (Pssst, project four in SuperHi's Crypto + Web 3 for Creatives course covers exactly this.)
Some challenges surrounding NFTs
NFTs and the environment
We covered this a bit in the first article in this series focused on cryptocurrency, but it remains a big barrier to adoption for many who find the ideas worthwhile, but don't find the environmental trade-off worth it.
Aside from the fact that many blockchains are moving to the more clean and energy-efficient Proof of Stake mining mechanism (Ethereum, NFT's biggest player, is set to have a fully usable Proof of Stake chain sometime in early 2022), NFT minting doesn't actually increase energy consumption. It's the crypto mining process required to power transactions, and the network's energy consumption is based on the number of miners (the people and their computers that are verifying transactions). So, Ethereum is designed to run on the same energy consumption, regardless of the number of transactions happening on the blockchain.
The lines of ethics are blurry here, though, because it can be argued that even if more NFTs don't directly increase energy consumption, the adoption of them surely will bring more miners, which will. So this is a big challenge, one that many are working on to solve in order to bring the ideals of crypto to fruition with less harm on the planet.
Hidden fees and costs
There's a fee that comes with selling and buying NFTs, which is known as ‘gas’ (gasless minting is available on some NFT platforms such as Mintable). This fee is the amount of cryptocurrency that's required to perform a function such as verifying an NFT sale on the blockchain, and the exact fee varies depending on how busy the network is at any given time. When more people are using the network, the gas is higher. Think of it like driving during rush hour.
This means minting (and purchasing) an NFT usually costs more than you think it will. I learned my lesson when I bought a domain for what I thought was $15; it ended up being $150.
I've since learned that with fewer people transacting on weekends, that's currently the cheapest time to mint NFTs. Well, you mint and you learn.
Democratization turned elitism
So you must've noticed: almost all the big stories about NFTs involve people who already have a lot of money (almost, because the other subset of big stories about NFTs are about the too-young-to-even-drink-and-now-I-have-$$$ set). So much for giving power back to the people, eh? Some look at crypto this way and it's not hard to see why: when you're selling pixel art and tweets for more than some people make in an entire year, it's hard not to feel like all of this is just a game for the rich and privileged, another way to throw piles of money at something and call it art, democratization, a way to give back to the fans.
NFTs sound great for the independent, emerging artists and creatives among us. But it's quite obviously the rich and already famous that can mint and sell more, and spend more to buy even more (especially when so many NFTs are auctions, whoever has the most wins the most.)
Could we be in the midst of a cautionary tale, one of many dystopias that started out as utopias, oligarchies that were proposed as meritocracies? It wouldn't be the first time.
Transactions on the blockchain are all public and verified, but they're also anonymous. You as the buyer or seller are identified by a crypto address, which is just a series of letters and numbers with no attached legal identity.
Because of this anonymity, some critics believe that NFTs are ripe for money laundering schemes, which could make making money from illegal activity easier. Just create an NFT of a blob, then sell it to yourself for exorbitant amounts of money. Rinse and repeat and you have a stash of money and basically worthless NFTs with artificially blown up prices. (You didn't hear it from me.)
Technically, it's like a certificate proving you own something, but it's not the thing itself
Let's say a certificate exists out there saying someone owns this thing. It's still up to the people to respect that, isn't it? Anyone can come by and say, well, that certificate doesn't mean anything because I'm saying it doesn't mean anything.
An NFT is not the asset itself. You're not minting the actual art on the blockchain. You're minting the idea of it. Remember: it's a token representing the asset.
I once read a Twitter thread where someone likened NFTs to the Star Naming Market where some people decided that they could register stars and sell them, and people bought into it, but all they really got was a piece of paper. Did that prove ownership?
Hypothetically: what if I were to mint an NFT on Ethereum and someone else uploaded the same JPEG and minted an NFT on another blockchain? Who owns it? NFTs don't hold legal weight, so the answer might be no one. What if I decided to mint the ocean? Could I? I guess. Does it mean anything? Probably not.
Barriers to mass adoption
Because NFTs are traded on Ethereum and similar blockchains, in order to hold an NFT, you need to know how to open and use a wallet that can store NFTs. That's a hurdle for most of the world outside of early tech adopters. But I opened a crypto wallet and, spoiler: it was much easier than opening a new bank account.
That's not to say it can't be done, after all, we've all gone from thinking the internet was going to combust and not change anything to the internet being very alive and well, in fact so alive and so well that it's taken over every single aspect of our lives, all in the span of a couple of decades.
It's not exactly a question of predicting the future. When the future is just made up of the actions of people, the question becomes about who cares enough to make it happen.
Things become what we make of them and today, there are enough people (and growing!) working to make NFTs and the whole Web 3 ecosystem not only more user-friendly, but also more approachable. There are even alter egos (Cozomo de' Medici aka Snoop Dogg, NFT collector extraordinaire) and entire venture funds (Variant Fund aka a first-check crypto fund investing in the ownership economy) dedicated to this new world.
Now, back to the biggest question, certainly the one that I had: "What can you do with claim of ownership? What does it even matter that you say you own ____?"
Why should creatives care?
When I’ve got my graphic designer hat on, I’m thinking about ephemera; nothing lasts at all. You make a logo, the client will inevitably want a new one. Websites go down. One of the heartbreaking things I’ve had to accept over my career is that there’s a lot of stuff in my portfolio that just doesn’t exist out in the world anymore. All I have is screenshots. NFTs can be more resilient. – Art director Eric Hu as interviewed by Jose Mejia, for Friends With Benefits
It wasn't that long ago that the idea of ownership was cast aside as archaic. Media was buzzing with headlines like ‘The End of Ownership?’ and reports of the rise of the rental economy. Today, we can rent houses, clothes, cars, and rides. When a lot of the world seems to be moving away from ownership, what does ownership matter? Does it?
I'd like to think that it's not as though we've abandoned the concept of ownership altogether, just that we've come to decide (and maybe not all of us, but enough) that there are some things we don't have to or want to own, and there are some things that we'd like to. Being able to experience more for less is possible now, just as we're now turning a corner on being able to own the experience of the things we do value and find worth keeping. Cynics may attribute the rise of wanting to own the intangible and amorphous to our inability to own the things that previous generations could so easily: housing, for example.
So what can you do with the intangible idea of ‘ownership’? When it's a physical item, that's easy. It's in your physical possession. What about digital things? Well, who says they have to stay digital?
You can do exactly what you do with physical art: put it up. And why not? We've invented digital photo frames, heard of those? Imagine: art on your wall that moves or art on your wall that changes when you want it to? And what if, just like how 2D printers became a staple in households and offices, 3D printers branched outside of the realm of industrial and product design hobbyists? What if you could print the 3D art you own? Then, print it again when it breaks? Or print it again to give away? Now, doesn't digital art all of a sudden sound more valuable than physical art? (We're not too far off with Beeple's $69 million NFT, placing him in the top three of most valuable living artists, physical or digital.)
Why shouldn't digital art be valued and owned the same way as physical art? Why shouldn't an essay be worth money for the value of its content, not for the number of clicks it gets for an advertiser? What if we could pay to have and to hold something we want, love, admire, respect, are profoundly excited about – and not just sit in awe while our beloved creator survives on exposure before fading into oblivion? What if we could say I like what you're doing and I believe in you/it and support them doing more of it?
Art and content are industries where payment, especially for young and emerging creators, comes in the form of ‘exposure’ until the few that can keep going through luck, grit, or privilege, make it to the end. What if it wasn't the few but the many?
Okay, officially stopping with the philosophical musings now and getting back to the real world: while a lot of the backlash around NFTs brings up conversations on wealth and privilege, the media skews that because people throwing lots of money around generally makes a news story. That doesn't mean that every NFT that's made is sold, and that every NFT is worth lots. And it certainly doesn't mean that every NFT creator is a celebrity, billionaire, or even a very successful artist. For every million dollar rock (not slang for diamonds), there are many more creators just trying to land on solid ground. For many people (maybe even you), NFTs aren't their path to millions; they're the path to making art and making a viable living, period.
If you think about it, all art, all everything, can be argued as intangible or overvalued. Who gets to draw the line? NFTs say no one, and everyone, at the same time.
‘This digital world is what you make of it in the end.’ – Ciara, singer
Ana Wang was previously the Head of Content at SuperHi. She is an ex fashion designer and copywriter who ran a whole bunch of ecommerce stores and brands and then helped other people run ecommerce stores, then helped other people help other people run ecommerce stores. Now, she's a creative generalist who plays with different mediums to tell stories.