Non Fungible Tokens and the Future of Art

A further look at the use of blockchain tech to create unique digital expressions, aka 'Art', and provide proof of ownership.    And trade the Art in the real world.  Note also the inclusion of 'smart contracts',  which can guarantee additional contracted payment to an artist on future sales.  

Non-Fungible Tokens and the Future of Art   By Logan Kugler  in CACM

Communications of the ACM, September 2021, Vol. 64 No. 9, Pages 19-20  10.1145/3474355

Behind Jeff Koons and David Hockney, the most lucrative auction for a piece of art from a living artist happened in 2021—and it was for a work that existed in a JPEG file. The artist Beeple's "Everydays—The First 5,000 Days," a series of digital artworks, sold at Christie's for the princely sum of $69.3 million.

It was a stunning event made possible by a technology called non-fungible tokens (NFTs).

NFTs are cryptographic tokens built on the Ethereum blockchain. NFTs are "minted," then sold, just like Bitcoin. The difference, though, is that Bitcoin is "fungible." If you swap Bitcoin with someone, you both still have the same asset: some amount of Bitcoin. There's no functional difference between one Bitcoin or another.

However, NFTs are "non-fungible." Each token is unique, and that token proves that you, and only you, have ownership rights over a digital asset—like Beeple's art. As a random Internet user, you can view Beeple's "Everydays—The First 5,000 Days" online, but only the person who bought the NFT tied to the art owns it.

This dynamic creates a simple, but powerful, change in how digital art works: it makes digital art exclusive. Once minted on the Ethereum blockchain, the NFT is represented on a public ledger that can't be changed. By owning the token, you are proven the owner of the art piece. There is nothing stopping someone online from viewing, copying, and sharing a digital art file, but thanks to NFTs, they cannot fake possession of the art. NFTs make it possible to have exclusive ownership of digital art—something that was previously impossible.

In some cases, artists like Beeple may structure the NFTs tied to their work in unique ways. They may retain rights to reproduce the image. They also may require automatic royalty payouts every time the NFT is resold.

Think of an NFT like the documents that come with owning an original Picasso. Art experts verify your Picasso is, in fact, original; they verify your ownership and provide documentation. As a result, the world accepts that you own an original Picasso.

The only big difference here is that NFTs make it possible to verify ownership of digital assets. Unquestionably there exist plenty of fraudulent Picassos, but given the limited supply of his works, and the legions of experts evaluating paintings, it is possible to prove that an individual owns a specific, legitimate Picasso.

It used to be impossible to do this for digital art. You could create digital art and everyone would know you made it, but anyone could reproduce it and share it with the entire world at the click of a button. In a scenario in which you can duplicate art with perfect fidelity indefinitely, the artist has some legal recourse to protect against how reproductions are used in commercial ventures. But who owns the original piece? What is the original piece? Is it the first file the artist created? Is it the first version of the finished piece?

Before NFTs, there was no widely accepted way to determine the "original" piece of a digital artwork. There was also no widely accepted way to prove or transfer its ownership. NFTs have changed that, and with it, they're changing the world of art.

"We feel very confident that this is just the beginning for NFTs," says Meghan Doyle, a cataloguer of post-war and contemporary art at auction house Christie's. "There is tremendous potential for NFTs in the art market and beyond. As a mechanism, the potential that NFTs have to shift the way that we establish ownership has no bounds."

A Better Way to Create

With this ability to mint ownership of digital assets, NFTs have transformed how artists and creators make a living while changing how we buy, sell, and relate to art. NFTs also have expanded interest in blockchain technology beyond investment in Bitcoin and Ethereum. Experts still debate whether NFTs are the future of art or just a fad, but the amount of money changing hands for art backed by NFTs has the art world, technologists, and financiers paying attention.

The biggest mainstream use of NFTs today is for artwork, thanks to Beeple's big sale.

NFTs are so prevalent in art because digitally native creators can bestow scarcity on works that consist entirely of pixels, says Doyle at Christie's. They enable creators to earn more than they would outside the restrictions of the fine art world. Today, creators typically only get paid when they initially sell a piece of artwork; should the artwork's new owner sell it to someone else, they pocket any gains made—and the artist gets nothing. However, NFTs use smart contracts to verify ownership and terms. Those terms can include paying the original artist royalties every time the artwork changes hands.  ... '