NFTs have opened up a potentially lucrative new world for artists in developing economies
Rich Allela, like so many other artists, has seen his career disrupted by the pandemic. The Nairobi-based photographer’s income quickly dried up during Kenya’s partial lockdowns in 2020. He tried alternatives: affiliate marketing, YouTube videos. Nothing stuck. And then a friend introduced him to non-fungible tokens (NFTs). “It was a complete game-changer,” says Allela. “It allowed me to have the freedom again to create work without having to constantly think about making art for money and paying bills.”
Unlike physical money and cryptocurrencies, NFTs are not interchangeable. They’re like physical – digital-only – collectibles of artwork, videos, music, and in-game purchases. And they’ve taken the world of art and collectibles by storm. . Crypto millionaires with Ethereum to spend can now invest directly in NFTs, keeping the money in the cryptocurrency ecosystem. Rapidly rising prices and the prospect of big returns contributed to the boom.
Trade in NFTs reached $17.6 billion last year, according to a report by NFT data firm Nonfungible.com. Chainalysis puts the figure at over $40 billion.
Prices can be outrageous. One of Larva Labs’ CryptoPunks – a collection of 10,000 uniquely crafted “punk” characters dreamed up by two creative technologists – sold last year for a whopping $23.7 million to the CEO from Chain, a blockchain-based technology company. Commonly credited with starting the NFT craze, CryptoPunks could originally be claimed for free by anyone with an Ethereum digital wallet. Just four years later, the cheapest available is 60.95 ETH (about $128,000 as of May 14).
However, for creators like Allela, NFTs are growing in popularity because they solve a long-standing problem: how to monetize digital artwork. For artists, photographers, animators and others, potentially lucrative opportunities are opening up, especially in developing economies, where content creators have previously struggled to market and sell in the traditional multi-media art market. billions of dollars.
Shake up the art world
When people create or “mount” an NFT, they execute code stored in smart contracts that assign ownership through a unique identifier and metadata. Since the information is recorded in the blockchain, a distributed public ledger, ownership can be easily verified. So while an NFT can be copied or tampered with, ownership of the metadata associated with the work cannot. It is a radically important concept.
Before blockchain, digital artists struggled to prove they were the original creator of a work. The advent of NFTs has been a game-changer, disrupting the business model of commercial galleries, which have traditionally claimed the lion’s share of art market profits. Artists trade directly online, usually through marketplaces like OpenSea or Nifty Gateway, which eliminates the need for a reseller. Rather than sacrificing 40-50% to a gallery owner, they pay a small transaction commission.
Basically, unlike the mainstream art world, flipping is rampant. A no-no in the industry, flipping artwork is usually negated by gallery verification from collectors and dealers. But with NFTs, anyone can buy, often anonymously, prompting investors to quickly resell for a profit rather than hold, as true collectors would.
Osinachi, Nigeria’s most bankable digital artist, who creates his work using Microsoft Word, doesn’t think it’s that bad. “In the traditional art space, most of the time the artist doesn’t even know that the ownership of the work has changed,” he says. “But in the NFT space, you get your royalties in real time because people resell and flip.”
NFTs allow artists to get a share of all future sales, providing a degree of financial security that most traditional artists do not have. When artists sell works on the blockchain, they sign a self-executing agreement with the buyer that guarantees royalties, often between 10-30%. For artists, “it’s really huge,” says Osinachi. “Even when you die, if someone who is a relative has access to your wallet, they collect royalties that would come from your work.”
However, NFTs are not without challenges. Crypto’s environmental track record is dismal and scams are rampant. The most notorious is the “rug pull”: creators cash in quickly after launching what appears to be a legitimate crypto project, then run away with investors’ funds. Crypto investors lost more than $2.8 billion to rug draws last year, according to a report by Chainalysis. Cybercrime is also a real risk, ranging from account takeovers to fake marketplaces.
NFTs allow artists to get a share of all future sales, providing a degree of financial security that most traditional artists do not have.
Allela was concerned about safety when he struck his first work and encourages those considering entering space to do their own research and seek community. He thinks there are still too few African artists in the NFT space – its complexity, difficulties in building an audience and gas fees (the cost of a transaction on the blockchain) are a hindrance. But he remains optimistic and has big ambitions for the future. As well as digitizing his work, he now runs a company that works with 157 artists across Africa to “revolutionize the African digital space”, he says. “We are looking to generate $2-5 million in sales this year. Just to show people that it’s possible.
Opinions expressed in articles and other materials are those of the authors; they do not necessarily reflect IMF policy.