A beginner’s guide to NFTs in art

Regardless of your knowledge of the art and investment worlds, you’ve probably heard about NFTs (Non-Fungible Tokens). They’re an exciting element of both the art and fintech worlds, but are still unfamiliar to many. And, while some say they’re the next frontier of art, others have become staunch skeptics. Regardless, the facts are undeniable: millions have already been paid (or exchanged via crypto) for art NFTs. For example, digital artist Beeple sold an NFT for $69 million at the famous auction house Christie’s in 2021. 

Read on to learn what NFTs are, who is making them, and how you might start making or collecting them too. 

What is an NFT?

NFT stands for “non-fungible token,” but for anyone encountering this term for the first, it may require further explanation. If an asset or piece of currency is fungible, it can be swapped for another similar item without changing value. So if you and your friend trade one-dollar bills, you each still have a dollar, meaning that dollar is fungible. Even cryptocurrency is fungible, in that exchanging one bitcoin unit for one bitcoin unit at the same time results in equal value. “Non-fungible,” then, refers to something that is unique and unable to be duplicated. So, a non-fungible token is a non-replicable deed stating that you own something. That “something,” in this case, is a piece of digital art.

The popularity of art NFTs stems from the fact that digital files are easily replicable. If someone makes a video, for example, it’s difficult for them to own it in a way that means other people don’t have access to it in the same way. If a video is posted to the internet, someone can simply download the file and have a copy as well. However, the meaning of art ownership is very different online than it is in person. Think of how hard it is to forge a painting compared to how easy it is to download a digital image. A piece of digital art isn’t composed of unique brushstrokes — but instead a unique grouping of ones and zeroes. 

NFTs are a solution to the problem of ownership in digital art. These “tokens” are essentially deeds claiming that the deed holder “owns” a piece of digital art. The specific terms of an NFT dictate the owner’s rights. For example, an NFT’s owner might be able to control how a file can be used or reproduced. 

Since NFTs exist on blockchain — mostly the Ethereum blockchain — they are extremely secure and have unique identifying codes. While you technically could make multiple NFTs for the same image, song, or video, it’s not common. 

It’s important to understand that, while NFTs assign ownership of a piece of art, it doesn’t mean other people can’t access the art. For example, if you spend $69 million on a digital collage by Beeple, what you gain is the ability to claim ownership of it, not exclusive access to it. Anyone can download a digital file of the collage, screenshot it, or even print it out. Only you, however, have the unique NFT that claims you own it. This means that, if this digital art has any future revenue attached to it (e.g., commercial usage or value), that revenue belongs to you. 

In addition, as NFTs are securely stored on blockchain, there is a clear record of ownership, validating your claim to any future revenue or the proceeds from the sale of the NFT should you choose to sell it.

What is blockchain?

If you’ve heard of cryptocurrency or Bitcoin (a type of cryptocurrency), you’ve probably heard of blockchain. Blockchain is a decentralized, distributed, and encoded database of records. It is shared among the nodes of a computer network, and it stores information in “blocks.” Each block limits the amount of data it can store and, when one block fills up, it is closed down and connected to the previous block. Then, another block opens to record the next data set. This is what creates the chain. 

One important aspect of blockchain is that many different computer systems use it and blockchain records are simultaneously posted (or distributed) to them all. This means that, in order to hack a blockchain, all computers containing that blockchain would have to be hacked simultaneously and altered at exactly the same time to successfully change the contents of a blockchain. This is considered a nearly unbeatable level of digital security. 

Blockchain can hold many different types of data or records, including NFTs. They are often used as a ledger for transactions, which is why cryptocurrency depends on the blockchain. People also use blockchain to exchange things like currency, property, art, and contracts without bringing in a third party like a bank, an agent, or a corporation. For content creators and artists, this means that they can connect with — and sell directly to — their fans without the intermediary of a social media algorithm.

chart showing what blockchain is and how it works

The NFT market

Like the fine art market, the NFT market is speculative. This means that people bidding millions of dollars for the deed to a digital image or video believe that, in the future, they will be able to resell it for an even higher price. The worlds of finance and art have always been tightly intertwined — the NFT market is simply a venue for that relationship to go digital. 

The rise of NFTs has also heralded an expansion and diversification of the art market. Now, a wider range of artists can make and sell their art on global platforms — the Beeple sale at Christie’s was a groundbreaking, historic moment for the NFT market and the art world alike. While some art collectors and artists are skeptical of NFTs, many high-profile artists like Damien Hirst and Tom Sachs have launched their own NFT collections.

How to make an NFT

The process of making an NFT is called “minting.” Through this process, content creators and artists turn digital files into assets on a blockchain. These files are then stored in a blockchain ledger and cannot be altered. Once minted, an NFT can be bought, sold, or traded. Most NFT sellers list their prices in cryptocurrency. 

The platform used to make an NFT will determine the specifics of the minting process. Generally, cryptocurrency will need to be purchased (likely Ethereum) and a crypto wallet will be set up via a platform like MetaMask. The crypto wallet will then be connected to the NFT platform desired, and NFTs can then be created and uploaded. Be aware that many NFT platforms charge fees, so it’s important to research that in advance.

How to sell an NFT

Once you’ve set up your digital wallet, created an account with your NFT platform, and paid your fees, you’re ready to sell. Once the NFT is listed, anyone can purchase or bid on it, depending on the sales method you’ve selected. Some choose to sell at auction, while others list NFTs the way you might sell a homemade mug on Etsy. Of course, to maximize the number of people interested in an NFT, it’s important to identify an audience. Many artists and creators leverage social media to connect with a community of followers to generate interest in their work. As with the traditional art market, NFT prices often reflect a combination of reputation and social media buzz. 

It’s also important to determine which channels will be most effective in communicating with an NFT’s potential buyers. Examples include Reddit, Discord, Telegram, or even Instagram. Maintaining a steady stream of contact with the audience is key: posting, hosting live streams, or even doing AMAs (Ask Me Anything). This process can take a lot of time and effort, but it is an effective way to create brand awareness and demand. 

One of the great blockchain benefits, though initially an unintended one, is that there is finally a robust exchange for digital art, which has been difficult to buy and sell in the traditional art world. It’s also created a revenue stream for content creators who have gained popularity via social media, though they may not have received a warm welcome from traditional galleries and critics. 

How to buy and collect NFTs

Just as you need a digital wallet linked to an NFT platform to start selling NFTs, you also need one to buy them. You will likely need a digital wallet that supports Ethereum, since that is the blockchain and cryptocurrency that most NFTs exist within. Of course, you’ll also need Ethereum cryptocurrency in your wallet to purchase your NFTs as well.

As a reminder, just as gas fees are incurred when selling NFTs, they are also incurred when buying them. This fee is commonly between Ξ5 and Ξ50 (note: Ξ is the symbol for Ethereum).

When buying your first NFT, think of it like any other shopping experience — start by browsing. Spend some time on marketplaces like OpenSea, Foundation and SuperRare to get a sense of what’s out there; paying attention to what you like. Once you find something that you like within your budget, you’ll be able to buy it using the crypto in your crypto wallet. 

If you want to invest in NFTs as a financial investment, it’s important to educate yourself regarding the marketplace — just like you would research stocks before buying them. Spend time reading up on recent NFT auctions, the big players and which artists and styles are valued most highly.

More NFT resources:

    Disclaimer: This article is for informational purposes only, and is not intended to be a source of financial or business advice. Please consult with a financial professional before making investment decisions. 

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