NFTs, Blockchain, Smart Contracts: Tech Topics Creatives Should Know
There’s a lot of buzz these days around non-fungible tokens, or NFTs, tied to blockchains and smart contracts previously outside creatives’ domains. But recent sales of $300 million in cryptocurrency for digital art assets is turning heads—and shaking them too.
Just what is going on, and do these tech topics benefit creatives (beyond the obvious financial gains)?
I’ve listened to numerous podcasts and scoured a dozen articles on the topic. Though less hazy on what’s happening, it’s still unclear if this new business model will be a boom or bust down the road. It’s just too early to tell, and that’s because much of the value in today’s transactions is based on cultural currency, not crypto. Collectors and super fans with considerable cash are buying ownership into publicly accessible works—from Jack Dorsey’s first tweet, which fetched almost $3 million, to Beeple’s mind-boggling $69 million JPEG collage—with the hope their investments will someday be worth more.
Purchasing or selling digital assets using NFTs
There are a number of ways creatives can use non-reproducible NFTs to enhance the value of their works. Recording artists, for instance, can sell a limited number of tokens to build a community whose members are rewarded for their patronage with exclusives or early releases on new material. Others, such as writers and illustrators, can work through platforms like Nifty Gateway and Open Sea to conduct transactions around digital works. When sold directly to customers, these artists retain more of the profits by eliminating intermediaries that impact pricing and time to market. Among the first major recording artists to test the NFT waters is the band Kings of Leon, which sold digital assets tied to its latest album as an NFT.
From what I’ve gathered, the artist or author typically retains copyrights to works sold as NFTs. For instance, The New York Times’ Kevin Roos recently sold a column as an NFT for more than $500,000 in an experiment. What the purchaser now has is a PNG of the printed column, for which the newspaper still owns rights. It appears what the buyer basically purchased was participation in a piece of history (thus, the term non-fungible token).
Everything is built on the blockchain
A major reason for the current buying spree is what NFTs offer: exclusivity. These tokens cannot be copied, which means only one person owns the original. And to ensure against fraud, ownership is built on the blockchain. Here again, eyes glaze over when such ledger-keeping is mentioned. Unlike NFTs, though, blockchain’s viability already has been tested by other, digitally progressive industries like the financial sector.
One of the best explanations for non-techies comes from episode 85 of computer science professor Cal Newport’s podcast Deep Questions (listen from 6:57 to 23:40). At its core, a blockchain provides a way to store any digital asset, including NFTs, in a secure manner. It uses an algorithm to provide layers of protections and tamper-proofing.
Beyond NFTs, writers and artists are increasingly eyeing blockchain as a way to manage their digitized works and eliminate middlemen now performing this function. One of the most popular technology for such publishing applications is open-sourced, blockchain-based Ethereum, which has its own cryptocurrency known as ether. Other companies like Facebook have or will developed their own cryptocurrencies to capture portions of these emerging markets. One advantage Ethereum has, in addition to its current influence, is the smart contract functionality within its massive platform.
Agreements made with smart contracts
If NFTs and blockchain are difficult to grasp, smart contracts are not. Written contracts that are scoured, amended and ultimately signed also are going digital and need a secure place to reside. Blockchain ensures a digital trail and prevents changes after signatures are verified. What makes smart contracts different is they are created around code and processed by blockchain. This way of sealing deals eliminates third-parties that drive up costs and consume precious time.
Smart contracts make sense for those who sell and buy digital creative assets like those we’ve discussed. A seller wants assurance he or she will be paid, and the buyer wants the same to eliminate future copies from circulating in marketplaces.
Even if you’re still getting your head around what NFTs, blockchain and smart contracts can do for your business or future sales, just remember: Very few of us know exactly how the internet works, but it hasn’t stopped us from making it an integral part of our lives.
Thank you for reading this,