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Art dealers can support their portfolio of artists through Non-Fungible Tokens (NFTs).
What is an NFT? How does it work?
NFTs are blockchain-based virtual tokens that convey ownership of a piece of virtual media. These tokens are non-fungible because, unlike digital coins (like Bitcoin or Ethereum), each contains a unique identifier that makes it one of a kind. The selling history and ownership of each NFT is easily verifiable via blockchain.
What do NFTs mean for art?
NFTs can be used by artists to sell virtual content like works of authorship, pictures, videos, music, and other forms of digital art. An NFT is created (minted) by a platform, which can be open or curated depending on the terms and conditions agreed upon with the artists. Platforms sell art to collectors or dealers. Once sold, NFTs enter the secondary market, meaning they can be resold from one collector/dealer to another. For each transaction, the artist may derive a royalty, depending on the terms of the initial sale.
What are the advantages of NFTs?
There are many advantages to trading art as an NFT. First, because blockchain ledgers are transparent and decentralized, the true owner of an NFT is easily verifiable.
Second, NFTs can easily be transferred between individuals. NFTs are completely digital, meaning there is no need to physically transfer a product or cash. Third, NFTs are highly customizable. Creators can program NFTs to automatically enforce the terms of an
agreement or acquire certain qualities upon the occurrence of triggering events.
Lastly, purchasing NFTs supports artists whose work may otherwise be distributed without appropriate compensation.
What are disadvantages of NFTs?
There are still existing disadvantages to NFTs. First, once an NFT is minted by the platform and transferred via blockchain, it can only be transferred using the same blockchain technology. In other words, ownership of an NFT will always be tied to the blockchain on which it was originally sold.
Second, NFTs and blockchain are new technologies, and the law has not had time to develop adequately in this area. There are still legal issues surrounding ownership of NFTs.
Third, unlike the easily replaceable credit cards in a real wallet, collectors may permanently lose access to digital assets if they lose access to their digital wallet.
How can you begin selling NFTs?
Online marketplaces are the primary mechanism for selling NFTs. However, there is an opening for more established galleries to enter the NFT market through their storefront space and online through the creation of their own marketplaces.
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For further information, please contact: Melchionna PLLC