NFT art compared to traditional art. Let’s find out.
Digital art was known to be worthless for art collectors. It had no collectibility compared to physical artwork. This is because digital art can be distributed indefinitely. Unlike a physical piece of art where there is only one original art piece that can be owned by one person at a time, millions and thousands of people can download digital artworks.
NFT changes that. By introducing the concept of limited ownership of digital assets.
What Makes an Artwork Valuable?
First, we have to understand what makes art valuable. The factors that contribute to the value of fine art are:
- Originality: Reproductions or copycats are worthless to an art collector. In the art market, buyers look for signs of originality in artworks. These signs can include the signature of the artist and the date of completion.
- Condition of the Artwork: Undamaged Pieces are valued higher.
- Technical Details: dimensions, materials that made the art, date of production.
- Artist’s fame and reputation.
Compare this to digital artworks:
- The artist has the original file. However, it can be downloaded by thousands of people once uploaded to the internet. Originality ceases to matter because anyone can technically own digital artwork.
- The condition of digital artworks is immaculate. No physical factors can damage the quality of it.
- Dimensions of digital art solely regard the digital file size and orientation. The date of production can be written by the artist on the digital artwork but has the possibility of being tampered with by editing tools.
What is an NFT?
Non-fungible Token (NFT) uses the same blockchain technology as cryptocurrencies but it is non-fungible. NFT is the digital certificate that represents ownership of physical and digital assets.
- Non-fungible: every NFT is different from each other. For instance, a dollar note is equivalent to a dollar note, but one NFT is not the same as another NFT.
NFT itself is a token of ownership, it does not contain the data files of the digital assets. Instead, the token points to an address where the digital asset is stored. The digital asset cannot be changed and cannot be copied.
Think of NFT like the artist’s signature below an art piece. NFT is more fraud-resistant than an artist signature because it lives in the blockchain. Each transfer of ownership is traceable back to the original artist who minted the NFT.
How NFT Makes The Ownership of Digital Assets Worth It
- The original file of the digital artwork is in high-definition (HD) format. The date of NFT creation is stored in the blockchain and the date of production can be signed by the artist. Originality is maintained. Investors can track the chain of ownership via the blockchain.
- The condition of digital artwork cannot deteriorate.
- Artist fame and reputation can be examined by the digital presence in NFT Marketplace or social media presence.
Criticisms on the value of NFT digital artwork
NFT Can Be Viewed by Anyone and Screenshot by Anyone
NFT digital artwork can be acquired with just a screenshot. This means anyone can “own” the digital art and view it on their device. Hence, it is worthless!
I disagree.
Mona Lisa is still valuable even though there are many online images of it in circulation. Yet, many people go to the Musem Louvre to view the artwork. We can take picture of the Mona Lisa, distribute them, share it amongst our friends and the value of owning the value of Mona Lisa will still be high.
The value lies in the ownership of Mona Lisa, not that you have a copy of it stored on your phone. The NFT digital art that you screenshot is exactly like the Mona Lisa images circulating on the internet.
NFT Has No Intrinsic Value
NFT has no intrinsic value. It is worthless!
This can be applied to any collectible market. Collectibles are not meant to have a functional value tied to them. Give a Pokemon rare trading card to someone who doesn’t participate in it. I bet they will deem it as useless. The worth of the collectible depends mostly on:
- Fanbase
- Scarcity
In other words, demand and supply. Pokemon rare cards do not have any sort of function. It is valuable because it has a fanatic fanbase and a very limited supply. Fundamentally, it has no practical utility except being utilized in a card game. The collectibles market is the market of the greater fools, where the price of assets is determined by the likelihood of selling them at a higher price in the future. They are speculative in nature.
Problems with NFT digital artworks
I am ecstatic for the future of NFT. However, there are still some underlying issues to be addressed.
Technical Problems
NFTs themselves do not contain their corresponding digital files. Instead, it points to an address where the digital asset is stored, usually to an InterPlanetary File System (IPFS). Files that need to be accessed via the Internet need to be hosted by a server. If the URL breaks or the server has issues, the investor would not be able to access their digital asset.
Cybersecurity Risk
NFTs, like cryptocurrencies, faces digital security risks. If you lose your private keys to your wallet that contain NFT tokens, the token is forever lost. If your wallet has been hacked and accessed without permission, your NFT can be transferred out of your wallet. Every transaction is permanent and irreversible. Since there is no central authority to “reverse” this process, investors risk losing their valuable NFT.
Possible Fraud
NFT certifies the ownership of the digital assets. However, no one is stopping people from screenshots the digital art pieces and trying to sell their own NFT version of them. Investors have to be cautious and only buy from certified artists. Artists can include their own unique signature on NFT as well.
I believe NFT is more fraud-resistant than the traditional art market. Due to the blockchain being decentralized and transparent. Anyone can verify the chain of ownership to track back the initial ownership of NFT, which will be the artist. Compare this with traditional art where the chain of ownership is likely to be opaque.
Environmental Issues
Environmental issues should not be a huge problem, as more cryptocurrencies are favoring the proof of stake mechanism (PoS) than proof of work (PoW) to validate transactions.
- PoW mechanism validates transactions by solving mathematically complex cryptographic algorithms. New blocks are added to the blockchain once the algorithm has been successfully solved and the miners get rewarded respectively. It consumes large amounts of electricity as computer hardware has to run loads of complex mathematical calculations.
- PoS mechanism validates transactions by using the concept of “validators”. Validators lock up their crypto as collateral to verify transactions. PoS consumes very little energy compared to PoW.
One of the most well-known cryptocurrencies, Ethereum, is moving from PoW to the PoS mechanism.
Conclusion
NFT provides ownership of digital artworks. This changed the game for digital art, which was deemed as “worthless” due to “infinite supply”.
The value of digital art with NFT token is comparable with traditional art market. The argument that NFT is worthless because it has no intrinsic value is similar to saying the whole collectible market is worthless. The value of these markets is speculative in nature.
NFT faces problems like hacks, server hosting errors, and fraudulent reproductions, and large amounts of energy consumption. However, energy consumption is only a temporary concern as more cryptocurrencies move from proof of work mechanism to proof of stake mechanism.
In one sentence — NFT art are as valuable as physical art.
Want to know more about blockchain? Every Sunday, I share about blockchain basics or projects at comprehend.substack.com
Disclaimer: This article is for informational and educational purposes only and does not constitute financial or legal advice. Not all information in this article will be exactly accurate due to the fast development of the market. Consult a financial professional before making any significant financial decisions.
