NFTs emerged during the pandemic as a new way to trade everything from art to NBA highlights to virtual horses. Take a closer look at how they actually work, and you’ll find the current boom is being made possible by culture and value building around existing technology.
NFTs, or nonfungible tokens, use blockchain to create secure, authenticated transactions online between artists and buyers.
Visual artists like Aaron Ricketts have sold NFTs for thousands of dollars and tapped into a previously unseen world of art commerce that allows both for equity, and higher sales.
During the annual Technical.ly Developers Conference, Ricketts and The Washington Post VP of Commercial Jarrod Dicker talked with Technical.ly Managing Editor Julie Zeglen about what NFTs are, what the market for them looks like and how NFTs could change the sale of artwork in the future.
The May 11 discussion was part of Philly Tech Week presented by Comcast. Sponsors of the Technical.ly Developers Conference include Comcast NBCUniversal, URBN, including their Urban Outfitters and Nuuly brands, Vanguard, TD Bank, Linode, Pinnacle21, Cerner, SIG, Listrak, Burlington Stores, Perpay, Odessa, Inspire Energy, FORT Robotics and Greenphire.
Here’s a look at key takeaways from the virtual conversation. Count it as a primer on the basics of NFTs:
NFTs allow for digital assets to have an authenticated, unique status.
Dicker explained that NFTs are a prime example of how blockchain technology has evolved. Encryption lends NFTs a way of authenticating digital assets that was never before available on the internet.
“When the internet developed, things [became] easily replicable,” Dicker said. “NFTs are also opening up this entirely new opportunity where digital goods are becoming provably unique. A technology that can now associate that something is the true one or a unique asset is something on the internet that we were never able to do [before].”
The technology behind NFTs is not new.
While NFTs have recently become more prevalent in pop culture, Dicker said that they have actually been around for some years now, with technical development and attention from the cryptocurrency community kicking into high gear around 2017.
"What is often the trend is that culture follows economics. A trend is set and a culture is built on it."
“What is often the trend is that culture follows economics,” he said. “A trend is set and a culture is built on it. People in crypto were talking about NFTs in 2017 as a way to seek provenance of info, but there was no culture built on top of it. The reason we talk about it now is that there are brilliant artists creating on top of this technology. That usually draws the most attention and is way more exciting than seeing what works financially.”
Understanding the value of a creator’s work matters with NFTs.
Ricketts has sold five NFTs. He said the experience reaffirmed his work as an artist, and the value he places upon his own process.
“One of the important things to realize is that you always have to value yourself as a creator, first and foremost,” he said. “For someone coming in and creating a one-of-one piece and selling it at $250, it should be valued higher because you can say this is a validated unique format. For people pricing NFTs, it comes down to what you value [work] as an artist.”
Selling NFTs can involve bidding from multiple interested buyers.
Ricketts has sold an NFT for as much as $5,268.69 and as little as $1,400. For him, the bidding that can happen for NFTs can often significantly increase the price of a work.
“Someone can offer you a price to sell your NFT,” he said. “A lot of people are using bidding systems. You may list your NFT to a reserve price of $500. Someone meets that and a bidding war can start.”
Blockchain is allowing people to sell virtual trading cards and invest in virtual horses.
Dicker spoke with a sense of amazement about the levels in which cryptocurrency has given way to other forms of gaming systems, such as the virtual highlight trading cards of NBA Top Shot and ZED RUN, a platform that allows users to buy, trade, breed and race virtual horses.
“What we’re seeing with crypto is that people can associate reputation with blockchain and now finance,” he said. “Zed Run is a way to purchase horses and participate in these amazing events and evolve in the ecosystem. It’s hard to argue this would all be possible without this sort of technology prior.”
There is a hierarchy of platforms used to sell NFTs.
Access to platforms for NFT selling was something Ricketts likened to the hierarchy of cars. High-end platforms like NiftyGateway have seen immense success, such as when artist Beeple used the platform to sell an NFT for $69 million via a Christie’s auction. NiftyGateway is more akin to a luxury car, while NFT selling platform Foundation may be a step below. While people may still sell NFTs via free, more accessible platforms, he has noticed that people more frequently gravitate to the invite-only platforms.
"The accessibility is leveling out for more and more people to enter the space."
“When it comes to different platforms, you have to look at them as different levels of cars,” he said. “You have your luxury car, which some people may look to as SuperRare or NiftyGateway. Someone sold an NFT for Christie’s for $69 million with NiftyGateway. Foundation may be a step lower, but a lot of higher-end platforms are invite-only, or you have to submit an application.”
Selling NFTs is becoming more accessible.
Selling NFTs involves what Ricketts referred to as “gas fees,” or fees needed to conduct transactions on Ethereum blockchain. He’s noticed that the cost of those gas fees has steadily declined and believes that could make selling NFTs more accessible to people interested in getting involved.
“I feel like the accessibility is leveling out for more and more people to enter the space,” he said. “It comes down to people understanding how the platforms work and which works best for them.”
Michael Butler is a 2020-2021 corps member for Report for America, an initiative of The Groundtruth Project that pairs young journalists with local newsrooms. This position is supported by the Lenfest Institute for Journalism.-30-