Art has always been collectable. Collectors drive the art market by purchasing physical art, such as paintings, sculptures, and literature. However, collectors are paying millions for the ownership of digital artwork.
The trade in digital art makes use of the same technology that drives the cryptocurrency market. Except, instead of receiving a digital currency such as Bitcoin, collectors own a non-fungible token (NFT), which proves their ownership of a specific piece of digital art.
What is a non-fungible token?
NFTs first appeared in 2014 and didn’t receive mainstream attention until the last few years.
An example of a non-fungible item is a one-of-a-kind piece of artwork. It cannot be replaced with anything else without you noticing. This is what makes it unique and as a result, something which is valuable to collectors.
NFTs are a unique certificate of ownership for digital artwork, and a shared ledger (known as a blockchain) stores a record of who owns these certificates. Blockchains are shared across many computers operated by different people. This distribution makes them difficult to forge, so it is easy for collectors to prove their ownership of an NFT but difficult for them to be stolen.
How are NFTs traded?
An NFT is generated for a piece of art, and it’s made available on a marketplace when it can be purchased. This allows artists to sell their digital artwork and take a commission each time it’s traded.
The NFTs are purchased by collectors looking to support artists that interest them, whilst also owning a unique piece of their work. They are also bought by investors hoping the NFT will increase in value, creating a profit for them when they traded in the future.
What are the limitations?
Like any new technology, there are a few issues to resolve before it becomes a widespread method of owning digital artwork.
The sale of an NFT doesn’t typically grant the copyright of digital artwork; that remains with the artist. However, in some cases, a formal agreement may govern a transaction, and specifically, copyright. It also doesn’t stop the artwork from being copied or downloaded by others. Although this is also the case with physical artwork; whilst there are many prints of the Mona Lisa, there’s only one original painting.
Another issue is there is nothing that prevents multiple NFTs from being created for the same artwork. Although this would decrease its value, making it less impactful as income for artists and an unattractive investment.
There have also been cases of collectors purchasing NFTs for fake digital art.
Are NFTs here to stay? Do NFTs accurately represent ownership of the artwork? Is it worth it if the art can be easily duplicated? Let us know what you think; follow us on Twitter, Facebook and LinkedIn.