Here is everything you need to know about the NFT boom and why blockchain-minted art is probably here to stay, for better or worse.
It may seem as though all of your favorite creators are suddenly NFT obsessed. But crypto’s art-world infiltration has been long-stewing. And the sheer scale of the artistic recession brought on by the pandemic may have invoked the perfect balance of terror and excitement for gigging musicians and digital artists who have nervously endeared themselves to the blockchain. In the span of just a few years, a marketplace for one-of-one digital pieces has bloomed into a billion-dollar industry for those savvy enough to keep up with all of the new vocabulary or fortunate enough to have the backing of a major label or investor.
If you weren’t one of the few hundred artists to cash-in on the introductory wave, don’t fret. The heavy learning curve, the environmental toll, and the crypto economy’s historic volatility are all great reasons to monitor the situation from a safe distance for now. But it seems entirely likely blockchain, NFT markets, and the speculation surrounding their emergence and eventual prevalence, are here to stay. So there’s no time like now to, at the very least, begin the process of understanding some of the keywords, players, and fundamentals at work.
To be frank, this isn’t brain-breaking stuff, really. But there are a number of terms, coins, trends, exchanges, and pitfalls (current and prospective) to familiarize yourself with should you choose to engage with the nascent digital bazaar. To get you acquainted with the ins and outs, we’ve put together a primer of everything you need to know about the NFT boom as an exploration of whether it genuinely presents a new frontier for independent artists or just another soon-to-pop tech bubble.
What is a NFT (A non-fungible what?)
The concept of an NFT is deceptively (and remarkably) simple. For as long as media — be it images, video, or music — has been shared between people on the internet, the creators of those works have had virtually no means of verifying their ownership of the original. As an NFT, or non-fungible token, that piece is instead minted as a unique digital file hosted on a server and then sold through the blockchain, an encrypted ledger that tracks the use and purchase of that work, in exchange for some amount of cryptocurrency (in most cases, either Bitcoin or Ether.)
Sold in single copy auctions (highest bidder is awarded the ultra-coveted “one-of-one”); silent auctions (in which bidders contend for one copy of a limited run piece); or fixed-price sales (the more traditional transaction with a hard price point) NFTs can be a digital representation of literally anything. This hasn’t gone over the heads of some industrious artists. A random selection of pieces sold within the last few months includes everything from furniture designs to Instagram face filters to articles from major publications to every conceivable take on pixelated art.
For musicians testing the market, sales have also included non-digital assets like physical merch, limited vinyl pressings of albums, and concert tickets. Others have built-in bonuses like unreleased songs and music videos to sweeten the deal. And while it’s still hard to gauge whether add-ons are impacting the going price for any particular auction, recent sales suggest price tags are tapering off a bit (likely due to hype fatigue.)
Why do people buy NFTs? Think Pokemon cards, but for, like, adults.
Out of due respect for the heart-rattling volatility of crypto markets, artistic or purely transactional, it feels important to note some of the sure-shot reasons to be wary of putting your work and money into a machine governed by manufactured scarcity and a currency that jumps or dives 30% every time billionaire Elon Musk coughs.
Not unlike the 30-something-year-old who forgot to throw away his old Pokemon cards and fell ass backwards into a small fortune, buyers and holders of NFTs that hold no practical use — which accounts for an alarming amount of what’s been sold to date — are basically banking on almost everyone forgetting they exist until the moment the crypto economy goes mainstream and presumably launches the value of their purchases to unseen heights. They’re also hoping a cultural and collective value takes shape at some point. After all, even in the case of some of the more conventional types of drops — albums, songs, videos, digital art, and the like — collectors are essentially the new owners of very expensive links to a digital version of the piece they purchased (not even the original.) And the infrastructure to share and display those digitized pieces (the way we ascribe value to almost anything else) is still pretty scrappy.
All of this is to say it’s not an irresponsible leap here to assume, outside of exclusivity alone, often the main bragging right in purchasing an NFT is potential resale value. Yet sales are still moving at a steady clip through dedicated online auction houses/server rooms like Rarible, OpenSea, SuperRare, Nifty Gateway, and Blockparty.) Hell, even bluechip auctioneers like Sotheby’s and Christie’s are getting in on the action.
How independent artists are using NFTs. (Going, going, gone, baby, gone.)
The new (and sometimes even good!) press is a win for NFTs and crypto at large. But new visibility comes with new vultures. Like so many mini-revolutions of modern computing, the NFT market presents as a new frontier for independent artists. Mp3s, social media, blogging, and all of the internet that occurred between those neighboring eras promised artists, writers, and all kinds of digital creators a more direct line to their supporters. And just like its predecessors, corporate interests began circling overhead the moment a profit margin was proven, leading some to believe NFTs are just a new tech bubble providing cover for the wealthy and their crypto fortunes.
That said, it does appear fans and collectors are currently driving the market. And on the other side of the digital canvas, indie artists and musicians comprise the bulk of listings. According to a market report compiled by journalist Cherie Hu, independent artists are overwhelmingly leading the charge in music NFTs, accounting for 68.4% of total sales (or $41.2 million of the $60.2 million in total music NFT revenues) through April 25th of this year. Just a day before his death, Illust Space closed the auction for a series of unique AR versions of MF DOOM’s iconic mask, which sold for 9.5 ETH ($24,700 USD,) 101 ETH ($262,000 USD,) 200 ETH ($520,000 USD,) and 450 ETH ($1,170,000 USD), respectively.
Several artists have used NFT auctions to raise money for political and environmental causes they’ve taken on. Earlier this year, Aphex Twin recently sold a graphic for 72 ETH ($187,200 USD,) allocating a portion of the sale to “planting trees and either donating to permaculture projects or setting them up ourselves.” Pussy Riot member Nadya Tolokonnikova donated a chunk of the nearly $500,000 brought in from the sale of a four-part NFT series to a shelter for domestic violence victims in Russia. And, just last week, Georgia Anne Muldrow sold a copy of her new album, VWETO III, and the project’s cover art in an OpenSea auction to benefit Critical Resistance, an organization advocating for prison abolition and criminal justice reforms.
It should also be noted, until the next crypto crash (which could currently be underway) all of those sales are, at the moment, worth 40-60% more than they were at the time of auction. And that type of appreciation is bringing major label players to the floor. Recent NFT drops from Eminem ($1.82 million USD) Kings of Leon ($1.9 million USD) Grimes (more than $6 million) and others are tipping the scale for established acts hoping to cash in while they still can.
What are the environmental cost of NFTs (and all things crypto)?
Zooming out on the charts of the most popular digital coins, one can easily sense the scale of this quick-to-colossal $2 trillion economy that emerged over the last decade or so. But no matter the height of those peaks, the amount of power needed to generate cryptocurrencies and NFTs presents a genuine threat to not just the future of this mid-bloom alt-economy but the planet. Being relatively new terrain for both economists and environmentalists, studies on the ecological impact of damn-near anything powered by cryptocurrencies are only just beginning. Until a more robust range of scholarship surfaces, all we really have to go by are the early signs. And they’re not great.
As noted earlier, many NFT markets operate on Ethereum, which, like its rival coins, is built on something called “proof of work.” To understand why this system is so intensely energy-demanding requires at least a primer on how blockchain technologies work and why they were structured that way. That would take more than a few hundred words and there are people far better qualified to rehash the dark history of cryptocurrencies and blockchain-based transactions. So to keep it criminally short, blockchain, a digital and decentralized ledger, essentially acts as a financial regulator in the absence of oversight from banks, governments, or any other official institution. In order to remain decentralized, blockchains enlist “miners” — or people who own top-performing computers — to solve complicated puzzles and equations on a suite of apps. When a formula is completed, a “block” of transactions is created and the miner is compensated with some amount of the digital coin they’ve been commissioned to “excavate.”
The electricity demands for this process are irresponsibly inefficient. And it was designed to be. The sky-high energy demands of these systems were intended to discourage miners from defrauding the ledger by presumably making them pay handily for an electric bill. Some have suggested cryptocurrency values absorb both the fiscal and ecological costs of this security measure. Across the board, the most circulated and valuable cryptocurrencies have a carbon footprint commensurate with their trading price. Ethereum alone uses about as much energy as many small countries. Bitcoin’s network is said to be three times worse per transaction and nearly 20x as bad system-wide.
As users, buyers, and willing participants, we are entirely complicit in hiking the environmental cost of the crypto craze. Though NFTs currently make up a fraction of total Ethereum transactions, and it’s still unclear whether their recent popularity has caused an uptick in mining, some NFTs can require an immense amount of energy to power, generating CO2 emissions that can outsize other single blockchain transactions. Again, not great.
The future of NFTs (Beyond the boom.)
Hopefully, by now, the NFT landscape and the mechanisms powering it have crystallized in some way. Like the broader cryptocurrency economy, there’s clearly cause to be both righteously wary and cautiously optimistic. And while it’s really anyone’s guess if the frenzy (or the funds) behind NFTs will hold much longer, the hype may have settled just enough for fans and artists to objectively survey the field and determine how they want to engage with the market. Or if it’s even worth it in the first place.
Without a viable green alternative to Ethereum, vendors and buyers are equally staked in the environmental damage associated with each purchase. Their contribution to emissions won’t begin diminishing until more cryptocurrency machines move past the posturing and commit to implementing energy-efficient solutions. And though there’s been plenty of lip service and proposed plans — ditching “proof of work,” mining with renewable energy sources, or minting “Green NFTs” — we’re a long way out from a consensus on the fix — which is precisely what cryptocurrency markets need in order to avoid a collapse of the entire system.
On the upside, we have officially entered uncharted territory in artist-to-patron commerce. Sure, we’re still in the weird and wild opening act, but NFTs and cryptocurrency are already presenting a number of new tools for artists that could prove to be crucial in the long game for financial independence and fair pay. In the terms of an NFT sale, the author can (and often does) work in royalties with “smart contracts,” ensuring they (and anyone who may have contributed) are able to automatically collect on each subsequent use or purchase of the work. Beyond the band’s split and access to fresh eyes and ears with flush digital wallets, the ability to track ownership of a digital piece on the blockchain is going to be a vital asset in the decades-long struggle to modernize the sampling and licensing systems. As the streaming wars drudge on, the arrival of blockchain-based music platforms like Audius, Opus, and Dsound, could put pressure on Spotify, Apple Music, and TIDAL, to finally bump their offensively low payouts.
Artists hoping for a short-game, big-gain play here may have missed the moment to maximize their return. But even as auction prices predictably cool from a series of market highs, the demand for unique digital art, whatever form it might take, isn’t budging. And new “greener” NFT markets are steadily surfacing with a fraction of the emissions produced by Ethereum’s blockchain. Environmentally sustainable NFT markets also carry far cheaper minting fees compared to the $150 for minting on Ethereum, widening the point of entry for artists with a day job.
It’s going to take time, advocacy, and studious observation of these new technologies to fully grasp their relative nuances, applications, and capacities to facilitate an equitable system of finance for artists. As we’ve learned from the fleeting marvels of internet past, without the scrutiny of our participation in its development, big money will, no doubt, occupy a commanding share of these networks. We may just have to build the ship while learning to sail on this one.