NFTs: How Do They Work and What Should You Know?
Part Two: NFTs in 120 Minutes Series
Fanny Lakoubay is a New York based Blockchain and Art Market Consultant with 12 years experience advising people on art and technology. She supports institutional and private collectors to navigate the NFT space. She has been involved in some of the pioneering NFT projects (MoCDA, New Art Academy, CADAF, Editional App, Snark.art) and worked with larger organizations (RadicalxChange Foundation, Christie’s Auction House, Artnet, Societe Generale Bank). Fanny talked us through the different platforms for NFTs, and what you should think about before buying.
Fanny starts by explaining 3 key terms and ideas around NFTs you should know.
“Fungible” means unique versus similar items. “Everything but money is non-fungible and it is helpful to think about it in this way.”
In layman’s terms an “NFT is a unique identifier for any digital asset”
It relies on decentralisation - this has resonance with issues in the art market
Why do NFTs matter for art?
There are a lot of characteristics of NFTs that resonate with issues the art market has had. One of them is ownership and scarcity of digital assets. Before blockchain, there was no way to trace the original copy of a jpeg. What was needed was a way to create a market and value for objects and to do this you need scarcity and the opportunity to make an object rare. “NFTs allow you to identify the original versus a copy.” It is then the original which has value and you can trade.
Traceability is also important because it records transactions, history and ultimately authenticity. On the blockchain, everything is recorded and it is interesting to see who has transferred to whom and how much it has sold for in the past. Fanny notes there is an anonymity with the usernames which represent a person or wallet.
Fanny continues explaining how “in most countries, there is no such thing as royalties under secondary sales or the artist.” Now, because everything is stored in this NFT, the work, the rules and the payment are all digital and on the same level. The rules that an artist decides on when creating the NFT is automatically self-executed with the code. Fanny recommends Charlotte Kent’s article on securing royalties for further reading on this topic.
What are they used for?
NFTs are used by lots of different artists. Fanny lists examples from photography, design, music, gaming, virtual assets like real estate and ENS domains and fashion. Generative and AI art in particular has thrived.
How to find a marketplace?
An NFT marketplace is where you can buy, sell and auction your NFTs. You can install a wallet as an extension on your browser so when you visit online market places, everything you buy will show up on your account. Fanny lists a few of the big player blockchains that are available to everyone such as OpenSea and Rarible. They show everything from gaming to music. “These marketplaces they help with the transactions but not with curation… like a nice artist or gallery website would have.”
There are also curated platforms which you have to be invited to. Fanny notes that there is a difference between being invited to curate on a platform and having a curated exhibition in the way we understand it in the physical space. Examples are KnownOrigin, SuperRare, makersplace and Blockparty. “This allows [the platform] to have a more polished website but… they are not looking to do more curation.”
How to find a blockchain?
As a quick reminder, a blockchain facilitates the process of recording transactions and tracking assets in a network. Fanny briefly lists some blockchains Tezos, Flow, Polygon, Polkadot. All have their own angle positioning themselves for managing NFTs.
How to find a good NFT?
Fanny acknowledges that there are lots of marketplaces and some of them aren’t that helpful. She recommends a few independent curators like MOGDA and Vertical Crypto Art. Twitter is also a great resource as artists and collectors will share names and support each other.
How to find an artist based platform?
Kate Vass and Breezy Art initially came to mind for Fanny who are longstanding platforms. Now Digital Art Galleries are moving forward with improved formats. Bitform Gallery, left gallery, TRANSFER and folia are examples of very curated platforms.
Traditional galleries are often cautious to enter the space but, “there is a lot of opportunities if you take the time to figure out if it is right for the artist.”
It’s not perfect… but its getting better
Fanny suggests there are a few things to push the space forward, on top of the technical details.
Support collectors in their discovery
Put the artist back in control - the marketplace has standardised the royalties but smart and custom contracts are better to get the artists in control of what they create.
Improve long-term storage solutions
“Support the artist and the collectors.” Part of this decentralisation and getting back the power and value to the artist forgets the middle man which is the galleries who curate, market and help with artist representation.
Write more research on the space - sharing the story behind the purchases.
Make royalties crossplatform - (more of a technical issue)
Future of NFTs
We will see more smart programmable NFTs away from the jpeg. Fanny also predicts there will be more collabroations with layers and generative art. This is fascinating as, for example, you can own a layer of an artwork. Finally, Fanny introduces the concept of the metaverse which is a virtual world. There is a lot of investment put into NFTs in the US that is looking towards these virtual worlds and what they could be.