Chapter 3: NFT Movement

A news notification came in the other morning. American megastar rapper Snoop Dogg announced the release of his new music in the form of an NFT, to be released on the upstart cryptocurrency Cardano and its blockchain. 

Apparently reports of the NFT movement's demise were premature.

It was hard to go a day in 2021 without hearing about another record breaking price paid for an NFT. And rightly so. What began as a whim in 2014 by digital artist James McCoy when the first known NFT was minted has grown to a 40 billion dollar industry in a mere few years.

But what exactly are these mysteriously named entities and why are artists of all creative stripes distributing their work in this exciting new format? And better yet, why are investors willing to pay seemingly exorbitant prices to own a piece of said art and what does this signify for the future relationship between creators and consumers in the emerging digital art world?

For starters, lets define our terms. NFT stands for Non-Fungible Token. Still confused? Welcome to the world of crypto, where you have to explain your explanations. (In Crypto's defense, when all the various terms of the crypto world originated, I doubt seriously the innovators imagined crypto and all its manifestations ever reaching such a mainstream audience. They were innovating for an insular crowd of programmers and other tech-types, hence the confusing jargon. One of our goals here is to redefine the often opaque crypto terminology into easily accessible everyday terms)

Let us begin with the Token part of an NFT. Again, similar to there being no actual coin in a Bitcoin, there are no physical tokens associated with an NFT.  We are dealing with a strictly digital asset, a series of code that rests on a blockchain server within a network near you.

Now for the Non-Fungible part.  For those of you who took Econ in college, you've encountered the word fungible before, usually associated with our money. Fungible means interchangeable, a good that has essentially identical properties. If I make 100 prints of the same picture, all 100 are equally interchangeable, of equal value and are what would be considered a fungible good. If I have a five dollar bill and I trade it for another 5 dollar bill, I still only have 5 dollars of purchasing power, hence our money is fungible.

So for an item to be deemed non-fungible means it is unique and not equally interchangeable. Diamonds are all different, collectible baseball cards are non-fungible (no two are in the same shape), used cars are non-fungible. Could be the exact make and model, but will be in different condition, hence non-fungible.)

So an NFT is a digital asset that one can buy/collect that has a unique digital identifier that can not be copied. Sometimes it may operate as an authentication of a piece of digital art, a digital signature if you will that is stored on your respective blockchain, verifiable for all on the network to see. (There's no claiming something is an original. Its all right there, stored on the blockchain for all to authenticate)

So what do you own when you buy an NFT? You own the original copy of the digital file in the same way you may own the original copy of a piece of art. There may also be more than one owner. Take a concert poster by a famed artist. He may produce 50 signed prints of his work. Your buying one of the 50 limited edition signed prints to which there will be no more produced. If the concert turns out to be a famous show or the creator grows into a world renowned  artist, your limited edition signed copy will increase in value, often dramatically. The NFT digital art world operates in the same vein.

What can you do with your NFT? The token is yours to trade or hold or display in anyway you like. If you're an investor, you're buying a speculative asset that may or may not go up in value, that hinges on market conditions and you doing your due diligence. If you're a collector, your NFT purchase can be part of a broader collection either of a specific artist or a type of art. And of course you can display your art in anyway you see fit, either by enhancing your virtual space (if you have one) or by displaying the art in print. Why would one feel the need to buy something they could so easily download and copy? For the same reason people invest in great art. Anybody can put a copy in a frame, but there's value and status bestowed upon owning an original.

Which brings us to the psychology of collecting. One of the challenges with any art distributed through the internet is how easy it is to reproduce. The internet operates as a giant copy machine, where copies of music, images, films or art can be right clicked and saved on every hard drive in existence, without adversely affecting the original. The infinite copy-making quality of the internet was great for making digital objects abundant. But it was horrible for making them scarce. If you were an artist who wanted to make only 100 “first editions” of your digital artwork, or a professional athlete who wanted to sell digital trading cards to your fans (and have those cards retain value the same way that physical trading cards would), your options weren’t great. But NFT technology now allows a creator to designate the unique authenticity of their digital creations

Do NFTs have staying power? The NFT market has grown from zero to a 40 billion dollar industry in under a decade. But is it a fad? Will it go the way of beanie babies and Pokemon? The history of every tradable asset has a peek period, where speculation, interest, investment, and trading volume are at their peeks. They even get names. The Gold Rush. Oil Boom. The Dot Com Bubble. 

The trading of an asset high in speculation and volatility is unsustainable and definitely not for everyone. Fortunes can get made and lost in an instant. But underlying the speculative frenzy is an emerging asset, its future worth high, yet uncertain. And some investors are willing to wager on the future value of an important asset. (See Tesla for a more concrete example) In time, markets settle down when the fundamentals of said asset are better understood and easier to assess value. Much of the recent NFT volatility and frenzy is just that. Aggressive traders jockeying for position on the future value of an emerging and exciting new platform.

While the investment angle of NFTs are what create the headlines, the true promise of NFTs will be their role in the Creator Economy.  The Creator economy is a new financial system comprised mostly of independent creators (artists and influencers) who no longer depend on traditional modes for funding i.e., big corporations, media houses, and agencies as they have been able to generate revenue by reaching out directly to their audience. The Creator Economy has been around for a while, allowing artists to earn revenue directly from their creations through websites like YouTube, Instagram, Facebook, Tik Tok, Spotify, OnlyFans and many more. Artists ability to upload their creative content to these platforms has been revolutionary for countless creative mediums. But these platforms still hold tremendous sway over creative content and the ability of artists to profit fully off their work. NFT technology changes much of that.

The introduction of NFT technology even furthers the prospects for artists within the Creator economy, essentially eliminating the internet platforms that operate as the new middlemen between artists and their creations.

Four benefits to NFT application jump out at us. 

Ownership: The inherent human tendency to perceive owned things as valuable has helped high art stay relevant over centuries. The same tendency helps NFTs bring value to the ownership of content. The value of NFTs increases with time since ownership can be proven, an aspect rarely acknowledged by social platforms.

Resilience to Forging: NFTs are also resistant to issues such as counterfeiting or forgery. The underlying blockchain technology acts as a sort of underwriting for the creators, protecting the ownership of the content and allowing them to focus on their creativity.

Traceability: Blockchain technology also helps track the ownership, something that can help creators see how their artwork is being used.

No Intermediaries: The NFT space is one that can ensure better profits as it cuts out intermediaries, helping creators earn better for every single creation.

Such promise of transparency and authenticity of ownership along with the openness and flexibility to monetize art is unlike anything experienced by creators before, especially given that it applies to both digital and physical assets. NFT platforms are playing a vital role in bridging the gap between blockchain technology and the wider creator economy. These platforms also help to democratize art ownership by enabling fans to ‘own’ the art of their choice in a legal manner. With such profound gains, NFTs are redefining the creator economy as we write.

We live in an era where the boundaries between the real and virtual world are fading fast. With interest in the metaverse, cryptocurrency, and digital collectibles growing by the day, NFTs offers a befitting space for new-age creators that benefits not only them but the collectors as well. More dynamic shifts are expected in near future, especially in the financial aspect of this hybrid creator economy that has already begun to take shape.

The NFT movement has been hot for investors and creators. But how about for collectors?

Collecting is in our human DNA. It starts at birth when you see babies amassing toys and dolls and all sorts of kid things. Collecting is essentially seeking out objects of desire. It designates a certain expertise whether one collects guitars, cars, baseball cards or signatures. It has been and will always be a vital part of the human experience. Its part of how we present ourselves to the world, hoping to attract like-minded passionate people. Within the grand scope of human creativity and ingenuity, our capacity to appreciate quality style and beauty is the fuel for collecting. People like to collect things that are cool to them, and rarely care what other people see in those items. And the best thing about collecting is you don't need anyone's permission to collect.

 Collecting can be a hobby. It can be a passion. What are museums other than collections. And zoos. I mean, who doesn't like to see the pandas, but you're not going to see them at the County Fair. Clubs forming around owning things are not new. There are Harley clubs and rare book clubs and model train clubs. As it pertains to the digital world,  I could right click any image and have it. But I could do that for the Mona Lisa too, but showcasing a copied image in a frame is somewhat silly. 

With NFT collecting, the psychology of being part of an exclusive group is empowering. Human nature can be quite primitive in how it prescribes value. Who has the most, the largest, the most valuable, the rarest. The digital internet world made everything a copy and abundant, making collecting near obsolete as we entered a period where everything was available at the click of a button. I mean, has anyone ever said come over and check out my stream collection? In the NFT world, now you can. With digital exclusivity, once again scarcity and value have returned in the form of Non-Fungible assets. 

 

As with all innovative yet disruptive new technologies, there will be skeptics. NFTs and the entire Crypto space more than have their share. Behind every skepticism is a motivation. The traditional centralized currency economy feels threatened, attempting to fend off the challenge. To counter the attacks, many crypto enthusiasts rail against the old economy, making grand promises about the future economy and the role of crypto within. Both sides are guilty of overstating their claims. And as always, the truth lies somewhere in between.

As with any hyped innovation, don't listen to what they say, watch what they do. Sotheby's and Christie's, the world's two largest art markets, both sold over 100 million dollars in NFT digital art in 2021. What started as a whim under a decade ago has already reached the most reputable of art markets, with more eclectic digital art auctions scheduled for 2022 and beyond. One can only imagine where this exciting new space grows in the years to come. 

And the aforementioned Snoop Dogg release.  He's selling more than just an album. There are limited edition artworks only available to those who join his DAO, the Snoopverse. Within the Snoopverse, members get access to exclusive Snoop Dogg music videos as well as private concerts and all sorts of other perks. Superstar DJ Steve Aoki already made more money in one year of NFT drops then he ever did in his ten year career working with the music industry, predicting a seismic upheaval in the Creator Economy and how musicians get their music to their fans.

And the naysayers, poking fun at the Bored Ape. There will always be snobbery in the art world.  There's an awful lot of art. In the end, what truly defines art? According to Aristotle, it has to be of high quality,  beautiful in an aesthetic or moral way, and had to be thought provoking. Digital Art in the NFT form easily surpasses all three categories.

And the snobbery toward the aesthetics of tech. Steve Jobs faced massive resistance trying to make tech more stylish. In the end, technology's end goal is about improving the quality of human life. The NFT movement's potential in enhancing the direct connection between artists and their fans has already been revolutionary with the future of the medium unlimited.

For the digital world is upon us. Its an entirely new dimension and its coming fast. Facebook didn't change its name to META for fun. The Metaverse and all its incantations is happening as an increasing percentage of the world goes virtual.

Too new to have a history, the NFT movement's story focuses more on its origin and mostly where its going. Its gone from raw and experimental to useful and mainstream in a heartbeat. And the future is now. Just ask Snoop Dogg.   Through tokenization, programmability, collaboration, royalties, and more direct connections between artists and collectors, NFTs may soon be a technology vital to everyday life. 

Anyone, from artists to entrepreneurs, art advocates, corporations, authors, videographers, social media personalities, and even average Joes and Joannas, can create an NFT. No experience is necessary, and as long as someone can prove they created or legally own the content, they can mint an NFT.

And within this exciting new platform have emerged small subgroups called DAOs. Let us discuss these emerging new groups and their role in furthering the growth of the NFT and Crypto worlds.