Earlier this summer, 12 year-old Benyamin Ahmed decided to dabble in business. Like many kids his age whose businesses range from lemonade stands to plastic jewelry, his idea was simple: he would sell his own digital drawings of whales, some in bright colors, others wearing hats. He made over $160,000 in one day.
How could one pre-teen make more in one day than most American workers make in two years? Welcome to the world of NFTs.
NFTs have been the talk of the internet for the past year, both in tech circles and the art world. But even with the discussion surrounding them, most people know very little about NFTs and are unsure where to start when learning about them. For Benyamin Ahmed, the NFT marketplace was a means to reach a larger audience than his preteen social circle, and create a competitive market for his work. But what does all of this even mean?
What Does NFT Stand For?
NFT stands for Non-Fungible Token. In English, that means a unique digital file that cannot be interchanged with others, even if they are identical. NFTs can be audio files, videos, photos, art, or even memes (recently, a popular meme sold for $4 million dollars).
For those of us who still have trouble navigating Zoom, all of these new terms can seem like a foreign language. The term “non-fungible” conjures images of mushrooms more than technology or art. However, once you get past the jargon, NFTs are not that different from other transactions.
An important clarification: owning an NFT is not equivalent to owning a copyright, trademark, patent, or any other form of intellectual property. Generally speaking, the intellectual property rests with the creator of the NFT, not the owner. For artists who are dabbling in technology but worried about losing the rights to their work, NFTs pose little threat to their intellectual property. In fact, there are “smart contracts” that can be built into NFTs that guarantee artists a percentage of secondary market sales.
What is Blockchain?
Blockchain is a type of database that is used to record NFT transactions. Think of it like a digital filing system. All records of transactions are filed away here, but unlike physical documents or other digital records, they cannot be altered or destroyed. A piece of information in this database is referred to as a “block,” which is “chained” to any older or newer blocks in chronological order, creating a concrete chain of custody. This database is also one that can be accessed by a larger group of people, so that no one person is in charge of the information. Blockchain technology can prevent artists and NFT collectors from being exploited or scammed. Because of its inalterable nature, the system gives artists and collectors security in investments. Blockchain prevents a work from being sold to multiple people and guarantees authenticity.
As CHF’s own Carolyn Edlund says on ArtsyShark, “Blockchain… is disrupting the status quo. It tends to increase fairness and stability, and take power out of the hands of a small group of decision makers. In this way, blockchain mirrors the art industry itself, which has fractured and placed more control in the hands of self-determining individual artists.” Perhaps, then, Blockchain is not just an algorithm, but a new way for today’s artists to assert themselves and take charge of their careers.
What is Cryptocurrency?
This is another term you’ve probably heard (and possibly been confused by) in the news. Cryptocurrency is a digital form of currency that is impossible to counterfeit through Blockchain technology. In this context, Blockchain operates a little like the watermark on a bill—the system works to root out fraud with devastating accuracy. There are many different cryptocurrencies, one of the most prominent being Bitcoin—and the art world is seeing Ethereum become a major player after the 69.3 million dollar sale at Christie’s in spring 2021. Cryptocurrency value fluctuates depending on the state of the market, much like stocks. However, while most stocks will display long-term growth despite occasional dips throughout the years, the value of cryptocurrency is more like a rollercoaster, with boom and bust sometimes occurring in a matter of days. Cryptocurrency is often, though not always, used to buy NFTs. While it’s not necessary to understand crypto to understand NFTs, it is useful to understand the online culture surrounding it.
Why are NFTs Controversial?
Many traditional artists and collectors shirk from the concept, imagining that an NFT cannot be hung up on a wall or displayed in a museum, or that you can’t see the artist’s individual brushstrokes or the real-life scale of the work. That’s often true: many NFTs exist solely as digital files—although, just to make it more complicated, you can “tokenize” a physical piece of artwork and make it into an NFT so it exists in both spheres. You can even add a holographic authenticity badge to the back of a physical frame.
Some eco-activists are worried about the link between NFTs and carbon production. Other critics believe that NFTs have little actual value, which isn’t helped by the types of NFTs being sold. Some creators have succeeded in selling “moments” to overzealous investors.
In addition, NFTs are also still an overinflated market. Because they are such a novel concept, many investors will pay more simply to own an NFT, regardless of the content. We’re still in the Wild West of the NFT market, where sales are largely unregulated and unrestrained. A cartoon cat isn’t going to sell at Christie’s for a big price tag—but with a plethora of tech-fascinated investors rushing to own NFTs, even the most amateur art can sell for massive prices.
So while early NFTs will likely remain valuable, it will take a few years to see how the market shapes up. In short, if you were planning on liquidating your funds and investing in NFTs, you might want to hit pause.
What Can We Learn from NFTs?
Despite these concerns, NFTs have advantages. Blockchain is one of the most secure ways to document transactions and can keep artists and buyers alike from getting scammed.
NFTs allow artists to reach a larger audience. Before the internet, an artist’s consumer base would be made of people in their local area until word of mouth spread farther. But today, artists can reach potential buyers across the planet in mere seconds.
The perceived security of NFTs and the Blockchain system is also a plus. The inalterable nature of Blockchain prevents duplicate sales and scams, and provides a digital receipt for every purchase ever made. In addition, NFTs are available for everyone to view, even though one person may own it. Therefore, an NFT collection functions almost like a museum, where an institution or person may own a work, but the public is free to view it. Unlike a strictly-physical piece of art, an NFT owner can’t hide their purchase away in a back room, but they are also secure in knowing that their acquisition cannot be stolen or destroyed.
But all of this can seem daunting. Isn’t art supposed to be about creation and expression, rather than algorithms and market crashes? That may be true, but keep this in mind: CHF’s Executive Director, Elizabeth Hulings, has said that her father, painter Clark Hulings would learn any skill as long as it was useful to his art. For artists who want to take initiative in selling their work or who want to reach a larger audience, learning about art technology can’t be harmful. While cryptocurrency might not appeal to everyone, it’s important for today’s artists to learn how to harness the internet and technology to their advantage, especially in order to make a living from their work.
Even with the rise of NFTs, physical art is unlikely to disappear. The feeling of hanging up a painting on a wall or looking at an artist’s brush strokes is irreplaceable. But NFTs can work alongside real-life art to give artists more agency, secure transactions, and help build a wider network for creatives at all stages of their careers. And maybe, if you’re as lucky as Benyamin Ahmed, it can make you a little extra pocket change.