Unless you’ve been living on Mars, you’ve probably heard of NFTs.
Perhaps you heard the story of Sultan Gustaf Al Ghozali, the Indonesian student who became an accidental millionaire by selling selfies. Or maybe you read about Benyahim Ahmed, the 12-year-old coder who made six figures selling his “Weird Whales” NFTs, and are wondering how you can get in on the action.
For digital artists and designers, these stories are intriguing. They point to the possibility that NFT projects could help digital designers make decent money from their art.
Although NFTs have been around for a few years — the first one was created and minted by Kevin McCoy in 2014 — 2021 was the year they really began to take off. Global NFT sales jumped from $82.5 million in 2020 to $17 billion in 2021.
But, like three-quarters of the population, you may be wondering just what the hell an NFT is, anyway? And is it really possible for designers like you to make money in the NFT space?
This beginner’s guide to NFTs will cover a brief history of NFTs, how they work, and how artists and designers can harness their potential by selling their own NFTs on the blockchain.
What exactly is an NFT?
“NFT” stands for “non-fungible token.” It’s based on the economic principle of fungibility. If an item is fungible, it means it can be replaced with another identical item — the individual item itself holds no particular value. Non-fungible, therefore, means the opposite: the item is unique and irreplaceable.
Think about the Mona Lisa. There’s only one, and she’s hanging in the Louvre in Paris. The non-fungibility of the painting is what gives it its value — nothing in the world can replace it, and only one person or entity can own it (in this case, the French government).
NFTs are the digital version of that. Essentially, an NFT is a digital record created using the blockchain — the same technology behind cryptocurrencies. Blockchain records are immutable, which means they can never be replicated or changed. When you create an NFT and assign it to a digital asset, it becomes a unique item in the same way that the Mona Lisa is.
This process creates scarcity. In other words, it becomes impossible to right-click and “Save As,” — which, in turn, creates value. The NFT can then be bought, sold, or traded on the NFT market, with its ownership traceable through the blockchain records, known as the blockchain ledger. NFTs are, therefore, a way for digital artists to make money from their work in the same way physical artists do.
How did NFTs originate? Who is Beeple?
NFTs have their origins in online video games, where gamers first developed the concept of buying and selling digital assets — such as virtual clothes and weapons — for their avatars.
Back then, there was no blockchain, which meant there was no way to make a digital item unique from all its copies (or stop people from copying it). There was also no secure ledger in which to record all transactions.
In 2014, artist Kevin McCoy had the idea of using blockchain technology to create ownership of a digital asset, and the first NFT — called Quantum — was born.
Fast forward to December 2020, when Mike Winkelman — a father from Wisconsin whose artist name is Beeple — sold $3.5 million worth of NFTs in his first-ever auction.
Despite having a massive following in the digital world (over 1.8 million followers on Instagram), Beeple had no standing in the traditional art world or auction houses. Before turning to NFTs, he rarely made more than $100 per sale of his prints.
In March 2021, he made history by selling an NFT for a whopping $69 million at Christie’s auction house, and his story cemented the power of NFTs in the artist and designer market.
The blockchain: the thing that powers NFTs
You probably know the blockchain as the tech behind cryptocurrencies, but it’s also what makes NFTs possible.
The blockchain contains the data records of every transaction ever made through it. This is known as the blockchain ledger. Every time a transaction is made with crypto, it’s logged into the blockchain as a block of data that cannot be changed, deleted, or hacked into.
This makes the blockchain an extremely secure method of evaluating the ownership of digital art and allows digital artists and designers to create scarcity, which in turn drives up value.
While there’s no guarantee your art will become the next Cryptopunks, blockchain technology enables digital artists and designers to earn a living out of non-physical assets.
Although Bitcoin is the original cryptocurrency, Ethereum has played a critical role in pioneering NFTs.
They were the first to create a standard — known as ERC-721 — for the process and information required to create a valid EFT and enter it into the blockchain. This includes who created it and where it’s located, as well as custom information, such as the artist’s signature. For this reason, most NFTs are minted and sold on the Ethereum blockchain.
How to create and set up an NFT
Ready to create your first NFT? Follow these five steps to get started.
1. Open a crypto wallet
NFTs are bought and sold with the cryptocurrency Ethereum. And just like crypto, they’re stored in crypto wallets.
Therefore, your first step is to open a crypto wallet and buy some Ethereum. You’ll need your ETH wallet for the next step, minting your NFT, as well as for receiving payments.
2. Mint your NFT
Minting your NFT is the process that rarifies it. During the minting process, Ethereum runs a series of computer calculations similar to the ones used for mining cryptocurrency.
This process requires a fee — a slightly controversial topic among artists — known as “gas fees.” This is the reason you’ll need to buy some ETH before you can create your NFT.
3. Link your crypto wallet
Next, you’ll need to link your digital wallet to an NFT marketplace — a place where NFTs are advertised, bought, and sold.
Some of the most popular NFT marketplaces include OpenSea, Rarible, Mintable, and SuperRare.
4. Decide how many copies to make
You can either sell a single, unique piece of art on the marketplace or create and sell a finite number of copies.
Just like with physical art, the number of copies in circulation will affect the value of each copy. The fewer the copies, the higher the value will be.
5. Set the price and sell
You can set a fixed price for your token, or you can let people bid on it in an online auction.
What benefits do NFTs offer artists and designers?
Still need convincing that NFTs are the way forward for you as a digital artist? Here are four of their main benefits.
1. Digital ownership
The most prominent benefit of NFTs is that they allow digital artists to make each painting or design piece unique.
Therefore, every digitally created work of art has value, and the buyer has a way of proving that they own the original and not a right-clicked copy — all thanks to the power of blockchain technology.
The ability to prove ownership of digital art legitimizes its value and opens up the potential for lucrative earnings for digital artists.
2. Global reach
NFTs have made the trading of digital art possible across the globe, but even physical artists see NFTs as a promising opportunity.
How so? Because, until now, they had to rely on sales to private clients or exhibition ticket sales that only a fraction of their worldwide fanbase could attend.
But by harnessing NFTs, even brush-on-canvas artists can turn their projects into an NFT collection and sell to an international audience online. The same applies to digital artists, who can successfully sell NFTs even when starting in relative obscurity.
3. A secure source of income
NFTs offer a safe, non-hackable method of payment for artists and designers. Much like any product bought and sold on an e-commerce website, an NFT cannot be purchased unless it is fully paid for.
This is great news for artists who no longer have to worry about chasing clients for missed payments or hunting down illegal copies of their work.
4. Royalties
Minting NFTs using the Ethereum ERC-721 standard allows you to build royalties into the smart contract. When you mint your NFT, you can decide what percentage you want on future sales of your digital artwork.
This means that every time someone sells your work on an NFT platform, you take a cut, allowing artists and designers to earn royalties and create a steady source of income from their work.
What are the downsides of NFTs?
Of course, NFTs have some disadvantages, too. For a start, it’s still not clear what NFT ownership means and what rights it gives the owner over the digital file. There are no clearly-defined rules around ownership. For example, if you buy an NFT and use it to make t-shirts which you then sell for profit, should the artist get a share of those profits?
Another downside to NFTs is the environmental impact, which applies to the whole blockchain and crypto in general. Cryptocurrency mining and NFT minting are infinitely secure but massively inefficient and require vast amounts of energy to run.
Bitcoin alone consumes more energy each year than Finland, a country with a population of 5.5 million people. This has led many people to question the sustainability of blockchain technology and, by extension, NFTs.
NFTs — the future of digital art?
Like it or not, NFTs are here to stay. And despite their drawbacks, they also have the potential to transform the “starving artist” paradigm for digital artists and designers.
If you want to harness the digital sphere and leave your mark on the world by creating digital collectibles, NFTs are the way to go.
Here at Playbook, we’re passionate about all things digital art. Check out our blog to stay on top of all the latest developments in the fields of art and design.