Want To Start Collecting NFTs? Here’s What You Need To Know First
If you have not already jumped on the NFT art bandwagon, here are a few things to consider—whether you are an artist, a musician or a collector
Given the buzz about non-fungible tokens (NFTs) and art, many in Singapore must also be wondering what this tech disruptor means for our culture scene.
Globally, NFTs’ impact is astonishing. It has blurred some of the boundaries in the ecosystem, allowing artists and musicians to interact—and sell—directly to consumers. Leading auction houses such as Christie’s have jumped into the game, with art changing hands for millions. One head-spinning number: US$69.3 million, which was what one digital work of artist Beeple sold for.
A quick recap: an NFT is a unique digital asset lodged on a blockchain and which belongs to one person exclusively. The nature of the technology is that it is flexible enough to represent any digital asset—from a meme to a voice recording to a digital collage.
What’s good is that NFTs allow for creators and collectors or consumers to confidently establish provenance, price transactions and ownership, thanks to the open-access public record. Creators also get potentially better financial outcomes given that the middle man—whether it is the art gallery or record label—is now out of the equation. Sounds really good, right? Are we feeling a sense of FOMO yet?
Well, before you power up your devices to sign up, there is plenty to think about and, if you are more risk-averse, give you pause.
For starters, you must understand the tech well enough. There are different wallet providers out there, of varying standards of security, and different cryptocurrencies are used for online bids, depending on the marketplace platform. So like it or not, you have to sign up with one of these providers. You will also have to factor in the risks of the fluctuating value of the cryptocurrency you bought with your hard-earned, real-world money.
What other risks are there? Even before the tide of NFTs, digital art was already being created, exhibited and sold. The deterioration of image quality or file formats becoming obsolete (think about old photos you may have stored in a CD-ROM) are all practical realities to contend with.
And while technically, every NFT is a unique token on the blockchain, there could be an infinite number of copies of the same artwork, similar to editions of a print artwork or a digital trading card that one may see in the sports or gaming arenas. This has implications when collectors decide to resell the digital assets they own.
Even if one can confirm the scarcity and provenance of an artwork (there have been reports of artists who complain their works have been appropriated in whole or in part by less-ethical creators), the ultimate risk is probably the blockchain platform itself.
Given human frailty, there is firstly the risk that collectors will forget the all-critical passwords, which are the keys to unlock their wallets. More seriously, there is currently no real recourse for NFT owners if a blockchain company shuts down. (Of course, to be fair, even with physical artefacts, materials can break down and colours can fade; one could also misplace or damage an artwork.)
So how should one approach the NFT bandwagon? For artists and musicians, I would encourage them to explore this brave new world to reach new audiences, but the usual important caveats must apply, including understanding intellectual property rights, contracts and the evolving technology. Better yet if artists can work with blockchains that have a royalty collection mechanism built in. This way, they will get a share if work is resold.
For potential collectors, obviously, caveat emptor applies. But if you have some spare dosh lying idle and you are prepared to play patron and angel investor (read: monies you can afford to write off!), do head into this new frontier after the necessary due diligence.
But importantly, as seasoned collectors would advise, you must love or at least be stimulated by what you are acquiring. (There is after all a surfeit of online memes, animated GIFs and video clips circulating, free and accessible 24/7.)
The art should appeal to your sense of aesthetic or intellectual curiosity and be something you are proud to display at home (in a digital art frame). That’s always a good start to collecting and supporting the vibrant arts scene in Singapore, whatever the medium may be.
Paul Tan is a poet and arts administrator who was, until recently, the deputy chief executive of the National Arts Council. The views expressed here are his own.