The terms "NFT" and "disruption" have been used interchangeably, as NFTs, or non-fungible tokens, continue to dominate the art space and fintech news. And it's no surprise why - the untapped potential this form of digital media offers creates a new level of access for artists that hasn't been seen before, both in blockchain technology and the traditional arts and entertainment industry.
Mainstream figures and artists have generated success in the NFT market, and its allure is attracting the likes of institutional art players, investors, musicians, and more worldwide. Even Damien Hirst, notable British contemporary artist, is set to sell 10,000 NFTs on Palm, a new energy efficient Ethereum technology.
NFTs, Explained
In a recent Atlantic article, Anil Dash, CEO of Glitch and co-creator of NFT technology, explains the role that non-fungible tokens was intended to play - to enable artists to have control over their own work, to make art easier to sell, and to further protect artwork from being appropriated without an artist's permission.
Thus the creation of NFTs.
NFTs are a form of digital media that represent a wide range of unique items, such as a photograph or digital art. The NFT is wrapped in a piece of code layered with additional information in order to be uploaded onto the blockchain - a decentralized, digital ledger that records every NFT produced, as well as its transfers.
It's important to note while NFTs were originally produced for the digitization of artwork, any digital file could essentially be "minted," or uploaded as an NFT.
Redefining Value
Buyers of NFTs are not purchasing the intellectual property nor the actual physical copy of a digital asset. So where exactly does the value of an NFT come from?
The general buzz around NFTs may stem from the opportunity to produce both individual agency and community building. Real-time conversations through Clubhouse and Discord, as well as other social media channels, make it easier to filter authenticity and intent. While the market value of an NFT accumulates through trading and fluctuations of gas fees, many NFT enthusiasts invest in the people they choose to support.
This reputation is reflected in the current NFT market, as it’s set at a current value of $250 million according to a market analysis conducted by NFT analysis firm NonFungible.com. The price of Ethereum is forecasted to hit $5,000 by the end of 2021.
Artists, Brands, Collectors
It must be said that well-established brands and public figures with large social followings have also entered the NFT space in order to promote hype and digital engagement with their audiences.
By riding the current excitement around NFTs, companies have been able to take advantage of this new virtual medium and its ability to communicate with consumers. Brands have a broader range of utilities like offering exclusive incentives, unique licensing contracts, event ticketing, and donations or crowdfunding.
Moreover, brands that minted their own NFTs simply generate a new level of brand awareness and identity by taking part in its popularity. Taco Bell exemplified this when the company released five digital art collections under the name NFTacoBell on Rarible. It’s safe to say more brands will also begin boarding the NFT train as it continues to take off with high demand. This could then produce a snowball effect, with more fans, collectors and artists entering the NFT arena as well.