Are NFTs a fad or an enduring breakthrough for the art world?

Non-fungible Tokens (NFTs) present a wealth of exciting possibilities for artistic compensation, community interaction, and expanding the way art consumers engage with digital art. 

But the amount of cultural hype and equally strong notoriety has made it difficult to determine what elements of NFTs are a fad and what is truly transformative. 

When viewing digital art beyond investible assets or collectible items, NFTs deliver innovations for creators in the new digital frontier. 

Fad - Demystifying the hype of NFTs 

The demand for collectible NFT art has largely been driven by brand marketing, the social value of participating in digital communities, and the investors chasing a “return on investment”.

Rather than a reflection of artistic quality, most NFT sales embody the power of hype.

Hype bubbles propped up by fanfare and marketing have made the digital art marketplace an unsustainable environment for artists over time as the greater trend of boom markets is a rapid decline in prices.

Prominent NFT art collections like Cryptopunks are a cautionary tale of this volatility. Despite high-profile investments from celebrities like Jay-Z, Snoop Dogg, and Serena Williams, the collection has seen a 62% decline in sales volume in the last year. 

The demand for NFTs masks security concerns

The race to capitalise on the boom of NFT art has led to an influx of money into this space, but with little explicit regulation to speak of, scams, fraud, and exploitation are common. 

The cyber theft of over $US 2.2 million worth of NFTs from Todd Kramer, an art collector, and gallerist, in 2021 is one of many examples where cybersecurity risks are apparent. 

As the development of firm regulatory frameworks is still a work in progress for many governments, consumer and creator protections are less than desirable. 

The environmental costs of NFTs are significant 

The majority of NFT artworks are minted using the Ethereum blockchain, which requires a significant amount of greenhouse energy to power. 

Alternative proof of work blockchains such as Flow have attempted to offset carbon emissions through investing in renewable energy and conservation projects. But these have yet to become mainstays of the NFT art world. 

Breakthrough - Blockchain technology is an innovation that supports artists

Beyond the facade of hype and speculative investment, NFTs offer something truly revolutionary to the digital art industry. 

NFTs create a viable path for artists to protect, monetise and gain recognition 

Providing a decentralised, publicly verifiable, and verifiable unique record of ownership, NFTs have introduced an element of security of IP for digital artists. 

These innovations extend to complete control over licensing rights, where creators can mint their work on the blockchain before anyone else.

Cases like Cath Simard, who sold a widely stolen photograph of hers as an NFT for $US 300,000, show the potential for artists to take back the creatorship of their work. 

Instead of fighting thousands of individual IP claims, Cath Simard minted her viral photograph and sold the NFT - Then released free downloads of the image.

NFT technology empowered her with the agency to choose the licensing rights of her photograph whilst immutably becoming recognised as the photographer

This autonomy over copyright means unlike with physical art, artists can earn royalties and income from sales in secondary markets.

In an environment where accessibility, protections for intellectual property, and unique ownership have been historically limited, these developments are significant. 

The NFT art space is a unique launching pad for artists and fundraising

The democratised and lower barriers to entry in NFT art present new opportunities for less established, more diverse, and avant-garde artists to gain recognition. 

Local creators like Sugar Glider Digital’s feature artist James Mcgrath are exemplary of this notion. Synthesizing science, technology, and digital, Mcgrath has used fractionalised NFT art to highlight the beauty of trees from the Royal Botanic Gardens in Sydney. 

Having buyers interested in both the NFT art and ultimately the trees, the project provides a level of interaction between consumers and the artistic content, while helping to fund the conservation of nature. 

The impermanence of the NFT art is apparent when viewed through the lens of a “return on investment” and the capitalisation of hype. In order to harness the value of innovation for artists and consumers, we need to focus on the sustainable benefits of immutable provenance and unique storytelling. 

Bridging the junction between consumers, artists, and the subject of digital art, the enduring value of NFTs is beyond collectible items and financial investments.

Words by Cam Thach