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Understanding NFTs

Problems NFTs may solve for Digital Art

bitcoin, NFT, ethereum, art3 min read

If we take the premise that digital art has never had the same valuation as the plastic fine arts due to challenges with establishing rarity, uniqueness and originality and provenance, NFTs supposedly solve the problem by using code to create a sort of "authenticity certificate" that shows up on a publically viewable database (the blockchain).

Pierre Paslier sums up the ongoing issues for generative artists:

Most of us in the GenArt [Generative Art] community don't sell enough artworks to make a living. When we sell a plotter drawing or a print it's usually to a generative art enthusiast. > Only a fraction of the top digital artists are receiving interest from collectors in the art market because of four main reasons:

  1. It’s hard for them to find a buyer to resell on the secondary market
  2. It’s hard to prove that the artwork was really made by you, the artist
  3. It’s hard to show that the value of the artwork is growing over time
  4. In some cases it’s hard to prove that the collector is the rightful owner of the artwork In the pre-NFT world, art galleries solve #1. Experts who can certify masterpieces solve problem #2 and #3. Thieves mess around with point #4. All the stakeholders above essentially take a big cut on what the artist initially created.

NFTs offer a completely new solution ...removing the need for all these intermediates and giving an unprecedented amount of control to the artist over their creations.

There's been ongoing desire for smart contracts to solve the artist's dread of missing payments, unclear loan and resale agreements, etc.12 Who hasn't had a gallerist fall through on shipping their work back despite what's written on a piece of paper you've both signed? Who's not heard of that friend that got cheated when a gallerist sold their work and kept the money without telling them? Stick around for 10 years and all of us have a few of those horror stories.

In theory, decentralized distribution cuts out the middleperson-gallerist empowers digital artists. You're providing all the investment for your art up front anyway, what's a little more effort in reading docs, buying some eth and minting artworks? Take the money you'd put into shipping or applying to festivals, and put it into minting... or so I thought.

Success stories can also be found in the case of using the smart contract to dictate resale royalties of usually 10% returning back to the artist on subsequent sales, according to law professors Peter J. Karol and Guy A. Rub. 4 They trace a history where artists have tried to use legal means or the language of contracts to restrict the unfettered distribution of their work after the initial sale. However such contracts were at times found to be ineffective as they were not legally binding. Responding to the incident of an artist cheated payment of secondary sale royalties, crypto-substack editor William M. Peaster believes that specifying the royalty percentage and wallet address through "on-chain" NFT metadata would make foulplay easier to dispute.5

It's clear NFTs allow makers and artists to circumvent the need for the art market entirely. How enforceable smart contracts might be under existing legal structures still have to be tested.

Footnotes

1 Yan Ji. "From 'The Artist's Contract' to Smart Contracts", 2019

2 Mieke Marple and Tobias Vielmetter-Diekmann. "How Starving Artists Could Benefit from Smarter Contracts", Artsy. Apr 25, 2018

3 Pierre Paslier. "My Dealbreakers for NFTs" Mar 8, 2021.

4 Peter J. Karol and Guy A. Rub. "ROYALTY CHECK", Slant, ArtForum. Apr. 5, 2021

5 "On-chain royalties are ideal because they let NFT creators embed their wallet and royalty data directly inside their NFT metadata. This dynamic allows marketplaces to read this metadata and dispense royalties automatically regardless of where tokens were minted. The result is a streamlined experience for platforms, creators, and collectors alike. The grand problem for now is simply getting a range of NFT ecosystem stakeholders on board with a unified on-chain royalty standard."

William M Peaster. "TokenSmart NFT Humpday Report #13: Let's Talk On-Chain Royalties!" TokenSmart. Substack, Dec 23, 2020

6 Anuradha Vikram. "THE NFT’S PROMISE OF CONTROL", Art In America. May 5, 2021