NFT stands for Non-Fungible Token art and refers to digital or traditional artworks that have been tokenized on blockchain networks, typically the Ethereum blockchain.
Non-fungible tokens are unique digital assets that represent ownership or proof of authenticity for a specific item or piece of content, and they cannot be exchanged on a one-to-one basis like cryptocurrencies such as Bitcoin or Ethereum, which are fungible.
Investing in digital art attracts the attention of many investors nowadays. It involves buying and holding digital assets that represent ownership or access to a piece of digital art.
This investment type attracted the attention of investors for different reasons.
NFT artwork provides a transparent and immutable record of NFT movement and ownership on a blockchain.
This helps establish the NFT collection authenticity and provenance of digital or physical artworks, which can be crucial for both an artist and a collector.
NFTs create digital scarcity by ensuring that a specific digital artwork is unique in the NFT art market and cannot be replicated. This uniqueness and digital provenance of digital artworks can enhance the value of digital art.
NFTs work includes smart contracts that automatically distribute royalties to artists from secondary NFT sales. This provides ongoing income to artists, which is a significant advantage compared to physical artwork sales where artists typically don’t benefit from resale value even if their income could be millions of dollars.
NFT art allows for a more democratic and global art market. It enables younger artists to reach a global audience through NFT marketplaces available globally.
Collectors and investors can pick the most successful NFT projects without any geographical or regulatory limitations.
Online auction houses and art fairs enable everybody who has a digital wallet to benefit from investing in or collecting digital objects.
Blockchain technology ensures transparency in the NFT market, which can reduce the risk of fraud and counterfeit art thus protecting digital art collectors and artists. It provides a clear history of ownership and transactions.
Digital art can take various forms, including illustrations, animations, 3D models, music, virtual reality experiences, and more. Artists use software, digital drawing tablets, and other digital tools to create an art world worth millions of dollars.
The process begins with the digital artist choosing to tokenize their digital artwork as an NFT in the digital form thus turning it into crypto art.
To tokenize, they typically select a blockchain platform like Ethereum and use NFT marketplaces or minting NFTs platforms (e.g., OpenSea, Rarible, Mintable, Nifty gateway, and several marketplaces more ) to create the NFT. An NFT marketplace allows one to buy and sell NFTs, thus enabling investing in unique token assets.
Smart contracts are often utilized in the creation of crypto art. These contracts automatically execute actions like transferring ownership and distributing royalties to artists upon the sale or resale of the digital file created by them.
Investing in NFTs can be exciting, but it’s important to understand the basics and take a cautious approach, especially as a beginner. Here are some fundamental NFT investment basics for beginners.
Investing in NFTs (Non-Fungible Tokens) can be exciting, but it’s important to understand the basics and take a cautious approach, especially as a beginner. Here are some fundamental NFT investment basics for beginners:
Start by learning what these tokens are, how they work, and their various use cases. Research the different marketplaces, artists, projects of the digital artist, and at what price they were sold before you like before you start to collect art. Understanding the space and digital technology is essential before purchasing something.
Research this new world properly before, check digital galleries, learn about the most popular artwork pieces, their value in the market, at how much they were sold previously, and only then, dive into the market.
Select a well-established and reputable NFT marketplace to buy and sell NFTs collections and separate NFTs. Some popular platforms include OpenSea, Rarible, SuperRare, and Mintable. Ensure the platform aligns with your interests and goals.
Most NFTs can be speculative and volatile. Their value can fluctuate rapidly, and there is a risk of losing your investment. Be prepared for market fluctuations and don’t invest money you can’t afford to lose.
As a beginner, it’s advisable to start with smaller investments. Avoid putting all your funds into a single digital asset. Diversify your portfolio by buying multiple tokens from different artists and styles.
Be cautious about scams and counterfeit digital art pieces. Verify the authenticity of the token you’re interested in by checking the artist’s official social media profiles, website, or other trusted sources.
Ensure the digital creation links to the artist’s official channels. Only one person can own a digital art piece or its part, and a digital signature on the blockchain serves as proof of ownership.
Remember that such investments can be both rewarding and risky. Approach it with a long-term perspective and a genuine interest in the art itself, as well as an understanding of the technology and the market.
The NFT industry is vibrant and constantly evolving, with many prominent projects and artists gaining recognition. Some notable NFT art projects and artists are listed below.
Kevin McCoy: he created the first real NFTs called CryptoKitties. CryptoKitties is a blockchain game where users have to collect, breed, sell, and buy NFTs in the form of digital cats.
Jack Dorsey: The Twitter co-founder sold his first tweet as an NFT for almost $3 mln. So price points, even if being in most cases affordable, can peak very high.
CryptoPunks: Created by Larva Labs, CryptoPunks is one of the earliest NFT projects. These pixel art characters have become iconic in the NFT world.
Beeple: Beeple, also known as Mike Winkelmann, gained immense attention for his NFT art, including the record-breaking “Everydays: The First 5000 Days.” He’s known for his digital collage-style art.
Mad Dog Jones (Michaël Borras): Mad Dog Jones is known for his futuristic and cyberpunk-inspired digital art, which has gained a dedicated following.
Xcopy: Xcopy is known for his minimalist, crypto-inspired art, often featuring repeating patterns and references to blockchain and cryptocurrency.
The influence of non-fungible tokens on the traditional market is an ongoing process, and the relationship between the two continues to evolve. The existing art world has to adapt to the new standards set by NFT artists.
So, the Bored Ape Yacht Club collection, Nyan Cat, NBA Top Shot clips, and other types of tokens are shaping the future of the art by creating a one-of-a-kind experience with ownership. Everybody can buy and sell NFT collections, and fractional ownership allows owning at least a piece of a work made by a famous artist.
The value of digital art is expected to grow, and you can already see this trend in the example of NBA Top Shot and other famous collections, thus, this may be a great investment opportunity.
Even celebrities such as Snoop Dogg are engaged in this new market. However, don’t mix investment in the digital market and physical art.
If you are considering buying one or some digital art works, you may want to know the difference between digital art and physical art.
NFTs are digital assets representing ownership or access to digital or physical items, and they exist on blockchain technology. They are purely digital.
Traditional art investments involve physical assets, such as paintings, sculptures, and other artworks. Collectors can enjoy the aesthetic and tangible aspects of art.
NFTs have lowered barriers to entry for artists and collectors, making it more accessible for a global audience to participate in the market.
The traditional market has a long history and established institutions, including galleries, museums, and auction houses like Sotheby’s and Christie’s where the most impressive art pieces are sold.
NFTs offer transparent and immutable ownership records on the blockchain. The provenance of NFT art is easily traceable.
Ownership of real art pieces provides a sense of exclusivity and prestige. High-end art is sold at high prices and can be a status symbol.
It’s important to note that both NFT and traditional art investments have their risks and considerations.
NFT (Non-Fungible Token) art has the potential for value appreciation.
NFTs create digital scarcity, as each token represents a unique and verifiable digital item. This scarcity can drive demand and price growth, especially for well-regarded and limited-edition pieces.
Established and renowned artists who enter the NFT space can bring their existing following and collector base, increasing the price of their NFTs.
NFT art is still a relatively new and evolving market. Emerging trends, styles, and artists can quickly gain popularity and see value appreciation.
Among the main challenges, the following are to consider.
The NFT market is highly volatile, with prices that can fluctuate rapidly. While there have been instances of significant value appreciation, there have also been substantial declines.
The NFT market is still relatively unregulated, making it susceptible to fraud, scams, and price manipulation.
NFTs represent ownership of digital art, but the art itself remains digital or may have a limited physical presence. Some investors prefer owning tangible assets.
Investing in NFT art should be approached with caution and thorough due diligence. Consider your investment goals, risk tolerance, and personal interests in art. Diversifying your portfolio and being informed about the latest developments in the NFT space can help mitigate some of the challenges associated with NFT art investments.
Disclaimer. This material should not be construed as a basis for making investment decisions or as a recommendation to participate in investment transactions. Trading digital assets may involve significant risks and can result in the loss of invested capital. Therefore, you must ensure that you fully understand the risk involved, consider your level of experience, investment objectives, and seek independent financial advice if necessary.