NFTs and Contemporary Art
by Nick Reisland, Artist and CoCA Board Secretary
Read time: 9 min
Looking at the news media these days, NFTs appear to be rocking the world of contemporary art. But what do NFTs really bring to the table for most artists? The signal-to-noise level surrounding this question seems low. There is much noise to sift through. Is it worth an artist’s precious time to dive into the NFT art market? Is it safe? Will one make money?
The cryptocurrency field, of which NFTs are a facet, is fluid, mercurial, and difficult to understand for many of us. As an equity arts non-profit, CoCA and its members may benefit from having conversations around this topic. No doubt many CoCA artists are experienced in this market and have something to say. Others are probably not sure what to make of it. We can hopefully learn from each other.
What are NFTs?
There are many articles out there explaining the basic situation with NFTs. Here is a relatively simplified explanation from :
Non-fungible tokens, or NFTs, are unique digital financial instruments that are traded on exchanges similar to stocks. But they are not fungible like dollar bills or bitcoins. Each is unique and cannot be copied or subdivided, so they are called non-fungible. Like stocks, they are subject to speculation, hype and grift. The Motley Fool, a popular financial advisory service, advises their clients that “NFTs represent a highly speculative class of investment.” But like stocks, they are capable of representing ownership of assets with real value. A staggering amount of venture capital is now betting that NFTs and the blockchain portend a new and improved financial infrastructure.
So, NFTs, as financial instruments, are digital certificates of ownership, like stock certificates, that link or point to an asset. The asset can be just about anything, such as a car, real estate, or a work of art, real or digital. They are not an asset. They point to an asset. Transactions involving NFTs are recorded on a digital ledger known as a blockchain. This transaction record is immutable. It cannot be altered.
Artists may market and sell work that they have minted on an NFT marketplace. Minting first involves creating a digital artwork. This is usually a digital file like a .jpeg for visual art or an MP3 or ACC for audio. Next is obtaining a crypto (or digital) wallet on a chosen crypto wallet platform. Crypto wallets are similar to banking apps that allow transactions in cryptocurrency. Examples of popular digital wallets are Metamask, Coinbase Wallet, Trustwallet, and several others. Minting also involves choosing a digital marketplace on which to market one’s NFT art. Popular marketplaces are OpenSea, Rarible, SuperRare and others. Then one must choose a blockchain that is compatible with the selected marketplace. And there are several blockchains available. The following links provide further information, by way of example, regarding one of many marketplaces. This one is called OpenSea.
There is no middle man, no gallery, and, hence, no commission to pay and nobody to decide if your work is good enough to display. Though there are costs involved in bringing NFT art to market, called “gas”, these costs vary depending on the wallet, the marketplace and the blockchain chosen. Transactions involving NFTs may be conducted in cryptocurrency, PayPal, debit cards, credit cards and other modes depending on the marketplace and blockchain.
NFT transactions are stored on one of several available blockchains, also part of the minting process, as mentioned. Blockchains are ledgers, like spreadsheets. They keep track of transactions, of who owns what. The NFT, which is code, resides on the blockchain. The process of securing this data is known as “mining.” A software protocol used by some of the larger blockchains involves generating a fixed-length string of characters, called a hash, that must be guessed, or “mined”, in order to verify the blockchain integrity. This verification, known as Proof of Work (PoW), is performed by “nodes” or “miners” who are not centralized and who compete to solve the puzzle. The winners are rewarded in cryptocurrency. A downside of this protocol is its associated with high energy demands by increasingly large computing power needed in the competition among miners to solve the puzzle. If interested, this article is one relatively clear explanation of the Proof of Work methodology: https://blog.goodaudience.com/blockchain-for-beginners-what-is-blockchain-519db8c6677a
A more energy efficient protocol is called Proof of Stake (PoS), used by blockchains like Polkadot, Avalanche, and Cardano. Ethereum is a much larger blockchain and currently uses Proof of Work but is in the process of transitioning to Proof of Stake. You can read about this here: https://ethereum.org/en/developers/docs/consensus-mechanisms/pos/
The Ethereum blockchain is one of the largest of those involved with NFT art. They offer a more in-depth informational piece on NFTs, at least as they relate to their platform: https://ethereum.org/en/nft/
Is Crypto Secure?
The PoW blockchains are considered absolutely secure by cryptocurrency experts, depending on the blockchain. Bitcoin, thus far, has never been compromised. Ethereum had a security issue in 2016 involving the theft of $50 million but the blockchain itself wasn’t hacked. Blockchain-related services, however, like digital wallets and marketplaces, have had security issues with multiple instances of security problems. In 2018, customers of a large Canadian cryptocurrency exchange, or marketplace, were locked out of $190 million when the CEO died, taking the only known key with him to the grave. Victims of scams or security glitches or those who inadvertently forgot the password to their digital wallets can find themselves in trouble because there is no central authority that oversees blockchain operations.
While NFTs, which are code, reside on the blockchain, the art and other assets to which they point, do not. For digital art, the token refers to a file that sits at another location on the web. Critics often point out that while the blockchain and the tokens are durable, the assets to which they point are vulnerable, due to where they reside, to loss via power outages, digital “rot,” and other aspects of what is called “non-permanence.”
Can Artist Make Money?
Some artists are reportedly able to make a very good living through selling their art via NFTs. Some large museums and galleries seem to be “all in” behind this phenomenon. One truly new feature of NFTs is the possibility of configuring them such that if an artwork is resold, a percentage of the proceeds can be required to go back to the artist. But it remains to be documented whether financial rewards come more easily to artists via NFTs than via traditional analog marketing methods.
PROs and CONs
Some of the major selling points for adopting NFTs are:
Anyone can access cryptocurrency and purchase NFTs.
NFTs allow for highly trackable and provable ownership.
Transactions may be more secure and transparent, depending on the blockchain chosen.
Digital purchases are not locked into one of the Big Tech platforms. Unlike a Kindle book, for example, where you can neither sell nor trade after purchase, when you are finished using a digital object purchased on the blockchain you are able to trade or sell it. .
Future royalties can be stipulated in an NFT such that a musician or artist may enjoy future royalties.
Digital objects can be fractionally owned by several people, sharing the cost and enjoying the benefit.
Digital tokens can be easily and efficiently transferred among people anywhere in the world.
NFTs do not incur transport, shipping and physical space costs like traditional physical art.
The digital artworks to which art NFTs point are easily accessible for viewing enjoyment on current ubiquitous devices like desktops, laptops, tablets and mobile phones.
NFTs may provide opportunities for artists of groups that have been traditionally marginalized in the physical legacy art world of museums, galleries, art fairs, etc.
There are many who are skeptical of this technology. Some of their objections:
The digital platform on which the asset to which the NFT points may disappear and the asset with it, it may be managed poorly or be subject to theft, as alluded to above.
Transaction fees, called “gas,” can be high. It pays to shop around, however, because costs differ between blockchains, marketplaces and wallets.
It may be tricky to manage private keys that give access to digital wallets and cryptocurrency and multiple digital wallets may become a necessity.
Blockchains that use Proof of Work protocols use large amounts of electrical power, putting them on the wrong side of the equation from those with climate concerns. There are more energy efficient protocols coming into use, however.
Some view the fact that much of the venture capital going into blockchain technology comes from the same sources that brought us our current corporate centralized internet platforms that are perceived to have fueled income inequality, and therefore stand to exert control over those platforms they have enabled.
Cryptocurrencies are seen by some as pyramid schemes where rising value absolutely depends on ever more users joining the network, using coins and competing to mine them.
There seems to be disagreement and controversy surrounding many aspects of the blockchain. Most, but not all, of the available arguments in favor seem to come from those who are selling this technology or who otherwise might benefit from its adoption. One source of more objective information might be the academic community:
https://ocw.mit.edu/courses/15-s12-blockchain-and-money-fall-2018/resources/session-1-introduction/
There are also academic courses available on the web, like Stanford’s, for a cost:
https://online.stanford.edu/courses/soe-xcs0001-blockchain-and-cryptocurrency-what-you-need-know
Most of the arguments against NFTs seem to come from the media, which often benefits by exaggerating the negative and alarming aspects of anything in order to keep readers interested. There is simply too much out there to summarize for you in a short article like this. Ultimately it is up to you whether it is worth doing your own research, such as googling your questions. Facts are extremely difficult to come by and opinions abound. Some areas of uncertainty and controversy, however, seem to include but are not limited to the following:
Will NFTs substantially benefit most artists financially?
Whether NFTs will actually improve racial and economic equity, particularly for traditionally marginalized groups?
Is privacy sufficiently protected on the blockchain?
How will copyright issues end up being resolved?
How will centralized and decentralized platforms end up comparing?
With these questions and a myriad of others, it will take time to acquire reliable data and move beyond rumor, social pressure and anecdote. CoCA will hopefully continue to be active in exploring NFTs, their promise and risk for the future of artists in Seattle and beyond.
