Non-Fungible Tokens (NFTs) exploded onto the scene in 2021. Although people had been selling assets on the blockchain before this, NFTs have accelerated the formalization of the process, particularly when it comes to digital assets and works of art.
Although some critics question the real value of the digital assets being sold, the value of art and collectibles has always relied on trust and popular trends – who can forget that one of the most enduringly popular artists, Van Gogh, died penniless as his work wasn’t appreciated at the time. Art has always been subjectively valued. As our world is now inherently digital, NFTs are only a natural progression that allows us to produce and trade art and collectibles securely in
a manner that’s suited to the realities of today.
NFTs are set to benefit artists, traders, and collectors alike by providing a way to value, authenticate, and auction digital pieces of work. Let’s explore how NFTs are being used as a means of trading assets, and how this affects the crypto scene as a whole.
NFTs being used to sell collectables and art
NFTs are valued individually, and prices vary accordingly from token to token. As such, NFTs are not equally interchangeable.
The term “fungible” essentially means non-transferrable and is a key difference that NFTs hold against other types of cryptocurrency, which have equal value. By using an ERC-721 ledger, NFT’s more sophisticated infrastructure allows for complex terms and conditions to be recorded, such as the owner of the work, future royalty percentages, or sales clauses, all of which are vital for the trade of high-value artworks.
Despite being on the scene for just over a year, NFTs are already firmly in mainstream use in the art world: Christie’s ran the world’s first NFT auction for an exclusive, digital-only artwork by Beeple, which sold for an eye-watering $69,346,250. It would be hard to imagine a sale of such value being completed without protections in the ledger. With NFTs, it’s possible for the authenticity of digital artworks to be maintained, keep track of ownership, and maintain specifics such as royalty rights.
While Christie’s may not be within the reach of every collector, NFTs have many other applications and are particularly useful for areas that already boast a diehard fanbase, such as sports, gaming, and music. NBA Top Shots are a new form of digital collectible that allows fans to buy exclusive rights to basketball highlights – think collector’s cards for 2021. Given the enduring popularity of basketball – NBA viewership was up 34% in 2021 – it’s not surprising to learn that the collectibles have already generated $230 million in gross sales.
Why NFTs are important for cryptocurrency
NFTs form a new part of the crypto industry as they were developed for a specific purpose. While increased use of NFTs won’t necessarily affect or stabilize other cryptocurrencies as they run on a separate ledger, the popularity of NFTs will help to normalize the use of cryptocurrency digital assets. The secure transactions will allow investors to place their bets on exciting pieces of artwork or future collectibles. Future revenue will be determined by the investor’s ability to select NFTs, which will hold their value into the future, either due to rarity or increased popularity.
In this way, NFTs will modernize the investment market. However, more cautious investors may still be uncomfortable with the format, even with the high profile usage NFTs already have. For NFTs to reach their full potential, improved safeguards and new purchase options will be vital.
How can traders use NFTs safely and protect their purchases?
As NFTs can only be bought with cryptocurrencies, they will always be viewed as more high-risk to some investors due to the volatility of the coins. Allowing NFTs to be purchased with fiat currencies will inevitably improve their safety in the eyes of investors.
What’s more, the metadata of each NFT is as valuable as the artwork itself. When an NFT is minted, creators can encode a range of details about the piece, tracking information, and ownership rules. If these aren’t set up correctly, or investors don’t understand what to look for in these ledgers before making a purchase, they could unwittingly buy a piece of work that isn’t authentic, or doesn’t allow for subsequent trade to name a couple of examples.
It’s unlikely that even crypto-savvy investors will be aware of exactly what to look for in this metadata to guarantee the safety and longevity of their investment. As such, we’ll likely see new third-party services start to evolve too. These third parties will help to ensure authenticity, negotiate good terms and conditions, ensure these conditions are properly registered within the ledger, and help to manage the sales process during the exchange. Going further, these third parties may even offer custodian services to store and protect these artworks. Digital-only pieces, in particular, will benefit from additional insurance against hackers – both for the asset itself and the record on the ledger.
While such input might not be needed for small value, P2P purchases, investors interested in multi-million dollar art deals will be looking for additional assurances about the authenticity of the sale and guarantees that the exchange between money and art goes smoothly.
The final word
NFTs have already proven their viability in the marketplace and their popularity with buyers and sellers alike. We’re likely to see more arthouses follow the lead of Christie’s and open up the trade of digital art using NFTs in the future, in addition to further expansion into the world of collectible fan merchandise.
To truly see NFTs take off, the sector must focus on an improved user experience. This means better guarantees of a secure trade environment, an expanded range of payment options, new service providers to aid the exchange of goods, and market education overall. With these hurdles addressed, NFTs will be set to transform art forever.
Originally posted on: http://blocktribune.com/storage-or-show-how-to-make-nfts-future-in-collectible-art-a-success/