Commonly referred to as an NFT, the long name non-fungible token, is becoming an increasingly popular topic amongst artists, sellers and buyers of art. An NFT is a digital file and is unique. NFT's operate on a blockchain based platform such as Ethereum, but unlike crypto currency they are not interchangeable. I am not an expert, but I do have some knowledge. Here's my take.
What is the charm about NFT's? I suppose when one sells for $91 million (Pak's "The Merge") it becomes appealing to artists and buyers alike. However, the majority of NFT's sell for around $200. This is the median price, meaning half sold for more than $200 and half sold for less than $200. So let's face reality, we are not all Jack Dorsey (founder of Twitter) and will not sell our first tweet for $2.9 million dollars. Sorry to rain on your parade.
OpenSea seems to be a popular site to sell and purchase NFT's, but there are others. There is currently a $50 registration fee, and if an NFT sells, OpenSea receives 2.5% of the transaction. The maximum royalty fee you the seller can receive is 10%. Also there is a gas fee. According to OpenSea they use a Proof-of-Work mining model, which is currently Ethereum. These are the basic fees, which can reduce your share of the profit. The flip side of that, if your NFT does sell for a large sum of money, then these fees will be well worth the investment.
Another consideration is copyright. To me this is the most important factor, determining if I choose to place a piece of art for sale. Am I retaining the copyright. If copyright is a concern, and it should be, then I would consult a legal expert to better understand the possibility of losing the rights to the work. I think this is still an unknown, vague to be accurate.
Another note, NFT prices can be manipulated by scammers. Meaning I list a piece of art for a certain price, I then have someone purchase it for a higher price, this triggers a buying spree, and the original seller makes a nice profit. I'm sure there are more sophisticated methods to manipulating the prices, but this is my layman's explanation.
If one wants to call this an investment, then I would liken this type of transaction to the stock market, only unregulated and volatile. As with the stock market, I do not discourage people from entering in this type of transaction, just know the risks involved, and make your decision based on knowledge, not whims.
Art is subjective and digital art is no different. The virtual art is only worth what we assign it and if someone purchases it for $50.00 then that is what it is worth.
My last bit of skepticism is when fraud does take place, is there a third party arbiter. There are some legal experts that are willing to accept you as a client, but it is my belief that there are still too many variables to have a positive outcome. And that is my take.
If you enjoyed this blog please comment, or if you dislike it leave a comment. You can follow me on Twitter @DannyBaker0
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