Business & Finance

How Cryptocurrencies Are Changing the Art Market

Since the beginning of the year, we’ve seen the cryptocurrency market literally explode. The price of bitcoin has tripled since its 2017 all-time high, triggering a buying frenzy in the markets.

However, people don’t only buy bitcoin with credit card nowadays. They have diversified their investments into other coins or digital assets. The subject of this article are the increasingly popular NFTs or digital works of art that are created on the blockchain.

NFTs are all over the media. From digital paintings selling for millions of dollars to gaming collectibles, they have become a coveted asset by many, bringing considerable profit opportunities.

What are NFTs

NFTs is the acronym for non-fungible tokens. They have borrowed their name from their difference with fungible tokens such as bitcoin.

See, bitcoins and other similar cryptocurrencies can be exchanged seamlessly for one another. Just like a bar of gold equals another bar of gold or a dollar bill that can be exchanged for another dollar bill.

Non-fungible tokens are not interchangeable, because of the unique properties they hold. Each token is defined by its metadata on the blockchain and is inherently unique. To define them more precisely, we can draw a parallel to baseball trading cards.

Each card represents a different player, with different stats, which impact the price of the card. The year and the condition of the card influence its value even further and make it unique.

How artists “mint” NFTs

The Ethereum blockchain was the first to introduce the general public to a revolutionary innovation – the smart contract. These self-executing applications allow different tasks on the blockchain to be automated, which has helped the technology disrupt numerous industries such as healthcare, insurance, supply chain, and many more.

Furthermore, smart contracts offer the ability for developers to create their own cryptocurrencies (fungible) and NFTs. For instance, by using the ERC-20 token standard, many fungible cryptocurrencies have been created over the years, with the most popular being Tether (TUSD) or Chainlink (LINK).

However, there is another protocol on the Ethereum blockchain that allows for the creation of NFTs – the ERC-721 standard.

This standard has enabled artists to mint their digital artworks directly on the blockchain, making them easily transferable, verifiable, and unique.

Benefits of NFTs

Digital art minted as an NFT carries some incredible properties, improving classical art in almost every way. They use the properties of blockchain technology to become:

  • Unique – every NFT can be verified for its uniqueness on the blockchain.
  • Resistant to fraud and falsification – because they are just representations of data on the blockchain, NFT works of art cannot be copied or duplicated.
  • Easily transferable – unlike paintings and sculptures that are bulky and difficult to transport, NFTs can be sent through a couple of clicks on the Ethereum network.
  • Provide artists an inclusive medium to propagate their art – thanks to open NFT marketplaces, every artist can place their art for sale and reach thousands of potential buyers immediately.
  • Can’t be damaged – because of their digital nature, NFTs are entirely resistant to environmental damage such as fires, floods, or other natural disasters. As long as the private key giving access to the digital art is safe, so is the NFT.
  • Provide liquidity – some decentralized finance projects are pushing the idea to allow NFTs to be used as collateral for investments and money loans. This way, collectors can get access to liquid cash by putting up their art as collateral and without being obligated to sell them.

The most popular NFT artists

In the past couple of years, some artists have been standing out from the crowd when it comes to digital art on the blockchain.

  • Beeple – arguably the most successful artist in the milieu, Beeple recently sold a collection of his work for an astonishing $70 million.
  • Fewocious – this 18-year old artist has quickly become a favorite with the public. Her vibrant art gets sold out immediately after release.
  • Pak – this mysterious artist has remained anonymous to this day. After creating Archillect, the algorithm that shares trending images on social media, he has focused on creating incredible works of art on the blockchain.
  • Trevor Jones – this artist’s collaboration with comic book legend Jose Delbo saw their drawing of Batman reach over $500.000.

Wrapping up

The blockchain has disrupted countless sectors and the art industry wasn’t spared. Over the years, we can expect an increasing number of renowned artists to publish their art on the blockchain. This makes it a great opportunity for many investors to profit from this opportunity early.

To conclude, NFTs are a great way for crypto investors and art collectors to broaden their portfolios and collections. With cryptocurrency prices on the rise, we can only imagine what these might be worth 10 years from now.