NFT Art and NFT Artwork became buzz-words in recent times as the blockchain ecosystem continues to show its large potential to revolutionize not only the financial industry but many other sectors. These two terms are now linked to one of the most engaging periods of recent blockchain and cryptocurrency history.
This NFT Art finance industry is now moving millions of dollars a day. Companies in different regions are now acquiring NFT Art creations as if they were investing in fine arts. For example, VISA acquired an NFT Art piece for several thousands of dollars worth of Ethereum (ETH).
Additionally, Leonel Messi, one of the most popular football players worldwide has launched the so-called “Messiverse,” a unique NFT crypto art collection. These two examples represent just a small part of the market, but there are several millions of dollars handled of crypto art on a daily basis and on different platforms.
In this context, artists show the world they are able to create unique and valuable content without the need of old, and sometimes inaccessible, infrastructure. By using blockchain technology and some of the most popular blockchain networks, artists have reached a larger market that before was not available to them.
Simply put, NFT Art is here to stay and it has already engaged several companies and high-profile figures from around the world. In this guide, we will go through how NFT Art works, how this industry expanded and how RSK is helping artists and companies to engage in this unique and exciting ecosystem.
What is NFT Art?
NFT Art is a non-fungible token that works as the digital representation of an art piece. This art piece could be a real-world object or simply any type of digital file such as a ‘jpg.’ The term NFT stands for non-fungible token and it can also be applied to different objects…not only art.
But what is so special about NFT Art?
Artists from anywhere around the world can create and sell their unique art pieces online without having to rely on intermediaries. This could only take place thanks to the expansion of blockchain technology. This is perhaps the main characteristic of NFT art but there are many others. There is even something more special about NFT Art, and this is related to ownership. In the past (before the creation and usage of blockchain technology), artists could create digital art but they couldn’t irrefutably prove that they were the owners of their creations. There was nothing that could help possible buyers become the real owner of this asset.
This lack of a clear framework to sell digital art has been one of the main burdens to artists before the creation of NFTs. Basically, there was nothing that could let artists legally prove the ownership of their work. Hence, the market couldn’t expand as desired.
By using blockchain technology, artists can mint a new token that is unique, verifiable and easy to transact. Those NFT tokens have now value and there is a market that is constantly expanding. Therefore, companies and individual artists are now being part of a growing economy that could change the way in which digital art is handled.
Let’s not forget that blockchain technology is highly secure to store data. These distributed ledger networks are difficult to hack and enable participants to record valuable information. Therefore, artists can create their unique art, sell it in the market and prove their copyright in seconds.
The value that has been added to digital art thanks to the expansion of blockchain technology is now one of the special things of NFT Art. There was a clear difficulty for artists to show the world their work and get recognized for their masterpieces.
According to Business Insider, the NFT Art market has grown by more than 800% just during the first quarter of 2021 to over $490 million in valuation. This shows the large impact that it had on the cryptocurrency market. Moreover, new initiatives have also been recently appearing, meaning that these numbers could be higher. Although there are very positive things about NFT Art, there are some challenges that the industry will have to face if it wants to continue growing. But one thing is clear: NFT Art is here to stay.
How does NFT Art Work?
Now that we know what NFT Art is, we need to understand how NFT Art works. There are many stages in the life cycle of an NFT Art piece before they get sold in the open market. It goes from being just an idea to giving royalties to the creator after several trades on blockchain-backed marketplaces.
There is no NFT Art without an artist. This is the person in charge of creating an NFT piece. In order to start with it, the artist should create its piece in the most convenient format (usually .jpg, .gif, .npg, and others).
Once the file is created, the next step would be to upload it to the blockchain. This is the moment in which this file becomes unique and where the artist can prove its ownership. To do so, several platforms let users transform their images and art pieces into NFTs (non-fungible tokens).
In this context, the artist is already ready to sell the NFT Art piece that he created. But to do so, he would have to pay a small blockchain fee. There are different fees according to the blockchain platform used by the artist. Moreover, depending on the congestion at the time he mints the NFT, he/she would have to pay a higher or lower fee.
The next step is the one that every single artist is waiting for: selling their masterpieces. Generally speaking, users have many blockchain marketplaces that could be used to buy and sell NFT Art. The artist should upload the NFT to these platforms and in just minutes publish their NFT Art to be sold.
These NFT marketplaces let the artist mint their NFTs, set the price they expect to receive for their art and define whether there will be royalties paid or not in the future. Other details would make the whole experience even better. For example, rather than selling a single NFT Art piece, the artist could sell an entire collection of NFTs. Another thing that the seller can do is auctioning his NFTs rather than selling them for a fixed price.
To make it simple, the following is the life cycle of an NFT Art piece:
The artist creates the art piece that will later be converted into an NFT
The art piece is then converted into an NFT using a blockchain platform
These masterpieces can then be sold to the open market
If the artist decides to do so, he could add royalties to his NFT Art
Define other selling details such as price, type of listing, etc
NFT Art Characteristics
NFT Art tokens have specific characteristics that make them special and unique compared to other assets. These valuable features (that we will analyse in the following sections) have given value to the entire NFT Art industry and have helped it to grow.
In this context, understanding and recognizing these features would help us have a clearer understanding of NFT Art and NFT tokens. Artists are being recognized for their artwork because it’s verifiable, indestructible and because it gives them ownership of their art pieces.
Verifiable
One of the most important things of NFT Art is the possibility that it gives to buyers and sellers to verify the authenticity of specific art pieces. This is one of the main characteristics of NFTs that have given value to artwork created by crypto enthusiasts.
Users can prove that their artwork is original and only theirs. Knowing that art pieces can be verified increases the value of the NFT for artists. But how to validate the authenticity of NFT Art and confirm their uniqueness?
For instance, one of the ways you have to verify whether an art piece is original or not is by doing a fast check on Google. It is possible to find variants of the art you are purchasing or even find the same image online. This would give you a clear idea of how original the image is. Finding a website with the same image would show you that you are purchasing a fake or even plagiarized NFT.
But this is not the only available way to check and verify the authenticity of an art piece. You can always search for more information about the artist. In this case, common sense would be a key thing. Creators that have been selling artwork for longer periods should be trusted more than artists that have never sold a piece of art before. Social media networks such as Twitter would be key to understanding the popularity and recognition of the artist.
The NFT itself would have information about the name of the artist, the number of copies created for a specific art piece and more. All this information becomes valuable to verify the authenticity of an NFT. In addition, when analysing the authenticity of an NFT artwork, you should consider its price.
The lower the price, the more possibilities there are of being a plagiarized artwork. Extremely high prices would be suspicious, pushing potential buyers to investigate even further whether the art piece is original or not.
Foremost, you should always check the information provided by the NFT. We talk about the certification of the artwork. This would work as a certificate of authenticity. If you have previously purchased art pieces from traditional art galleries, you will receive a certificate that confirms the authenticity of the collection or piece purchased.
As we are talking about digital art, the physical certificate of authenticity would now be stored on the blockchain. It would include information like the number of pieces created, the value paid, its size and other valuable data. This would be one of the key things to consider when buying, selling or paying money for an art piece.
Indestructible
With the expansion of blockchain technology, we have heard of its data storing capabilities. Indeed, blockchain technology could be considered one of the best ways to store data. This is highly related to the fact that tokens cannot be destroyed. For example, cryptocurrencies cannot be deleted. They can be sent to a burn address but they cannot be fully or partially destroyed.
The same can be said about NFTs on different blockchain networks. Once an art piece has been minted as an NFT, it will never be destroyed. As long as the network on top of which the NFT was released continues to operate, it would never be destroyed.
Let’s use a clear example. If an artist creates an NFT, then he can sell it, hold it or transact it. It works as any non-fungible token in the market. Depending on the blockchain network in which it was created, it might be then transacted faster or for lower fees. However, it will always be on the blockchain.
If the artist decides to delete his artwork, he can only send it to a burn address (an address to which no one has the private keys). This would make the NFT inaccessible, but it would still be visible on the blockchain.
The blockchain term itself is defined as an immutable, transparent and reliable ledger where information and records are securely stored. This happens with Bitcoin (BTC), Ethereum (ETH) or NFTs.
NFTs, including art pieces created on the blockchain, will never be deleted. Think of them as the NFT tokens. They are not traditional jpg files that can be deleted from a database. There is always going to be a copy of a blockchain network where the NFT was released.
In essence, NFT art is indestructible once it has been minted as an NFT. Even if an artist decides to burn the NFT token, the art piece will always be available on the blockchain network on top of which it was launched.
Nowadays, Ethereum is the largest blockchain network to release digital art, but other blockchains are also expanding. RSK is working on several initiatives to bring NFTs to the Bitcoin network, the most secure and largest distributed ledger in the world.
Ownership
Finally, ownership is one of the most valuable characteristics of NFT Art. Before the existence of blockchain networks, we could not have and really own something in the digital world. Blockchain technology and non-fungible tokens have allowed the internet to become more than just a virtual place with things that have no real value.
For instance, people could now sell their house as an NFT if they would like to do so. But this is just one of the many examples of how distributed ledger technology evolved and enabled new opportunities.
Digital art ownership is allowing creators to own, sell and authenticate their work using blockchain technology. Without these things, the NFTs created would not have any value. Being indestructible, verifiable and allowing users to prove ownership of their NFTs, has allowed the market to reach millions of dollars of valuation.
Sales of NFT art collectables and art pieces have skyrocketed thanks to the fact that investors can become owners of scarce and unique assets that are verifiable and indestructible. Artists are showing and promoting their creative artwork and targeting users that value ownership and technology at the same time.
Ownership is also a valuable feature of NFTs as it can help smaller artists sell their artwork and reach an audience that was before not available to them. In this sense, platforms that support the creation of NFTs from artists enable the expansion of more decentralized economies. This is only possible thanks to the ability artists have to prove ownership of their work.
MakersPlace CEO Dannie Chu describes how metadata and blockchain signatures become important to prove ownership of digital art:
“There are hundreds of thousands of prints and reproductions of the Mona Lisa, but since they are not the original 1/1 Mona Lisa created by Da Vinci himself they are far less valued. The same principles are applied to NFTs, you can copy and paste an image but only the original, digitally signed by the artist, holds value.”
As we can see, NFTs in the art industry become valuable because they enable users to own an asset that is unique and created by the original artist. There might be copies out there, but proving the ownership of an NFT makes the art piece have real value. This is why marketplaces are nowadays processing several millions of dollars a day.
Digital Art Royalties
Let’s now move on with one of the most discussed and potentially disruptive topics of NFT Art: Digital Art royalties. We have already discussed how news articles reported that NFT Art was being sold for high prices and how artists are now enjoying new and fresh earnings for their work.
However, we didn’t discuss how royalties have become a secondary source of income once the NFT Art has been already sold. Royalties are a very important part of the expansion of NFT Art. Thanks to them, thousands of artists are now having an additional source of income on a regular basis.
But how do digital art royalties work?
When the artist sells an NFT Art piece, he receives the price he asked for in cryptocurrency. He gets paid to his wallet and the buyer receives the NFT token. In this case, we see that the artist receives one payment for his work. This is just the beginning.
Let’s imagine that after some days, the person that purchased the art piece decides to sell it again. This person will receive the price he asks for but the original seller will receive a royalty. For example, if the price of the NFT is 2 ETH and the royalties were set at 1%, then, the original seller (the creator) will receive 0.02 ETH directly to his wallet. The expansion of the NFT market is very important for artists as it helps them generate passive income.
If a piece of art is transacted many times, it means that there is large interest around it. Royalties are just one of the ways that artists have to get recognized for their work and the art they create.
NFTs on top of Bitcoin thanks to RSK
While the whole NFT industry continues to expand, RSK is working in order to bring NFTs to Bitcoin, the most secure blockchain network in the world. Most of the NFT art today is handled through the Ethereum network, the second-largest blockchain in the world. However, the possibilities to use the Bitcoin network to handle NFTs are still very limited. This is why RSK is playing a key role in building the future infrastructure to support artists that want to engage in the NFT market on the Bitcoin network.
After the expansion experienced by NFTs in March this year, Coinsilium Group Limited decided to work on a new non-fungible token project to create a new marketplace on Bitcoin powered by the RSK blockchain.
How could NFTs on Bitcoin improve the landscape for artists to operate?
If artists have a new marketplace, they have new opportunities to reach a larger number of users. Moreover, if this new marketplace is secured by the Bitcoin network, then it becomes even more interesting. In this way, RSK is becoming a key player in the NFT sector that would not only help artists but the NFT industry as a whole.
NFTs’ Challenges
We have reviewed how NFTs and artists are now creating a new and unique market for selling and buying art pieces. Royalties, ownership, traceability and transparency are just some of the words linked to NFTs and art but there are also challenges that need to be considered.
One of the challenges is related to stolen artwork. Rainbolt, one of the most popular artists in the NFT market, has found many of his art pieces being sold as NFTs without his permission, thus, breaking their privacy. This artist regularly uploaded content to social media networks without a watermark. Nowadays, he has added a watermark to each of the images he uploaded to avoid being sold on marketplaces.
Additionally, the interoperability of the blockchain market is also putting a limit to the pace at which NFT art could expand. However, different initiatives such as the ones mentioned in this article are already in place to improve interoperability within the NFT Art market.
Among other challenges, we also find the traditional scalability problem. Small players could easily be excluded from this market if they do not have enough funds to pay for expensive and overpriced gas fees on most of the largest blockchain networks in the market. Being user friendly means offering low fees, fast transaction times and easy-to-use interfaces.
