What I Know (and Don’t Know) About NFTs

Entrepreneur and guru of hustle Gary Vaynerchuk says NFT’s are gonna be big, especially for artists. While he warns that they are currently in a bubble reminiscent of the dot-com bubble of the early 2000s, he seems pretty certain they are going to change everything.

NFTs — non-fungible tokens—are the latest tech craze, alongside other crypto technology like Bitcoin, Etherium, and a slough of so-called Altcoins (smaller cryptocurrencies vying for a place in the emerging market). What are they? Honestly, even after literally making my own NFT this week, I still can’t say for sure what they are. But let me give it a shot.

Here’s what I know about NFTs (without having done much supporting research):

• They cannot be replicated or replaced. The term “fungible” means that something can be easily replaced by another thing of equal value. A $100 bill can be replaced for ten $10 bills. A non-fungible object cannot be replaced. There is nothing else that objectively equals its value. My dad’s collection of slides from his travels in the 1960s are non-fungible. My children are non-fungible. A Non-Fungible Token is somehow a digital “object” that cannot be replicated and for which there is no tradable asset of equal value.
• On the surface, an NFT and its source file are indistinguishable. NFTs can be any kind of digital file, including images (JPG, PNG, GIF), video (MP4, MOV), and audio (MP3, ACC, WAV). The files themselves are not special; they are image, video, audio (or whatever) files just like any other on your device. An NFT is sort of like a special digital package for a file. A file (asset) can become an NFT by being uploaded to an NFT marketplace like OpenSea.io, where additional properties are assigned to it (basically the same kind of thing as metadata: tags, copyright information, etc.). In the simplest sense, an NFT is a unique serial number that can be attached to any digital file.
• NFTs are just a way of making an infinite digital resource artificially scarce. The key thing that happens in the process of forging an NFT asset from an otherwise pretty normal file is that a unique ID is assigned to it, and together, the file, its metadata, and this unique ID is registered on what is called a blockchain. I have very little understanding of what a blockchain is or what it does, other than that it is “where” crypto assets like NFTs and cryptocurrency, are stored and tracked. At this point, it has become tokenized, or more specifically, an NFT. The source file is still on your computer, and this file will just exist like any other file you’ve ever made or used. But the tokenized version of your file is now indelibly on the blockchain and can be bought and sold on the NFT marketplace (such as OpenSea.io) as an asset.
• It costs quite a bit to actually get an NFT into the market. Depending on where you plan on selling your NFT and which cryptocurrency you hope to receive in exchange, you have to pay a miner fee. Not to be confused with a minor fee—as of this moment, the fee is around $80 USD. A couple days ago, it was $180. According to OpenSea.io:

Before you can list an item for sale or accept an offer on OpenSea, you need to set yourself up for trading. There’s no charge from us, but you’ll have to pay a one-time gas fee (network transaction cost) to initialize your wallet at the blockchain level. For info on how the process works,click here.

• You need a crypto wallet in order to sell and participate on the NFT market. A crypto wallet is an app where your digital currency is stored. My only experience is in using Coinbase and its partner app, Coinbase Wallet. Coinbase is where you buy, sell and trade cryptocurrency in the abstract. That means you can accumulate various crypto coins, whether that’s Bitcoin, Ether, or one of many other smaller altcoins. That’s step one. The next step is getting your crypto into a format where you can actually use it to buy stuff. If you have cryptocurrency on Coinbase, you can then transfer some of that over to your Wallet app. The reverse is also true. If you’re going to be selling NFTs, you will need a wallet in order to receive payment. On OpenSea, you simply choose which wallet you want to use (Coinbase Wallet is just one option), and the two apps do some communicatin’ with each other, and you’re set.
• For creators, the most promising feature of NFTs is in its ability to track ownership and transactions. Today, one of the hardest things for illustrators, or really, any creator of IP, is illicit usage. Piracy is the biggest issue. Royalty collection on licensed art is another. NFTs will make it much more easy to track and control how your work is used. One thing I’ve learned in my experimentation with NFTs last week is that each time an NFT is sold, I can collect a royalty. I can set up how much of a cut I want to receive on each transaction, and then from that point forward, each time my original creation is sold on the market, my cut automatically goes into my wallet. All of this is new to me. My understanding of NFTs and the extent of their potential for protecting our artwork and ensuring we get paid more fairly is limited. What I sense, however, is that in the very near future, NFTs will play an important role in our livelihood, including (but not limited to) how we can track and manage our digital illustration files.

This is really all I know. And here, as you can see, my knowledge is riddled with questions and misunderstandings.

In the past month I decided to dip my toes into the crypto world. I purchased a relatively small amount of Bitcoin, Ether and a few smaller coins, because, well, I feel like it’s important to know what all the fuss is about. By being somewhat invested, I’ve been more motivated to pay attention to what’s happening. Right now, we are definitely in some kind of a bubble. Most of crypto investments right now are speculative. It’s just a sort of barely legal gambling. I’ve been listening to and watching a lot of crypto experts, and the majority of them, as far as I can tell, are just trying to get rich without having real jobs. If I’m being blunt, the crypto space has a bit of a douchey vibe right now. Harsh digs aside, those who got in and have become good at playing the market are laughing right now, but it’s not entirely certain this will go on much longer. All this to say, I agree with Gary Vee’s assessment: that we are in a Dot-Com Era-esque bubble, where we see some huge potential but are perhaps responding overzealously.

As for art and NFTs, I think it’s good for artists to experiment. On the probability that NFTs are going to shake up the art, illustration and design economy, it’s probably good to be prepared. My own sense is that although there is hype, there is also something significant about NFTs. It could very well be like to the art industry what Napster was to the music industry.

To get started, really all you need to do is set up an account on an NFT marketplace, upload something you’ve created, and add a few extra bits of info. The process looks just like almost putting something up on Etsy. In order to create the NFT (called minting), you don’t even need to own crypto. You need crypto only once you plan on actually selling your NFT on the market. In which case you need to have a crypto wallet, and probably also a a trading app like Coinbase.

Personally, I won’t be buying any NFTs any time soon. I have one of my own up right now (you can even see it for yourself) but I haven’t listed it for actual sale, because of the high miner fees mentioned above. I really don’t see the value in terms of collecting digital files that I can look at and enjoy without feeling like I need to own it. It’s hard enough to imagine paying thousands or millions of dollars for physical trading cards, which are more truly non-fungible in the real world.

What I am doing: I’m paying attention. I’m not an early adopter. I’m not all-in. I’m skeptical, but I’m keeping a watchful eye on how things shape up. I remember someone mentioning being “on the blockchain” at an illustration conference in 2016. That person probably owns a Bitcoin or two, and, well, lucky them. At that time, I just thought it was tech mumbo-jumbo. I ignored it. Maybe if I listened a bit more, if I was more curious, I might have caught that first, quiet wave of crypto investment, and be a rich man today. Who knows? My goal today is not to become crypto-rich. As an illustrator, I pride myself on making art with a practical purpose that has real value to my clients and audiences. As a teacher, I pride myself on teaching others how to do the same. Crypto currencies and abstract notions of sole ownership may shape our future economy, but of themselves, they are meaningless. I will continue to focus on making things of actual value, both to me and to my clients and students—things that have meaning not for their speculative financial value, but for their actual positive contribution to life. If NFTs can one day help me to that end, then count me in.

LINKS AND FURTHER READING

1. Here’s the NFT I made on a lark. It’s based on a really, really bad pun, and I’m not at all sorry.
2. Watch this entertaining and educational video: I Sold a $500,000 NFT after GIving Free Art for 14 Years! by Ali Spagnola