NFT — Friend or Foe of Today’s Art Market?

Anything that is considered valuable “content” can have or will have the potential to become a non-fungible token, also known as an NFT. NFTs allow the owner and creator a shared sense of ownership that can be streamed down the blockchain. It acts as a constant source of income to the creator the same way it enables the owner a new ability to own events or moments as well as art, music, and soon land, homes, etc. Throughout this paper, I will define what exactly an NFT is, as well as go into the current legal landscape for NFTs within the scope of blockchain technology and potential. I will then discuss the value drivers of NFTs, namely social capital, community as well as their utility, i.e. as tickets for events, governance tokens, verification status for certain programs, etc. I will further develop on today’s NFT innovations on a more technical level, bringing up the multi token standard, fractionalization, scaling solutions, liquidity, and probably most importantly— proof of identity and ownership. I will touch on the way NFTs offer a way for owners to engage with real-world communities, as well as the earning potential of these tokens. I will need to discuss the importance of hedging and creator royalties within that context as well. I will later bring up the “cons” (or what I would like to think of these as elements that need to be worked on more) of NFTs, namely where some say that unlike physical ownership of an object, you don’t legally own anything on a public blockchain. As NFTs are tokens rather than physical pieces, they don’t have fundamental value, but instead possess a mere record within a large database. This database is still pretty young and some might argue it is still pretty murky and disorganized. To further my position as devil’s advocate for this ingenuity, I will discuss the argument that NFTs can be lost and ii stolen and may even disappear altogether within the blockchain if something goes wrong in the system. Even though the initial code will remain on the chain forever, the object, or the “JPEG” image might vanish or become corrupt. I will conclude with the overall environmental impact of NFTs, with its extreme carbon footprint that needs to be worked on, and possible solutions that I see at the forefront of this digital endeavor which we are all inevitably going to be a part of. I will also bring up my observed trajectory for NFTs within the current Covid landscape and the pandemic’s impact on the digital art market as a whole