In simple language about a new player on the art market. Crypto art is digital art that is prized as physical due to the ability to prove ownership of it.
The authenticity of the original work is confirmed by his signature on the raft, evaluations of art critics, and scientific expertise. The authenticity of the crypto-picture is confirmed in possibly even more reliable ways, using the NFT (Non-Fungible Token) technology.
Let’s figure out what NFT is, or non-fungible tokens. NFT is a type of digital asset that represents something unique. Everyone has long known tokens Bitcoin, Ethereum, Ripple, and others belong to the class of fungible assets. In this, they are similar to traditional (fiat) money.
What is interchangeability?
You can exchange any $100 banknote for another banknote with the same denomination, and the value of your assets will not change. Also, any two bitcoins have the same value on the market and at the same time can be exchanged at the same rate for another currency, or you can get the same goods and services for them (in those countries where it is allowed).
An example of non-fungible real assets can be real estate, art, or any other asset that cannot be exchanged for exactly the same while maintaining the same value. It is impossible to find two identical apartments at the same address, on the same floor, with the same layout, area, and view from the window. Some characteristics will differ.
All possible assets can be divided into fungible and non-fungible, as well as physical and digital. Unique items in online video games, NFT certificates, and the crypto art objects themselves are digital non-fungible assets.
A big and perennial challenge in the digital art world is how easy it can be to copy and distribute. As soon as something is copied and replicated for free, the value of that asset drops, and the whole market perspective disappears. For something to have value, it must be in short supply.
Blockchain helps digital artists solve this problem by introducing the idea of a “digital scarcity”: releasing a limited number of copies of items and linking them to unique proprietary tokens.
Blockchain technology is a fairly new technology platform that connects millions of devices and is open to everyone. The Harvard Business Review describes it as “an open distributed ledger that can record transactions between two parties in an efficient and verifiable manner on an ongoing basis.” If you have never heard of blockchain, you may be familiar with Bitcoin or Ethereum cryptocurrencies that use such technology.
The token in this case is a digital certificate that is stored in a secure and decentralized database – the blockchain. It confirms your right to something unique. You can attach it to anything: JPEG, GIF, MP4, even music. This token, which proves ownership of the “original” file, is stored on the blockchain.
NFT is an intellectual property, your right to which is publicly confirmed on the blockchain.
Everyone can download and share your painting, they can even print it and hang it on their wall, but only you will be the owner. And only you, respectively, can sell this piece of art. That is, in the crypto world, the blockchain itself would be the “expert” confirming the authenticity of the painting.
Here you can see paintings from The Complete MF Collection by graphic designer Michael Winklemann, which he sold for nearly $800.000 at auction on February 2, 2021.
Several questions arise, right?
Why does anyone pay for something that is already in the public domain?
There is a difference between downloading a picture or animation to a computer and owning the original backed by an NFT token. The files you download cost nothing, while the NFT-backed painting is an original piece of art from the artist. In the same way, everything happens in the physical world. You can download a photograph of Van Gogh’s painting or order a hand-drawn replica – in any case, such copies will not cost as much as the original. In the digital world, only owning an NFT token will allow you to sell or gift a piece of art, as well as receive a percentage of subsequent resales.
Why are digital artworks so expensive?
The presence of value is always associated with a lack of something. The scarcity of digital art is again confirmed by blockchain and NFT. Besides, people themselves endow any objects in our world with value, including in the digital space. Why are collectible cardboard athlete cards selling for thousands of dollars on eBay? Designs of objects in computer games, T-shirts, and even napkins with autographs of stars, and the actual banknotes themselves are valuable only because people agreed so. In the case of crypto art, value is invested by collectors. Someone buys it for speculative purposes, while someone just wants to support the author with a coin. Crypto coin.
The collectors we see in this space are usually not from the world of traditional art. They are usually young, educated, technologically advanced, and, like other collectors, adhere to specific tastes and strategies.
How and where to buy a crypto painting?
An important aspect of crypto art is that it is bought and sold using a specific cryptocurrency called Ether (ETH). Ether is the cryptocurrency of the Ethereum blockchain, on which all NFT tokens work.
NFTs are sold primarily through secure marketplaces. The most prominent that exist today include:
- Nifty Gateway: Purchase NFTs using a credit card or cryptocurrencies like Ether. This is unlike most of the other marketplaces that require you to make purchases exclusively in EtheWhile. That’s a simple step, but it’s a huge barrier.
- SuperRare: They only feature 1 of 1’s. It’s heavily curated. The auction format allows owners to accept the top bid at any time, often with a 24 hour countdown to notify collectors about when it will end.
There is no generally accepted concept of what crypto art is, but it can be described by the following principles:
- Digital nature. Digital art can be created, published, purchased, and sold completely electronically.
- Geographic independence. Artists from all over the world take part in the creation of the works. Crypto artworks are the first truly global art movement.
- Democracy. Everyone is encouraged to create artwork and popularize the movement, regardless of skill, achievement, class, gender, race, age, religion, etc.
- Decentralization. The tools developed to reduce the influence of art brokers and increase the power of the artists themselves.
- Anonymity. The use of pseudonyms allows artists to create and sell works of art while remaining anonymous (if preferred), freeing them from social evaluations.
Digital art is now in its infancy, driven by technological advances. The number of artists and community members will only grow. And there is every reason to believe that Crypto Art is a completely new page in the history of art.
In our opinion, the phenomenon of crypto art, supported by these principles and promising NFT technology, deserves understanding, and early adopters and investors can be well rewarded in the future for contributing to the development of the community in the early stages of its existence.
Everyone will have digital art on their wall. Digital art mastery will be part of your digital (online) existence, part of your identity, like distributing your favorite compositions in music or movies on social media. It is more than a traditional art world.
Not financial advice. Do your own research and take everything moderately.
Crypto-backed loans have their own risks that should be taken respectively.