As cryptocurrency prices skyrocket, celebrities from actress Lindsay Lohan to Youtuber Logan Paul are creating digital collectibles called non-fungible tokens (NFTs). These collectibles often include JPEGs or GIFs, although they can also be attached to tweets, MP3s, or any other type of digital file. The file is associated with an Ethereum token, kind of like a serial number, to prove ownership of the file.
And lots of people are buying them—spending millions of dollars so far in 2021. CoinDesk reported people have spent $174 million on NFTs since 2017.
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Some people are making a living with these Ethereum-based NFTs, whether that means creating and selling them or trading them like baseball cards. One such artist, Daniella Attfield in South Africa, uses an NFT site called SuperRare to sell her illustrations. She’s been tinkering with NFTs since 2018, but started really focusing on it as a sales mechanism in July 2020. These days, NFT sales are her primary income.
“My artworks come with a history which is recorded on the blockchain and can be proven to be authentic. They also have the knowledge that they are supporting an artist,” Attfield said. “The demand is constantly growing as more people join the space.”
Celebrities, like Dallas Mavericks owner and Silicon Valley investor Mark Cuban, frequently sell NFTs for upwards of $81,000. Artworks regularly go for hundreds of thousands of dollars. On February 8, 2021, two video game fans set a new record by spending $1.5 million worth of crypto to buy an NFT for digital land plots in the game Axie Infinity. Meanwhile, less famous artists may offer NFTs for just a few dollars each.
Someone not deep into NFTs already would probably wonder why anyone would pay as much as a house for something that anyone can simply take a screenshot of and save for free. This is fair, but still, thousands of people are still buying the unique tokens that represent these images in order to support the artist and prove ownership. NFT sellers like Venezuelan illustrator Alejandra Her say the blockchain aspect fosters a stronger sense of ownership for the intangible assets.
“People can also shoot a photo of any artwork in a museum and print it out. But they know they don’t own the artwork. It’s the same with NFTs,” Her said. “I think that my NFTs have been bought by different kinds of collectors: those who buy to resell later, those who buy my art because they like it, and those who are artists and like support each other.”
Ethereum fans use special crypto wallets to view the NFT images in their collection, otherwise the blockchain transaction acts like a receipt for users to look up the image using web platforms like OpenSea or Rarible.
There are at least half a dozen startup platforms that help people create or trade NFTs, including SuperRare (Soulja Boy’s preferred platform), Rarible, and Nifty Gateway, which is partially owned by Cameron and Tyler Winklevoss. Sometimes these platforms offer a built-in system where the artist can just upload their visual or audio file, click a few buttons and make a corresponding token.
Many of the most successful NFT artists, like Nifty Gateway user Mike Winkelmann, aka Beeple, are earning millions of dollars for these collectibles. According to a blog post by Nifty Gateway’s parent company, Gemini, that platform has seen 50 percent month-over-month growth since March 2020. Plus, Masha Vyazemsky, communications director for the NFT startup Rarible, said her platform facilitated roughly $5,668,986 worth of NFT transactions by 6,482 users in the last month alone. These pieces often include music, videos, and other content beyond visual images, as well.
NFTs aren’t cheap, and neither is selling them, especially for non-celebrities. Users need to pay Ethereum transaction fees to create and transfer the NFTs. For up-and-coming artists like Attfield, she said these transaction fees cost roughly 10 percent of her monthly income. She sees it as a business expense, the worthwhile cost of accessing international buyers without help from an art gallery.
“It’s best for single editions. It’s harder with multiple editions, because the artwork ends up costing the same as the gas [transaction fees] and it doesn’t seem worth it,” she said. “I also engage with my followers on Twitter and keep trying to improve my art, make it better.”
Coinfund co-founder Jake Brukhman, an investor in Rarible, said these high transaction fees, driven up by the broader bull market, are the sector’s biggest challenge.
“The options are you go onto layer two solutions, like Matic or Optimism, which just launched in a public beta and is very experimental and early,” Brukhman said. “That means the market is getting fragmented between these two solutions. It’s actually more expensive to move between them. That’s twice the transaction fee.”
Brukhman added that tech-savvy NFT creators and holders might be able to transfer their pieces to another blockchain, beyond Ethereum, next year. Those technology bridges are still under construction. Until then, NFT sellers like Her pay high transaction fees, called “gas,” in order to access customers and currencies beyond her local borders.
“In the last 30 days I think I’ve spent about $200 on gas. But I used to spend less than $50 a month until December,” Her said, adding NFT sales still represent 80 percent of her monthly income. “I am taking my time to produce a new series of artworks due to high gas prices. So I mint less but work the same amount.”
According to Brukhman, there’s much more to NFTs than digital art prints. “Don’t get stuck on the art use case for NFTs. NFTs are applicable to all digital content, not just art. Music, 3D models, maps, calligraphy fonts, etc,” he said.
NFTs can be used for community campaigns as well. Such was the case with Calvin Liu, the investor at Divergence Ventures who bought an NFT from the CGI influencer Miquela to raise $82,361 for charity. Liu said buying NFTs can be like joining a fan club. When real people offer personal NFTs, like Blockade Games CEO Marguerite deCourcelle, Liu said it can create an “informal social contract” that the artist will continue doing the work the fans enjoy. In deCourelle’s case, that means continuing to post her art and video games. For others, the NFT represents a one-off work of art with a blockchain receipt.
“Right now it’s on display via Crypto Voxels, a digital gallery,” Liu said of his celebrity NFT. “A lot of artists and designers are now diving into the space.”
Leigh Cuen is a freelance reporter for outlets like Vice, TechCrunch, Business Insider, Teen Vogue and CoinDesk. You can check out her latest poetry NFT collaborations on Known Origin and OpenSea.
