We like to describe NFTs in the Art Industry as Smart Contracts stored within a Blockchain – in particular (but not exclusively) the Ethereum Blockchain. These are generally accessible via Online Marketplaces. Let’s look at each of those 4 terms in a bit more detail.
A smart contract is an agreement between two parties which is executed and controlled by computer code. This code dictates the terms and conditions of the contract and holds the artwork as a digital file such as a JPEG.
In Download Artwork’s NFTs, you will notice that the “preview image” contains a watermark. This is to protect the artwork from illegal copies. The artwork itself is securely stored on the cloud and only accessible by the NFT owner via a link which is stored in the smart contract.
The smart contract not only dictates the asking price of the NFT, it shows the full sales history of the NFT. In addition, the contract can be set up to provide the artist with a royalty percentage of all future sales of the NFT.
Finally, the smart contract doesn’t just need to exclusively include digital art. It can include the ownership or part ownership of an original canvas or the rights to future profits from the sale of an original canvas. It can be set up to pretty much execute and contain anything!
Smart contracts are stored on a blockchain and, at the most simplistic level, a blockchain is a list of transactions which can be viewed by anyone via the internet. This means that the full history of an NFT is available for all to see. We’ll leave it there as there are plenty of technical articles which go into more detail and would do little to add value to this article.
Ethereum is a blockchain – or to be more accurate a blockchain based digital platform. In relation to the art industry, this digital platform can be used for:
- Sending and receiving value with its own cryptocurrency – this is called Ether.
- Creating smart contracts – i.e. NFTs.
This makes it ideal for the art industry as it allows the creation (“minting”), selling and buying of art on a single platform.
To be able to transact on the Ethereum blockchain you need to open an account with a Crypto Exchange (such as Coinbase) where they will provide you with a unique account (“wallet”) which you can use to buy Ether with “normal” currency. This Ether can then be used to buy and create artwork.
OK – so you should now have a good idea of what NFTs are and the significant opportunities for the whole art industry but how do you create or buy one?
The “simple answer” is you need to open an account with an online market place. These market places allow NFTs to be created (“minted”), bought and sold – just like a “physical goods” online marketplace.
There are many marketplaces and here is a small selection:
- Opensea (the first and largest marketplace)
Each of these marketplaces allow you to buy, sell and collect NFT artwork and we recommend that you look at each in turn to see whether they suit your needs.
We hope you have found this article useful in gaining an understanding of what NFTs are within the art industry. Should you have any questions please contact us.