By BLAKE WOODRUFF, Solutions New Bureau
This story was originally published in Metromode.
November 2021 changed Emily Swift’s life. Just a few months before, she had started her own business as photographer. The struggle to stand out and a steady diet of Ramen noodles were getting to her till she heard about non-fungible tokens.
“I couldn’t watch my friends make all this money and not get in on this,” she says.
Swift is one of many independent artists on the internet who are turning to NFTs to support themselves.
It took months of research and marketing before Swift released her first collection, Misfits. The collection was 33 prints that used the same photo negative and were painted over by an anonymous artist who is a friend. Swift says the process was difficult but, “the hardest most time-consuming part had absolutely nothing to do with creating the art, and it had everything to do with promoting the heck out of myself.”
What is an NFT?
An NFT is a digital item that has a unique identifier making it one-of-a-kind. The identifier acts as a digital certificate of authenticity. It cannot be duplicated or forged. This is because the identifier is stored in a blockchain.
A blockchain is powered by a collective of computers that keep track of sales of both digital and physical objects. It’s often referred to as a digital ledger. It works by using blocks of data that continue to build upon each other, making an unchangeable record. Transactions are made with digital money, like Bitcoin, called cryptocurrency.
The rise of blockchain technology has created a tangible value to digital goods and artwork. The marketplace is currently valued at $41 billion. An NFT is not an actual physical item, which means copies can still be made, it is a digital signature that verifies ownership of the original digital copy. One way to look at it is that the NFT is the original artwork and copies online are much like prints.
It paid off for Swift. All 33 of her prints sold out within 45 minutes. The pieces were listed at .33 Ethereum a piece, over $1,400 at the time of the sale.
“I looked at my friend when it sold out, we literally cried,” Swift says. “We could pay our rent. We could feed ourselves a good meal and we didn’t have to worry for a couple months. That was a feeling, that as artists, we have absolutely never been able to comfortably feel by means of strictly just selling artwork.”
NFTs worked for Swift. However, they have also led to disruption and disaster for others.
The decentralized nature of the NFT market has allowed criminals to exploit it. A common scam, a Rug Pull, introduces a new cryptocurrency or NFT to mint. After gaining enough investors, the creators drop the currency or NFT and disappear with the investors’ money.
Artistic control is another concern. The minting of an NFT does not always require the original creator. Numerous plagiarized pieces have been released on different marketplaces. Opensea, the leading seller of NFTs, says this year that its lazy minting tool led to “over 80% of the items created with this tool [to be] plagiarized works, fake collections, and spam.” Most of these illegal sales were initiated by bots. The freedom of the new market means little regulation and prosecution.
Is it just another trend?
NFTs have been around for nearly a decade. The idea dates back to 2012 with the creation of Colored Coins. They were colored Bitcoins that struggled to take off when there wasn’t a consensus on their value. Two more years of innovation led Kevin McCoy and Anil Dash to create the first true NFT in 2014. In 2017, CryptoKitties introduced the world to the economic potential of NFTs. Certain “kitties” were selling for as high as $100,000.
NFTs hit a record peak in February 2021. Christie’s, one of the world’s leading art auction houses sold a NFT titled “Everydays: The First 5000 Days” by an artist called Beeple for over $69 million.
The market continues to grow. Sales have increased by $20 million per 30-day period from just a year ago. With more individuals at home from the COVID-19 pandemic interest in digital media has increased with half a million users added each day.
NFTs are expanding beyond just visual art. Video games, movies, music and even memes are becoming NFTs. This is having real world impacts with stock prices doubling for one. Funko, a distributor of popular toy figures, announced it was investing in NFTs and its shares soared.
There have been similar claims about digital commerce with social media and sites like Patreon. While these options have given artists more reach neither have proved to be as profitable as NFTs have been. Yet, they are a reminder that new marketplaces often overpromise.
Swift is a true believer though. One of the reasons she has faith in NFTs is that she credits them for saving the life of her friend, Isaac Wright. He is a fellow photographer who was arrested for trespassing. Wright’s photography involves him taking pictures from the top of locations like bridges and skyscrapers. Wright’s friends were able to pay his legal fees by raising money through selling NFTs of his work. The money helped free Wright and he now auctions his photographs at Sotheby’s.
Wright’s experience led Swift to believe that NFTs can allow artists to invest in themselves. “Artists don’t have retirement funds. We don’t have 401ks. We kind of are in a position where we have to take care of ourselves.”
However, the risks of cryptocurrency might eventually outpace that investment. A study from Science Direct, in 2020, says that roughly 50% of every $1 in Bitcoin results in some form of climate or health damage in the U.S. As more transactions are happening with NFTs, the study says there is a potential to reach a point where the environmental cost of Bitcoin overtakes its economic value.
Are NFTs for me?
One of the challenges of NFTs are how they’re paid for. NFT sales require both buyers and sellers to use cryptocurrency. Opensea uses Ethereum for example. Sellers and buyers have to navigate all the different currencies, wallets and exchanges. Coupled with a volatile market it can be a hurdle for newcomers. The value of Bitcoin dropped nearly $10,000 over the month of January alone.
Most sites require a minting fee to put the NFT on a marketplace. Swift used Opensea to sell her collection. Along with the minting fee is a nonrefundable gas fee for every transaction. Opensea does allow lazy minting which covers the costs of gas fees upfront but limits the artist’s control in the minting process.
Swift says she had to pay around $3,000 to sell her collection after all the fees. She used a Smart Contract which gave her more control and guaranteed her a royalty standard – each time the NFT is resold a percentage of the new sale goes back to the original artist.
Even with her success, Swift says people should not be naïve about the risks. The $3,000 was a lot for her to invest but she had a partner and could afford the risk at the time.
“It’s hella scary to put a lot of trust and hope into such a volatile market and into such a new method for selling art. I really encourage people to do their research and to go into it knowing what could happen, both good and bad, so that you have realistic expectations. Don’t drain your bank account on Ethereum to release something because you just don’t know what will happen.”
Since the marketplace is still new, unique challenges appear to be popping up every day. With tax season coming up, Swift still isn’t sure how to claim her gains from the sale.
“It’s tricky as far as like making sure you file taxes correctly,” Swift says. “I did speak with a crypto financial advisor about everything, and it varies state to state. Essentially, it’s like being paid in shares. It’s a little different for all of us.”
As NFTs are creating new possibilities and problems Swift says it’s more about what artists do with the market than the market itself.
“We kind of are in a position where we have to go find it ourselves. NFTs have given us a beautiful place for that to happen. But they can also leave us stranded. It’s important to keep putting yourself out there. Push your story, push the work and the rest will follow.”