Anna Podedworna first heard about NFTs a month or so ago, when a fellow artist sent her an Instagram message trying to convince her to get on board. She found it really off-putting, like a pitch for a pyramid scheme. He had the best of intentions, she thought: NFTs, or non-fungible tokens, are basically just a way of selling and buying anything digital, including art, that’s supported by cryptocurrency. Since she’s a concept artist and illustrator, it would make sense for Podedworna to have some interest in them. “He just phrased it in the most unfortunate way possible,” she says.
Most of Podedworna’s income comes from the video game companies that hire her to work on their projects, but she makes her own art on the side. So despite her initial reaction to NFTs, she started researching whether they might provide some alternative income.
She’s still on the fence, but last week someone attempted to make the decision for her. Marble Cards, an NFT marketplace that sells URLs to pretty much any spot on the web as if they were digital trading cards, suddenly started showing listings for links to her work. NFTs like these aren’t necessarily attempting to sell the art itself, but the entries prominently featured her work and her name, giving the impression that she had authorized them. She tweeted about it and they were, rather promptly, taken down.
NFTs have become an unavoidable subject for anyone earning a living as a creative person online, prompting a rush to understand a concept that is deeply mired in the jargon of cryptocurrency and blockchain technology. Some promise that NFTs are part of a digital revolution that will democratize fame and give creators control over their destinies. Others point to the environmental impact of crypto and worry about unrealistic expectations set by, say, the news that digital artist Beeple had sold a JPG of his collected works for $69 million in a Christie’s auction.
Just as the trend is shuffling the deck on what is considered “valuable” digital art, however, it’s also re-creating some of the same problems that have plagued artists for ages: confusing hype, the whims of rich collectors, and theft. Digital artists already battle scammers who steal artwork and sell it as merchandise on user-generated T-shirt shops, for instance. NFTs are now simply another thing artists have to check.
Newcomers must untangle practical, logistical, and ethical conundrums if they want to enter the fray before the current wave of interest passes. And as some artists turn their digital creations into profitable offerings for a new audience of friendly, enthusiastic buyers, there’s a question lingering in the background: Is the NFT craze benefiting digital artists, or are artists helping to make wealthy cryptocurrency holders even richer?
“That feeling … is amazing”
Ellie Pritts, a photographer and animator from Los Angeles, learned about NFTs after talking to Foundation, an invite-only NFT marketplace, several months ago. Another artist recruited her for the site’s digital print business, but then she spoke with Kayvon Tehranian, the founder of Foundation, who mentioned its NFT sales.
“I was like, I don’t understand this. But it seems really interesting,” she says. “And there wasn’t a lot of information about it, but I was intrigued. He was actually the person who taught me about it.”
Non-fungible tokens are unique pieces of data that are part of a blockchain, bought and sold with the currency that blockchain supports. The ones you’re hearing about are pretty much all supported by Ethereum.
If you haven’t heard of Ethereum, you’ve probably heard of Bitcoin. Same idea; different blockchain. And while Bitcoin is primarily about exchanging money, Ethereum is better for exchanging assets. Any blockchain can in theory support NFTs, but this one was designed for them. NFTs are sold on any of various online marketplaces, where users can “mint,” or create, one for anything digital.
An NFT doesn’t mean that you own the piece of art itself. Instead, you’re basically buying metadata that grants you bragging rights—or, more often, the opportunity to sell that NFT later for even more money.
It’s a lot to take in, and sounds a bit strange. Pritts was skeptical until she minted and sold her first NFT in February. It was a short video piece she’d made for herself, without the expectation of getting paid: it sold for about a thousand dollars. Animation is time-consuming and expensive to create and has, historically, been difficult to sell for a fair price online. Maybe NFTs would let her do that, she thought. Mainly, though, selling just felt good. “That feeling that something that I made just because I love it has value is amazing,” she says. “The people who bought my pieces were doing a lot of research. They weren’t people that I knew. They decided to invest in me because they had looked into me and thought that I was promising.”
Tiffany Zhong, the founder of Islands, a creator platform that focuses on revenue streams, says that buyers aren’t necessarily supporting artists just as “cash grabs.” Instead, she thinks NFTs could become a different way for creators to build a fan base. Buying in early to an artist’s work comes with a sense of ownership, like having seen a now famous band at its very first gig. “If you’re an early supporter of a creator,” she says, “you’re betting on them.”
Pritts now feels like part of a community: she’s working on half a dozen collaborations with other artists who also mint NFTs, people she would never have met before jumping in a month ago. And, she says, she’s doubled her monthly income—in theory. The money is all in Ether rather than dollars, and she hasn’t cashed out yet.
“You have to put the legwork into it”
One of the difficult things about understanding NFTs is the jargon barrier; all the terms that explain how it works are really only familiar to people who already get crypto. As a result, a lot of the information on NFTs comes from its biggest evangelists: the marketplaces that sell them, the people who invest in them, and the artists who create them. To everyone else, it’s a bamboozle.
Amid the sudden rush of interest in this new avenue for their work, though, many artists have turned into guides for others.
Pinguino Kolb, an artist and longtime cryptocurrency advocate, has been flooded with questions from other artists about NFTs over the past month. “I get a lot of questions on why people are excited about it. That’s even from some of my programmer friends that know the crypto space,” she says. “They don’t understand why people are buying it.”
Her answer, essentially, is that it’s fun. “I think it broke a lot of the monotony of the pandemic. Because we’re not going to events or anything. We’re not going to art shows,” she says. “All of a sudden in the past month, my whole Twitter feed is just filled with artwork, and that wasn’t the case before.”
In mid-March Kolb held a Zoom seminar where she explained the whole thing to artists who had never purchased cryptocurrency. She hopes the information will help people figure out whether getting involved makes sense for them, she says. But it won’t for everyone.
“If you’re telling an already busy artist to drop everything they’re doing and jump on this train because they’re going to lose out,” she says, “I don’t think that’s something they should do.”
“You can’t just make an NFT, release it into the wild, and automatically somebody is going to buy it,” she adds. “You have to promote it. You have to put the legwork into it. You know, a lot of times you have to become more involved with that community. All that takes time. And if that’s not your core audience, it probably doesn’t make sense for you to do.”
“It instantly became morally indefensible”
Canadian concept artist Kimberly Parker first started hearing about NFTs a couple of years ago, when an artist she follows began to sell his work.
“I checked in on some of the top artists and was pretty shocked by the amount of money they were making from these sales, since most of it was just 2D images, JPGs, the kind of work that a lot of my peers and I were selling for pennies by comparison, if at all,” she says.
Even more confusing was that the art varied widely in quality: bad meme art was doing well right alongside beautiful, time-intensive animations, sometimes purchased by the same investor. People buy NFTs for many reasons, but one is that they think they can flip it for more money later. This didn’t turn her away from NFTs, though: instead, as she continued her research, what really disturbed her was learning about their environmental impact.
There are a couple of different ways in which blockchains can grow. Ethereum, like Bitcoin, uses a method called “proof of work,” in which computers have to solve complex math problems in order to add anything to the blockchain. That takes a lot of processing power, which is rare and expensive—and part of what gives cryptocurrencies their value. And it’s also why it costs money up front, called a “gas fee,” to mint an NFT.
That processing power requires electricity, which generates emissions. As Ethereum grows, so does its pollution output. According to the energy consumption tracker on the website Digiconomist, Bitcoin has a carbon footprint comparable to that of Switzerland, while Ethereum’s is comparable to Tanzania’s.
“For someone like me, who is very privileged and able to support myself already, it instantly became morally indefensible,” Parker says.
Anna Podedworna knows about the environmental impact of NFTs: it’s part of why she’s hesitant to start minting them. But she has another motivation for considering them seriously.
Podedworna lives in Poland and is concerned about her country’s increasingly right-wing, nationalist government. “Having some alternative income that is based in cryptocurrencies is sounding better and better,” she says. “I mean, I see where things are going in my country, and I have family to worry about.”
Ethereum has long promised to switch to a more energy-efficient system called “proof of stake,” but in the meantime, some creators are purchasing carbon offsets for the NFTs they mint. Ellie Pritts, the photographer and animator, argues that it’s unfair to single out artists for participating in something that produces pollution, given the many more common activities that do as well.
Andres Guadamuz, a senior lecturer in intellectual-property law at the University of Sussex who studies cryptocurrencies and copyright, cautions that even Ethereum’s plans to reduce its carbon footprint may exacerbate the inequality that already exists between rich early investors in the currency and everyone else.
Proof of stake removes the need for enormous processing power by replacing the mining process with one that essentially ties mining power to your financial stake in the cryptocurrency. “It builds in the inequality that is already in the system,” Guadamuz says. “So the people that make all the decisions are the people who are already very rich in the system.”
“That’s a lot to gamble on”
While it may feel as though NFTs are suddenly everywhere, the wave of interest started several years ago. Cryptokitties, a blockchain game based on Ethereum in which people buy and trade digital cats, launched in 2017 and was so popular that the traffic slowed down transactions on the entire network.
But Cryptokitties didn’t generate nearly the same amount of interest that NFTs now have. Essentially, Guadamuz argues, NFTs have evolved alongside ever-growing hype about cryptocurrencies in general: an attention economy inside an attention economy.
And so now NFTs are getting hyped up because Ethereum is getting hyped up because Bitcoin is getting hyped up because ... of the pandemic? Low interest rates? Elon Musk’s tweets? Whatever the reason, it’s important to see the connection between those things, Guadamuz says.
While artists are benefiting from NFT sales, he argues, Ethereum stakeholders are benefiting even more. “No matter how much money you put in right now, there are people that started this 10 years ago that you will never be able to match,” he says. All the people getting into the system now are just getting some of the vast amount of cryptocurrency that those people have accumulated over time.
Parker worries about the business model of these marketplaces, and the promises they make to artists. Anyone who lists work typically has to pay a fee to do so—easily about $100. “For small artists, that’s a lot to gamble on,” she says. “Artists are being sold this dream of riches and more control, but they’re just being used to boost the speculative value and prestige of cryptocurrency.”
Pritts says she’s frustrated by the amount of scrutiny that NFT artists are receiving, especially since for her, the work has been both financially and artistically fulfilling.
“It feels like it’s kind of like every other week there’s a new thing that’s trending as a reason to not like what we’re doing,” she says. “Environmental has been the biggest one for sure. But recently, the new one is that this whole thing is a Ponzi scheme or a pyramid scheme.” That is a characterization she strongly disagrees with.
“The way that I view it is essentially a new version of an old thing,” she says. What critics are tapping into when they call the NFT craze a pyramid scheme is that “only the people at the top make it.” But “that’s just being an artist,” she argues. “That’s always been how it is. Unfortunately, we cannot all make it.”
Why Ethereum is switching to proof of stake and how it will work
One of the world’s biggest blockchains is testing a new way to approve transactions. The move has been many years in the making but doesn’t come without risks.
Crypto millionaires are pouring money into Central America to build their own cities
A new class of crypto investors have bold plans to rebuild society from scratch. But their pet projects risk repeating the region’s long history of corporate colonialism.
It’s okay to opt out of the crypto revolution
The crypto industry is investing heavily in getting more people to buy in. That doesn't mean you have to.
Crypto is weathering a bitter storm. Some still hold on for dear life.
When a cryptocurrency’s value is theoretical, what happens if people quit believing?
Get the latest updates from
MIT Technology Review
Discover special offers, top stories, upcoming events, and more.