In March, the digital artist Beeple made $69 million on the sale of a single piece of art. In April, a fake “second edition” of the artwork was created and sold in his name, potentially costing Beeple and collectors hundreds of thousands of dollars.
Such is the promise and peril of NFTs.
NFTs, or non-fungible tokens, offer many potential benefits to creators. They apply the mechanisms of scarcity to digital assets by allowing artists to render them as one-of-a-kind collectibles, like a painting or a baseball card. This means artists — especially digital artists — who have struggled to make their streamable, screenshot-able or reprintable work hold value — can price their items at rates appropriate for something in short supply.
However, the digital trading mechanism is still in nascent stages, and rife with scams, hacks and copyright issues. Beeple was hit by an organized hack, for example. While artists can sometimes find financial solvency with NFTs, other times, they lose millions.
A few artists in San Francisco, however, seem to have cracked the code.
“Artists need to know what they’re getting into,” says Wade Wallerstein, a digital anthropologist, curator and artist who actively trades and has minted some of his own NFTs. “Some 10% of artists are making the vast majority of profits, but there’s definitely a lot of potential here. A lot of artists who didn’t have access before have now found success or even relative success in a little extra side money.”
A brief technical explainer: NFT doesn’t refer to an asset itself, but is instead an agreement certifying the ownership and authenticity of a digital asset. One might compare it to the deed to a house. When people make NFTs — a process referred to as minting an NFT — they are registering a digital asset to a specific user and initial owner.
Often, this initial user and owner is the artist who created the digital asset. This registration process tethers the digital asset to the blockchain, which is an immutable, publicly auditable ledger that tracks all transactions. These transactions are performed using digital currencies, called cryptocurrencies, which can be exchanged for government-issued currency.
After minting an NFT, one is theoretically able to track all transactions of an asset back to the original, verified, creator. Collectors are supposed to be able guarantee authenticity without reviewing individual provenance documents or getting in touch with the original owner because they (along with anyone else) can vet the public transaction history.
For digital artist Mark Sabb, this format has been a game-changer. He’s the founder of Felt, an internet-based creative studio and artist collective that has been publishing magazines and hosting events since 2011. Most of the artists who have contributed to Felt’s publications over the years did so in addition to holding down full-time jobs. But after the group started experimenting with NFTs, and, coincidentally, the trading mechanism exploded in popularity during the pandemic, many artists have started making so much money they no longer need other sources of income.
“Frankly, we don’t need to work anymore,” explains Sabb. “The core of us at Felt have been able to become financially independent because of NFTs.”
There are multiple ways to go about minting NFTs because whoever mints the NFT gets to decide the terms of ownership and sale. Felt maximizes scarcity by minting artworks in short supply, while Sabb and his colleagues work hard to maintain a vibrant community that engages with the artists’ processes and continues to buy their work. Wallerstein follows a similar format with his work.
Local musician Brett Henderson, on the other hand, who goes by the name Computerdata, mints NFTs in addition to making his music available to stream online. This creates an ecosystem around his work similar to Bandcamp, where fans can stream his music for free or buy a copy online if they want to support him financially. “I want my music to be accessible to everyone,” he explains.
For the benefits of NFTs to be actualized, Niki Selken says artists need to take steps to protect themselves against scams online. She’s creative development director for the digital arts-focused nonprofit Gray Area, and teaches artists in their incubation program about NFTs. She also mints NFTs of her own artwork. “Like in anything, there are obviously grifters, speculative purchasers — people who are buying to flip art. There are people money laundering, and all kinds of stuff,” she says.
Some of the most common scams are ones seen all across the internet. In phishing scams, for example, strangers convince buyers to transfer NFTs or money to them by sending falsified links via emails or direct messages. Outright catfishing is more complex. Here scammers pretend to be artists or other collectors on social media, Discord and Telegram. But the most common con is copy minting fraud, in which scammers fraudulently mint art they did not create and sell it, similar to a street seller hawking unauthorized Mona Lisa prints.
Guarding against scams, Selken says, is similar to proving provenance of any kind of art in the internet age. Artists need to make sure they have authoritative control of their social media and websites, and link their work back to those authentic media channels as much as possible. In other words, make it easy for purchasers to verify provenance, she says.
Wallerstein suggests taking additional steps of verification, such as acquiring profiles that verify cryptocurrency addresses or using domain naming services, which allow artists additional ways to prove their identity online.
The existence of these scams has, ironically, created a backlash against many people who mint NFTs, including Selken. Many of these critics claim all NFTs are bad, accusing people who use the mechanism of reinforcing a corrupt and toxic system. Tragic stories of ripped-off creators, they say, are enough to give up on NFTs all together.
But while it remains unclear whether the internet might exacerbate the issue of fraudulent art sales, these types of scams are not unique to NFTs, Selken asserts. “Nobody gets mad at a photographer for selling prints, and nobody gets mad at a painter for selling a painting, so why are we so upset about a digital artist selling an mp4 or a JPEG?” she asks. “It’s not good or bad; it’s just another way to sell and collect art.”
Further, both artists and Sabb encourage artists interested in minting NFTs to think carefully about what cryptocurrency they use. Some cryptocurrencies are more popular but come with fees to transact, while others are less well-known and cheaper. The price of cryptocurrency can also fluctuate dramatically day-to-day. For these reasons, Wallerstein warns against artists relying entirely on NFTs. “It makes me really nervous when artists put themselves in a situation of precarity for the sake of trying to get rich in the crypto gold rush,” he says.
In order to know how to set the starting price for an NFT (and, hopefully, spark a bidding war), each of these artists encourage peers to engage with online communities collecting NFTs. The most popular platforms for this are Twitter, Discord and Telegram.
Different internet communities have specific aesthetic tastes and values, and artists who succeed with NFTs often are experts at finding and cultivating a niche community. “The right retweet from the right person can earn someone their income for a year,” says Wallerstein.
For Sabb, who has cultivated a community around Felt for over a decade, this is precisely what’s so exciting about NFTs.
“It’s all about getting an underground, cult community engaged and self-sustaining,” Sabb explains. “It’s a mindset change. Even if you have to take your time and process that, that is going to be more important than any of the technology.”