When digital artist Beeple sold an image – titled “Everydays – The First 5000 Days” – for $69.3 million on March 11 in an auction by Christie’s, it catapulted the investment potential of non-fungible tokens into the public consciousness.
NFTs are unique digital files rooted in blockchains – the same ledgers that give cryptocurrencies such as Bitcoin value. But while units of a cryptocurrency are fungible – if you trade one bitcoin for another, you will not gain or lose anything – NFTs are not. An NFT can be any sort of file, including images, songs and videos, and each one carries its own unique value.
The world of NFTs is one Durangoan Brian Beach has immersed himself for a few years.
The Army veteran first became interested in blockchains and decentralized finance while serving with cryptography experts, who were mining their own bitcoins on the side, sometime around 2014 at a strategic facility in Germany.
“But I’ve been an artist for much longer than that,” he said, “and so NFTs sort of opened up this opportunity where I could kind of fuse two things that I really am passionate about and enjoy.”
In addition to collecting NFTs, such as digital art and trading cards, Beach creates his own tokens.
For example, his piece “Moonset” pays homage to both outer space, a frequent subject of his art, and the mountains of his home in Colorado. Another, an animated GIF titled “Subatomic Dreams,” is his take on the Higgs boson, an elementary particle discovered in 2012.
Beach is the featured artist for a wave of NFTs a company called Charged Particles will release on April 7. The firm specializes in minting NFTs that include a portfolio of underlying digital assets, such as tokens that allow the tokens to accrue interest over time, in addition to the speculative value of the token based on its non-fungible rarity.
The type of work Charged Particles is doing aligns closely with what Beach wants to do on his own.
“My vision really is to fuse art and decentralized finance,” he said.
Beach recently purchased a domain name, definft.org, and wants to offer crypto consulting to artists, offer art consulting to people interested in decentralized finance and create NFTs that carry more value than just their worth as a piece of art.
Beach said he felt vindicated that he is heading in the right direction when he sold his first NFT to a holder of one of the CryptoPunks, a set of 10,000 pixelated characters that was released as one of the first NFTs in 2017. CryptoPunks currently sell for hundreds of thousands or millions of dollars. Beach has sold several NFTs for 0.2 ETH, or about $400 at the time. (NFTs are most often rooted in the blockchain of Ethereum, abbreviated ETH, a cryptocurrency that is also the basis for most NFT trades.)
Art or investment?Ryan Griffin of Ignacio is one artist Beach has already mentored on the process of minting NFTs.
Griffin describes his art as dark and Tim Burton-esque. Even before he got interested in NFTs, he was reluctant to give up his original pen and ink and watercolor originals, always preferring to sell prints.
“That translated directly to the NFT idea for me,” he said. “That way, cool, I don’t have to sell an original. I can sell a digital copy. If I want to make it more appealing to a buyer, I can say, ‘Hey, email me and I’ll send you a hard copy in print,’ because to me, I’m selling a copy of my art. I think that’s really cool.”
Griffin said that as an artist, he wants to create NFTs that have inherent value.
“I’m going to try to actually make the NFT have some intrinsic value by using my art that took me 25 years to hone the skills to make,” he said. “I bought the art supplies, I bought the paper, I put 20 hours into the piece, and I’m selling a digital copy, just like I would sell a paper copy in a gallery. Same idea. ... I say that I am the physical artist, I made these works; there are hard copies available in the real world. When they see my NFT pieces, they see something that’s worth something. And hopefully, they’re sitting on a bunch of ETH and they buy a piece.”
As of now, Griffin has sold one of his NFTs for 0.15 Ethereum (about $260 at the time). He said this is about four or five times the price for which he typically sells a printed piece.
Still, he recommends treating NFTs as art rather than investment opportunities.
“Do not buy NFTs if you expect to make money off them. Buy them if you like them ... but when you buy a piece, don’t expect to get that back,” he said. “I’d hate to see somebody with three grand in their name take their stimulus money and go buy $1,400 worth of NFTs, because it’s definitely something you do with spare money.
“If you’re a creator, it can make you a little bit of money, if you’re lucky, but the odds are not high on that. It’s just another creative outlet that has potential for income earning.”
Environmental ethicsAs interest in NFTs has risen, so has concern about their effect on the environment. The advanced cryptography mining cryptocurrencies, such as Bitcoin and Ethereum, requires a lot of computing power, which in turn requires a lot of electricity. According to a recent Time article, Ethereum mining consumes about 26.5 terawatt-hours of electricity per year – almost as much as the country of Ireland. And if that power isn’t coming from a renewable source, it’s polluting the planet.
“I think it is important for blockchain artists and just people who use the blockchain to understand that there is a significant carbon footprint from mining,” Beach said. “I don’t think that we should shy away entirely from using it at all, because it – the intrinsic value of decentralization and the technology that’s built there already, that we have and are utilizing well – is so valuable that we should continue to use it. We have to figure out ways to make sure that the environmental impacts aren’t too significant.”
Beach points out that the carbon footprint of the creation of an NFT is the same as any other blockchain transaction. In other words, investors making hundreds of cryptocurrency trades a day are affecting the environment much more than artists minting NFTs.
“But at the same time, those artists should probably keep in mind that it does have impact on our environment and that they should try to curate what they create,” he said. “I think that also adds to the value of the non-fungible uniqueness.”