What are NFTs?
NFT, literally stands for Non-Fungible Token. WTF does fungible mean? Fungible is something that has a defined value. Like a euro bill. A euro bill equals €0.85. Or 1 US dollar. Or £.73 pounds. Bitcoin is fungible. 1 BTC equals like a gazillion dollars at this point (so what I sold all mine back in 2013, sue me 😭) So NON-fungible simply means it doesn’t have a set, defined value. Like Jimi Hendrix’s strat. Or the first pressing of Dark Side of the Moon on vinyl. Or Carter Beauford’s drum sticks.
NFTs are the digital version of these unique collectibles. NFTs are one of a kind – just like Jimi’s Strat. Yes there are many Fender Stratocaster guitars in the world. But there’s only a few that Jimi Hendrix played. And those are worth a hell of a lot more than just the one off the wall at Guitar Center. So what’s been happening here and why should you care? If you’re reading this article, you’ve most likely heard about the electronic artist 3LAU who made over $11 million selling his NFTs. Or Grimes NFTs which sold for $6 million. Or Kings of Leon who made over $2 million selling their new album (and other assets) as NFTs. Or Steve Aoki, who sold his NFT collection for $4.2 million. Or, outside the music space, you probably heard about Beeple who sold a digital piece of art for $69 million at auction. Or a screenshot of Jack Dorsey’s first tweet that sold for $2.9 million. Or that weird cat meme that sold for $600,000.
But these are the headline makers. You probably didn’t hear about:
ODESZA – $2.1 million from their recent album drops
VÉRITÉ – $12,000 on 2 songs at auction (with some physical goodies tied to it)
Lil Miquela – $82,000 visualizer
Or the other nearly 30,000 NFT sales from over 100 artists in the music space just this past year, grossing nearly $50 million. Let’s just consider for a second the numbers of some of these artists. Because, of course, as an industry (and society, sigh) we’re obsessed with numbers. Young and Sick only has 27,000 instagram followers. He’s both a visual and musical artist who made nearly a million dollars on his NFTs. Also, it’s worth noting that celebrity in the “real world” doesn’t necessarily equate to NFT success. Shawn Mendes with his 60 million Instagram followers only made around $380,000 on his NFTs.
Ok, so now you know that people are making money on NFTs. But why? And, wait, what are they?
Very simply, an NFT can be any digital file: a jpeg, wav, mp4, .mov, mp3, gif. Whathaveyou. Most NFTs in the music space have been short visualizers – typically videos between 10 seconds and a minute. And the vibe, as it is now, is fairly trippy and far left-of-center aesthetic. These are limited edition items. Just like a screen print or an original pressing vinyl. The question I know you’re screaming at this point is WHY WOULD ANYONE PAY MONEY FOR A DIGITAL IMAGE THEY CAN DOWNLOAD TO THEIR DESKTOP? Well, it’s a status thing.
Why do people wear $350,000 Rolex watches? Or drive Bugatti? Or wear Yeezys? Or sport Nike? Or Yankee hats?
Humans wear brands, typically, to showcase something about themselves. Why did someone buy a Hockney painting for $80 million, when they could just hang a print up for $20? It’s the story behind the item! The status symbol. NFTs are collectibles. Just like sports cards or band Ts. Some NFTs are tied to physical items. Like, Kings of Leon offered front-row tickets for life for one of their album NFTs. Whoever holds the token can redeem it. And it can’t be scalped. RAC tied his NFT to a cassette tape. 3LAU offered a physical sculpture alongside one of his NFTs and he shipped it out to all 33 people who bought this NFT. He also included an experience – in one of his auctions, the top bidder could collaborate on an upcoming 3LAU track. (When/if the NFT gets resold, the seller does not need to send the physical item – that’s not how NFTs work – this was just a perk for the original buyers). In this sense, it’s kind of like Patreon or Kickstarter packages. Artists include merch and experiences in those. However, these can’t be resold and the value doesn’t change. The $100 Kickstarter package costs $100 and when the campaign is over, it’s over. And the best part is, the original artist makes a commission on every sale. With NFTs the original artist gets paid ON EACH TRANSACTION. When the artist puts up their NFT onto a marketplace, they can set what commission they’d like to earn on each sale: 10%, 25%, 50%. Whatever.
So, a fan could buy an NFT from me for, say, $1,000, and then flip it for a quick profit for, maybe, $1,500. If I set my commission at 25%, then I will have made $1,000 on the first sale AND $375 on the second sale. Let’s say that second person holds onto my NFT and I become super famous and the value of this NFT now skyrockets to $15,000, well I just made an additional $3,750. And so on and so on. Not only does the artist get paid every time, it incentivizes fans to promote the artists for whom they own NFTs! If the artist becomes more popular, the NFTs will increase in value and that fan can decide to hold onto it for bragging rights or sell it and make them (and the original artist) some money. And some artists are even offering master ownership and/or royalties baked into the NFT. So now you’re not just investing in the artist long-term, but you’re earning residuals ongoing. Bye-bye labels!!!! Because NFTs are bought, sold and stored on the blockchain, each one can be transparently verified as to who the original artist is. And, on the blockchain, every transaction is noted. So anyone can see who sold which NFT to whom. There are plenty of brilliant art impersonators out there who could recreate a Picasso or Monet and you and I wouldn’t be able to tell the difference. And that’s why the paintings that get sold at auction have all been verified by art experts. Diamonds are verified by experts. Hell, even Yeezys have to be verified before they can be resold on a secondary market. Well, NFTs don’t have to be verified by an expert because the blockchain is a public record for everyone to see. Currently most NFTs are on the Ethereum blockchain (not to be confused with Bitcoin blockchain, which hosts, you guessed it, Bitcoin currency). Ethereum blockchain hosts the Ether currency. And most NFT marketplaces require you to use Ether to buy your NFT.
So, How To Buy and Sell NFTs?
There are marketplaces out there where you can buy and sell NFTs. Some are curated and invite-only, some are open to anyone. Meaning, you could theoretically upload your piece of art today and list it tonight.
The biggest NFT marketplaces right now are:
Some of these marketplaces allow limited edition sales (like 100 copies for $1,500 each). Some marketplaces are auction only (like, one of one only, for whatever the highest bidder pays). Some marketplaces offer both. And a somewhat overlooked talking point is that, at this current stage, selling NFTs is EXPENSIVE! There are a ton of fees associated with selling just one NFT. There’s what’s called “gas prices” – for the energy spent to put your NFT on the Ethereum blockchain. And then there are the fees the marketplaces charge. Some charge a commission fee (like 2.5% of the initial sale), others charge more or bake in flat-fees. Most require you to use Ether to purchase NFTs. So, you have to buy Ether with whatever your local currency is. It can be a couple hundred bucks to just sell one NFT. So beware!
Who Are NFTs For?
At this stage, 99% of the world has still never heard of NFTs. Even though the tech and music industries are obsessed right now because of headline-making price tags for various sales and auctions (and the sheer absurdity of some of the NFTs).
Most of the people buying them are early-adopters of technology. The gamers. The blockchain aficionados. The crypto club. And most are just speculating. Investing. Hoping they can flip these and make a quick buck. The reason the majority of the music NFTs have been put up by electronic artists (and especially the blockbusters) is because the electronic community typically takes to early tech like this. Most average music fans don’t have a crypto wallet. Or an NFT wallet. And it’s super complicated to buy or sell NFTs. Well, not super complicated if you’re in this community, but I watched a boat load of tutorials and they make it sound sooooo simple, just these 27 steps and you’re there! NFTs are definitely not hitting the general public most likely for a couple years.
