What is NFT Art?

What’s the Dealio With NFT Art?

Disclaimer This article is for general information purposes only and isn’t intended to be financial product advice. You should always obtain your own independent advice before making any financial decisions. The Chainsaw and its contributors aren’t liable for any decisions based on this content.

NFTs, or non-fungible tokens, have caused quite a stir in the last year. But what exactly are they? They are digital assets that are stored on a blockchain and represent unique, individual digital items, such as an image, song or video. But an NFT can also represent a unique one-of-one piece of artwork. 

Whisbe, Not Forgotten, But Gone sold for US$1 million in March 2021. Source: Whisbe

This is what makes it ‘non-fungible’ and different to a fungible asset like Bitcoin which has millions of the one asset. Or even money – $1 is the same and equal to any other $1. Not so with NFT art. A piece of art can be traded like Bitcoin or other fungible digital assets, but the key difference is that it is one-of-a-kind. 

The NFT art market has exploded as global adoption of blockchain technology soared in 2021. NFTs have been around for longer than this, since 2015 in fact. However, 2021 was the year that marked mainstream awareness of the ability to use cryptography and distributed ledger technology to prove that an asset is unique – and the art work ran with it. 

NFT art allows artists to produce original, digital art which can be showcased and sold around the world, unrestricted by location. This gives artists the opportunity to reach wider audiences and potentially generate more income.  

Critically, NFT creators have the ability to decide their own royalty payment structure for their digital art — this ensures they can be compensated for all future resales of their creation, providing passive income for the artist. How different is that to the current model? Very. Most analogue artists never see a cent following the sale of an original physical piece of art. With traditional art, artists often only see a pay cheque from a once-off sale with part of that commission taken from the gallery or other intermediaries along the way. Artists often have no say in their rights to royalties or sales thereafter. 

With NFT art, royalty terms are coded into the non-fungible token’s smart contract on the blockchain, meaning artists can be compensated for the eternal lifespan of their creation. The average NFT royalty ranges from 5-10%, which is a gamechanger for artists.

New to NFTs and keen to learn more? We’ve put together a handy explainer to help you navigate this new and exciting space.  

 How to create NFT Art?

1) Decide on the format, content and design 

Similar to any creation, you need to figure out what you actually want to ‘mint’, or upload to the blockchain, first.

Art comes in many forms beyond pictures – it could include text, music and video. The sky is truly the limit for minting NFT art and you have complete artistic freedom to explore to your heart’s desire. Of course, most NFT successful artists have played to their strengths.  

Creators that are particularly talented at producing artwork have produced some exceptional NFT original art pieces. One such example is Mike Winkelmann, known in the NFT world as ‘Beeple’, whose piece ‘Everydays The First 5000 days’ — a compilation of 5000 images created over 13 years – sold for a record-breaking US$69 million in 2021.

The most expensive NFT art piece to date, Everydays: The first 5000 days. Source: Beeple

Creators have released a wide range of NFT types from life-like images of human portraits, abstract paintings to memes. The infamous ‘Bad Luck Brian’ meme, a viral image recycled for memes since 2012 of an IRL kid named Kyle and his awkward yearbook photo, sold for US$36,000 in March 2021. 

Although this image might not bring much utility to the holder beyond bragging rights, given its fame around the world, it allows the holder to prove that they are the one-of-one owner of what is one of the most used meme images of all time. There are also various popular NFT projects that have a focus on community, allowing holders to share their thoughts, opinions and even voting power to contribute to the project’s development.  

Bored Ape Yacht Club (BAYC) is a good example of a project with a major community focus, having announced on October 4 the launch of the BAYC community council assembling a team of Apes with a proven track record of proactively and positively contributing to the club from the start.

Musicians are also diving into the NFT space producing music audio files in new an innovative formats. For example, NFT music platforms are attempting to transform the relationship between the artist and fans, with an example of one of these platforms including Serenade which offers a Digital Pressing — a package of various unique elements like voice notes, artwork or special VIP tickets for fans from artists.

2) Design your art NFT

Once you know what type of NFT you’d like to mint and your design, you can go forth and create it. The most important rule is that if you’re planning to sell it, it must be original. Examples of popular programs to make digital art include Adobe Photoshop, NFT Creator, Adobe Illustrator and SketchAr. 

Once you’ve completed your art-to-be-NFT, you will need to save as a supporting file format – JPG, PNG, FVG, MP4, WEBM, MP3, WAV or even GIF.

3) Create an account with an exchange and purchase the relevant cryptocurrency

You’ll need to create an account with a cryptocurrency exchange to purchase the relevant cryptocurrency to pay for gas fees. Gas fees are payments made to complete a transaction on the blockchain. In this case, you would need to pay a fee to mint your NFT on the blockchain. The amount of gas fees and the type of cryptocurrency will depend on the blockchain you’ll be storing your NFT on. Ethereum blockchain for example, requires much higher gas fees than popular alternatives such as Solana and Avalanche.

4) Upload your file to be minted into an NFT

Go to your chosen NFT marketplace and upload your supported file format to be minted into an NFT.  You can upload an individual file, or even create an NFT collection with that image having various traits and features. A popular tool to create an NFT collection with your image is The NFT Generator. 

5) Click mint – which will see fees deducted as gas

6) Create a hot or cold wallet

There are two types of storage wallets you can choose to hold your cryptocurrency and NFTs — hot wallets or cold wallets. A hot wallet is a digital storage wallet for your crypto and NFTs and is always connected to the internet. Popular options for hot wallets include Metamask and Trust Wallet.  

Cold wallets are physical digital storage wallets not connected to the internet, also known as offline wallets. Many crypto enthusiasts opt for cold wallets as they are more secure than digital wallets. Stealing from a cold wallet would require physical possession or access to the cold wallet. 

In your wallet you’ll be able to see your NFT, however the NFT is not stored in your wallet, it is stored on the blockchain. The wallet provides access to your NFTs, which is done through providing a private key to your wallet address, which allows you, the owner, to authorise transactions. 

To learn more about crypto storage, we’ve put together a piece to help you understand why most prefer to withdraw their assets from exchanges or marketplaces.

7) Withdraw

Now you’ve minted your NFT or NFT collection, congrats, it’s been published to the blockchain. You may then want to withdraw your NFT to your wallet, which will publish another transaction on the blockchain and you may also be subject to paying more gas fees for this to occur.

Make sure to put the right address in when you withdraw your NFT – it’s can be a stressful affair for even the most seasoned crypto investor.

What do NFTs mean for creators?

For a start, it’s a great way for the owner to be able to authenticate their work. Fraud is a big problem in the art world and NFTs can help current and future owners establish whether the piece is genuine or not. Another benefit is that unlike the traditional art world where artists have no visibility into future sales, with NFTs, artists are able to see and track their work as it moves from owner to owner. 

Speaking to The Chainsaw, Yasmin Shima, the Aussie artist behind the Year of the Woman NFT collection, said that artists will sell their paintings at exhibitions, and years later, have no idea how many times that piece of artwork has changed hands or where it is. NFTs are a gamechanger as artists can now trace their artwork from the initial sale right up to the current owner.

Ownership of digital art

Another major benefit of NFTs is that they allow the owner to have peace of mind that they own a one-of-a-kind digital asset. Of course, the fact that the barriers are low to creating NFTs means that there’s nothing stopping people from copying yours and minting their own NFT. This doesn’t however detract from the reality that yours is the original creation and if it were to have any value, it would presumably be much higher than a random replica.

It is unique and there is nothing identical. This allows the creator to name the rightful owner of the digital asset, as well as the ability to assign the rights to present, access or resell the digital asset.

To reduce your risk of buying duplicate and replica NFTs you should ensure the seller is verified on the NFT marketplace.  A verified seller will have a blue tick next to their artist profile picture on major NFT marketplaces such as Opensea. If the seller isn’t verified it’s worth doing your own research by contacting the artist directly via their website or social media to confirm it is the authentic NFT for sale.

“People are realising that if you own a piece of art, and feel that ownership, you feel more connected to that piece.”

Yasmin Shima, Australian artist behind Year of the Woman NFT collection

You can generate income with NFT art

In the real world, musicians, photographers and models are generally entitled to royalties of their work, allowing them to receive income from the lifespan of the work, as opposed to a single sale.

Artists, however, generally don’t get this luxury. When a piece of artwork is sold, that is generally the last point of income for the artist. That piece of art can be sold numerous times into the future, with sellers receiving profits as the artwork appreciates in value, however artists don’t see a kickback from that. The global wall-art market size hit US$46.33 billion in 2020, with predictions that the market value could increase from US$48.50 billion in 2021 to US$72.6 billion in 2028 with a compound annual growth rate of 5.9%.

Yasmin Shima told The Chainsaw that NFTs offer a stream of income over the lifespan of an artist’s work, so the artist can receive passive income upon each sale.

“NFT creators have the ability to set-up their royalty structure, right down to the details of percentage cut and whether that is directed back to the artist themselves or a charity they are passionate about. This can then be executed on every secondary sale of their artwork. This enables them to focus on their work, knowing they potentially have more money coming in down the track.”

Shima said it’s an exciting time for artists to “finally unlock” the same concept of royalties that musicians and photographers have long enjoyed.

How to sell NFT art?

1) Go onto your NFT marketplace and select the NFT you would like to sell

The NFT sale process is similar across the major NFT marketplaces, such as Opensea and Rarible. Go to “My Collections” and choose the NFT you wish to sell.

If your NFT is stored on a hardware wallet you’ll need to ensure you have the latest blockchain app installed on your Ledger device (Eg. ETH app or MATIC app) and that your Ledger device is running the latest firmware version.

You can then connect your Ledger to the digital wallet relevant for the NFT marketplace platform (Metamask for Ethereum for example), which acts as an intermediary between your hard wallet and the marketplace.

2) Click “sell” and choose the price type

There are two price options to choose from when selling your NFT — fixed price or timed auction. Fixed price is best for artists who wish to sell their NFTs at a specific price, whereas timed auctions are more suited to artists who are willing to see what people are willing to pay for their art by bidding, with the highest bidder the winner, similar to how you bid on eBay. 

However, another bidding technique that has proven to be popular in the NFT space is the dutch auction. A dutch auction is where an NFT project would be put on sale at a specific value set by the NFT creator. That value then decreases over time until a buyer makes a purchase or until it hits the floor price. 

The floor price is the amount set by creators that is the lowest price an NFT can drop. Usually in a dutch auction the starting price is set very high, with the first bidder getting the NFT. The creator will predetermine the conditions for the dutch auction, setting the starting price, floor price and duration.  

An example of this would be an NFT with a starting price of US$2,500, a floor price of US$1,000, and one in which the asking price is set to drop US$200 every 20 minutes. An example of an NFT collection that has had success with the dutch auction is the Fragments of an Infinity Field collection, an abstract project that the creator defined as a compositional system in which an idealised plant species is generated and arranged in a potential infinite field of foliage. 

The main environmental parameter of the composition is the determination of a season of the year. The project had a starting price of 10 ETH (Ethereum), decreasing in price every five minutes with a floor price of 0.25 ETH. The entire collection of 1,024 NFTs sold out within the hour, raising the equivalent of A$7,396,100.

It has proven to be a popular bidding method in the NFT space as it enables price transparency from the start, allowing bidders to participate equally in the auction. Many NFT art sales have chosen a dutch auction to execute total sales of their collections in a short period so that funds can be redirected back to the developers and artist to further development of projects.

3) Set a duration for the sale (optional)

This option allows you to set up how long the NFT will be on sale for, offering the option for artists to put urgency on potential buyers who don’t want to miss out on desired NFT artwork.

4) Complete your listing

This is the final step before your NFT goes up for sale. You’ll be asked to confirm your sale before you get confirmation that your listing is now live!

5) Sale of your NFT

Now your listing is up, the manner in which it is sold depends on how you’ve structured the sale.

If you’ve set a fixed price, the sale will happen once a buyer clicks ‘buy now’ at the price you’ve set, with the transfer of the NFT between wallets happening within minutes, once gas fees are deducted from the sale.

If you’ve opted for a traditional auction selling to the highest bidder, provided you receive a bid above the reserve price before the auction timer finishes, the NFT will be passed onto the highest bidder.  

Where to buy NFT art?

It’s important to ensure you are purchasing NFTs from trusted, reputable marketplaces. As with anything in Web3, always do your research and be aware of the risks.

If you connect your wallet to a fraudulent marketplace, it can result in you losing all your cryptocurrency, with little chance of ever getting it back. Make sure that the links you click on are legitimately for the marketplace concerned. 

These are the most respected platforms in the industry:  

  • OpenSeathe first and most popularNFT platform, which accepts a range of different cryptocurrencies. Some of the most famous NFT projects have been transacted on OpenSea such as CryptoPunks, Bored Ape Yacht Club and Doodles.
  • Rarible is a Web3 multichain marketplace where you can transact with Ethereum, Solana or Tezos.
  • Nifty Gatewayanother popular NFT platform that provides user-friendly access to buy, sell and store digital art.

NFT art price

Speaking to The Chainsaw, Jonathan Zawada, an Aussie artist based in Los Angeles, said that the pricing psychology of NFTs were really no different to traditional artwork. He argued that if the art market, curators and artists ”verify the artist”, people will believe that the particular piece of art will appreciate in value.

Zawada has had incredible success in the NFT world with his collaborations with international superstar, Flume, as well as being asked by Coachella music festival to create an NFT collection for all their passholders, named the In Bloom NFT. The infamous festival’s NFT design concept is a technicolor digital seed that blooms Friday morning of each of the two festival weekends into one of seven desert flowers designed by Zawada.

“It isn’t really any different to traditional artwork, people tell you something is worth a certain amount of money, they are either convincing or not convincing.”

Jonathan Zawada, Australian artist

What is the point of NFT art?

NFT art enables artists to utilise modern technology to express their art beyond the limitations of traditional paintings while giving power back to the artist to introduce their work to a global audience while deciding how they will take a cut.

An Australian unknown artist, for example, is at a disadvantage selling their traditional art to the US market as they must pay additional shipping costs. It’s also harder for an unknown artist to garner international hype on their artwork without the major galleries and dealers promoting them. NFTs allow for Australian artists to be on the same level playing field as artists all over the world, selling their artwork on the same marketplaces without limitation to the location of the artist.

If one of their NFT collections becomes a success, not only will they reap the rewards of a potential sold out collection, they also have the opportunity to setup their royalty structure in the initial smart contract when minting the NFT to ensure they are paid royalties on all future resales of the project. This creates a more efficient business model for artists cutting out the art galleries and art dealers taking their cuts.

NFT art allows artists to produce content that goes beyond the traditional art on the wall, allowing them to push their creativity to new levels. Zawada told The Chainsaw that NFTs allow artists to do things you couldn’t do with a painting, such as his wildly successful Generative Mushroom NFT series.

Yasmin Shima believes that NFTs are “the next advancement for art”.  She believes that NFTs will be integrated into the art world, beyond pure digital art, from advancements with the current crossovers with music NFTs, brands and unlocking opportunities for another way for art to be pushed out to society.

“There is saturation and rug pulls, but our focus is to just stick to making the best art we can and continue to push through the bear market, until something changes again,” she said. 

Does the NFT art industry have longevity?

Many artists in the art world are skeptical of NFTs, due to little understanding of how it works and how they would fit into the space.

Despite some traditional artists being skeptical, 2021 saw NFTs dominate the global art market. According to Oscula magazine NFT art constituted approximately 16% of the global art market value in 2021, with US$2.8 billion spent on crypto art, compared to US$14.6 billion on traditional art.

The NFT space is still in its infancy and like most new technologies will take time for traditional artists to be educated and understand how to adapt to digital art. In the interim, it remains a fascinating time to be alive as an age-old industry is disrupted in real time.