The Latest Trend in Digital Art: Crypto Art and NFTs
The answer: a unit of data called a non-fungible token (NFT). Crypto art is digital artwork that’s linked to such a token.
With a breathtaking rise in value, NFTs have been racking up headlines. But not everyone understands what they are and if the potential is real.
In this blog post, we’ll take a look at how crypto art came to be, what’s its status now, and where this type of digital art is headed.
What is blockchain crypto art?
In the physical world, art is made through traditional techniques like painting and sculpture. Today, there’s an equivalent in the digital world—crypto art.
Crypto art is digital art linked to a unique non-fungible token, known as an NFT. The piece of digital artwork that’s linked to an NFT gains a digital certificate that provides proof of ownership.
Adding such a certificate is a significant advancement because this has never been possible for digital artists before and opens new possibilities for selling digital artwork.
What are non-fungible tokens?
A non-fungible token is a unique collectible digital asset, and it can’t be exchanged one for another.
To fully understand the non-fungible tokens definition, let’s look at the meaning of each word.
- A token is a unit of value representing an asset in digital form (called a digital asset).
- Non-fungible means non-exchangeable—you can’t give it or exchange it for anyone else to use.
Some people think non-fungible tokens (NFTs or nifties) are like Bitcoin and Litecoin.
To a certain level, that’s true. They’re all types of cryptocurrencies, which don’t physically exist and aren’t governed by any central authority.
But non-fungible tokens aren’t quite the same as digital coins.
Digital coins are built on their independent blockchain—a digital ledger to store transaction data in blocks linked to form a chain.
Meanwhile, tokens don’t have their own blockchain. They’re created on top of an existing blockchain like Ethereum and NEO.
NFTs can take the form of JPGs, MP3s, GIFs, tweets, virtual trading cards, images of physical objects, video game skins, virtual real estate, and more.
Because NFTs hold value, they can be sold just like other types of art. NFT creators can choose to sell the ownership rights as a one-off work. Or they can issue a series of digital copies comparable to limited art prints or trading cards.
A good example of non-fungible tokens is CryptoPunks. The punk avatars below are priced from $30K to over $100M each.
Once a person purchases an NFT like a CryptoPunk, they have the digital rights to resell, distribute, or license the digital asset as they want. And they can resell the NFT at a much higher price than what they paid for.
Why should you sell NFTs?
Many NFT creators believe this space will explode in the future. “This digital art market is only getting warmed up and it could quite easily take over the $67B (physical) art market in the not too distant future. […] The traditional art markets, galleries, and auction houses that don’t see this and don’t prepare will become obsolete in 10 to 15 years,” said crypto artist Trevor Jones.
Another reason is that selling NFTs is simple. You can sell your cryptocurrency artwork directly to global audiences without needing a middleman like a dealer or art gallery. This helps you keep a significantly greater portion of the profits you make from sales.
William Shatner, best known as Captain Kirk from “Star Trek,” is a good case in point. He invested in crypto art in 2020 and issued 90K digital trading cards on the WAX blockchain showcasing various images of himself. Each card was initially sold for approximately $1 and now provides Shatner with passive royalty income every time one is resold.
Here come two questions: how is the value of NFTs determined? And how do you price your crypto artwork for selling?
Understanding the value of non-fungible tokens
Most NFTs are part of the Ethereum blockchain, which enables you to verify that you’re the sole owner of that work.
Let me break this down.
Look at this Nyan Cat meme below. It was sold for $590K.
The image itself, of course, isn’t worth $590K. Technically, a user could find this meme on Google, capture it with a screenshot, download it, or recreate it using Photoshop, right?
The person who bought the Nyan Cat meme doesn’t own the meme. What they actually own is a piece of code on the Ethereum blockchain showing the ownership of the unique token (data asset) associated with the meme. That’s the reason why you can’t sell the meme you downloaded on Google—your file doesn’t hold that code.
Take this 10-second video clip created by the crypto artist Beeple as an example:
In October 2020, Pablo Rodriguez-Fraile paid nearly $67K to buy this crypto artwork. About four months later, he sold it for $6.6M!
How’s that possible?
It’s because an NFT can be valued based on several components. For example:
- Utility: Utility value means how the NFT can be used. Is it limited to use on specific platforms or for certain games? If it’s meant for different purposes, its value would definitely be higher.
- Ownership history: An NFT’s value depends on the identity of the creator and its previous owners. If it’s created or owned by high-profile artists or famous brands, it’ll have a higher value.
- Future value: Is the NFT one-of-a-kind or mass-produced? Does the creator of a particular NFT have the opportunity to earn royalties from future reselling transactions? An NFT’s value can be driven by scarcity of supply and future cash flow.
- Liquidity: Is it easy to trade the NFT on the market? Will there be many potential buyers or just a few? High liquidity translates to a higher value of the NFT.
That said, there’s no formula for determining the value of a meme, a GIF, or a tweet. With crypto art, its worth depends on how rare it is or what it means to the person who wants to buy it.
Now that you’ve understood the basics about NFTs, let’s move on to learn where and how you can sell them.
Marketplaces to sell non-fungible tokens
You can sell NFTs on platforms like OpenSea, Mintable, Nifty Gateway, SuperRare, Bitski, KnownOrigin, Foundation, Mintbase, NiftyKit, VIV3, MakersPlace, and Rarible. Some platforms like Zora operate as invite-only, while others like Rarible allow you to upload and sell images and text as NFTs on the site.
OpenSea claims to be the largest NFT platform, allowing you to sell anything from CryptoPunks and CryptoKitties to virtual real estate and trading cards. It has over 200 categories and 4M items.
You can also sell NFTs on non-crypto marketplaces like eBay and Gumroad. But one caveat is they charge higher fees than NFT-focused platforms. For example, OpenSea takes 2.5% of sales that happen on their platform, while eBay takes up to 12% of your profits.
How to create an NFT
Before creating your first NFT, there are three crypto art terms you need to understand:
- Gas fees: The fees you have to pay to perform a specific transaction, like listing your NFT for sale. These fees vary depending on the platforms.
- Crypto wallet: A digital wallet that allows you to store and retrieve your NFT. Each blockchain has its own separate standard, compatible wallet services. For example, if you create NFTs on OpenSea—one of Ethereum’s leading NFT marketplaces, you can use only Ethereum wallets like MetaMask.
- Seed phrase: A list of words used to recover your crypto in case you forget your password or lose access to your wallet.
Once you know these terms, creating an NFT is easy. Most platforms provide clear instructions on how to do it.
For example, here’s how to make money with crypto art on OpenSea.
Step 1: Head over to MetaMask to create a crypto wallet. It’s free and takes just a few clicks.
Step 2: Navigate to OpenSea, connect it with MetaMask, and then you can start creating an NFT.
Step 3: List your NFT for sale. Here you have to pay a gas fee. You’ll only need to pay this fee the first time you create an NFT collection.
Once you’re done with this step, you’ve successfully given OpenSea permission to sell your NFT. Anyone can now find and purchase it on the OpenSea marketplace!
If someone’s interested in your NFT, they can bid for it. When you have the highest bidder, you can sell to them by accepting their offer.
What are the risks when selling non-fungible tokens?
Like any other digital collectibles, selling NFTs comes with risks you should be aware of before diving in.
The first risk lies in the nature of an NFT transaction. As said earlier,
The second is the emergence of scammers. In a report on NFTs, Nadya Ivanova, COO of the market research firm L’Atelier BNP Paribas, said that because anyone can create an NFT out of almost anything, there are many bad tokens out there. It takes a well-trained eye to determine what’s worth investing in.
Another risk is the volatility and liquidity of the NFT market. Since there are no specific regulations or mechanisms to help price NFTs, it’s hard to determine the actual value of your assets. You also need to find a buyer who’s willing to pay a certain price for your one-of-a-kind item, which is more challenging.
NFTs are also receiving controversy from environmentalists. Certain blockchains used for crypto art require computations that consume a lot of energy and are harmful to the environment.
For example, Space Cat, an NFT that’s basically a GIF of a cat, generated a carbon footprint equivalent to an EU resident’s electricity usage for two months.
NFT marketplace Nifty Gateway warned in a recent statement that some users experienced “account takeovers” and had their NFTs stolen. This leads to more concerns about NFT security and data protection when doing transactions on NFT platforms.
That said, there is a way you can turn your NFTs into real money while minimizing risks—by using your artwork to create print-on-demand (POD) products.
How to use NFTs to create print-on-demand products
If you’ve created an NFT for your own original artwork where you’re also the copyright holder of the artwork, you can use POD products to promote your crypto artwork. This won’t be applicable to animations and videos, but will work well with still images and tweets.
POD technologies allow you to put your digital artwork on all sorts of products—from apparel items to home and living products. You don’t have to handle sales transactions, packing, or shipping—all you need to do is create artwork, create an NFT, and then upload the digital artwork that’s linked to this token to POD platforms like Printful to create custom products promoting your crypto art.
Here are two ways to tie NFTs to custom products:
- Exclusive items: You can place your unique digital artwork on a product and sell it in a limited quantity. This will help create a sense of exclusivity and drive demand for your product.
- Custom brand collaborations: You can partner with NFT artists to produce unique product lines. NFTs unlock an entirely new avenue of opportunity to co-create.
Should you start selling NFTs?
The answer is—why not?
Crypto art is an emerging niche, and there’s still some uncertainty around NFTs. But one thing’s for sure—crypto art has made it possible for digital artwork to have a verifiable ownership. Anyone can buy a van Gogh’s print. But only one person can own the original. And to many wealthy people, this appeal transfers to the digital world too.