What Artists Should Know About NFTs In 2021
In February 2021, Grimes auctioned off NFTs to the value of $5.8 million. The same weekend, 3LAU sold $11.6 million in NFTs, before Latin-trap star Ozuna, Kings Of Leon and dozens of other artists followed suit. But what are NFTs, and what do they mean for the future of music?
What Is An NFT?
NFTs, or 'Non-Fungible Tokens' are a record of who owns a particular piece of digital content. Songs, graphic images and photographs are amongst the long list of forms this digital content might take.
‘Non-fungible’ simply means the content cannot be exchanged. A good example is to think of the difference between a cinema ticket and a plane ticket. You can easily give your fungible cinema ticket to a friend, but a plane ticket is non-fungible as it's registered to you.
When someone 'mints' an NFT, they create a file which lives on the blockchain permanently. Once this happens, the file can’t be deleted or edited. In this scenario, copies of the work can be made and sold, but they'll always be less valuable than the original.
NFTs are bought and sold in a cryptocurrency called Ethereum, so to buy an NFT, you have to buy Ethereum first.
The Main Attraction For Artists
NFTs react against the fact that anything on the internet can be endlessly copied and reproduced. For this reason, some people believe that NFTs could be the answer to the decline in consumers paying for music.
Within the current system, anyone can rip music from a CD and upload the music to the internet where it can be downloaded for free. With NFTs, a song or a photo can be unique and thereby desirable for purchase in the same way as a painting.
NFTs also provide continual payment to artists beyond the initial sale. If the token is sold again in another market, the creator of the NFT will receive a percentage of the purchase price. The artist will continue recieving a percentage of any sale from then on.
The Drawbacks For The Industry
You may have noticed that it’s only massive artists that seem to be cashing in on the NFT trend so far - largely because there are big costs involved for fans and little compensation for anyone else who's worked on the recording in question.
The minimum cost of minting an NFT in 2021 is $70. Given that the platform will take up to 15% of the transaction, the lowest possible price of a token is in the remit of around $100. This high price ostracises the average fan, meaning NFTs are exclusively accessible to wealthy super-fans.
A lot of concerns around NFTs have also been raised due to the fact that the system doesn’t really seem to follow the rules of the traditional music industry at all.
There’s no authentication to verify that the creator of a token actually is the owner. Hypothetically, someone could create an NFT of a song they hadn't created. Furthermore, while artists benefit from the sale of NFTs, it’s unclear how collaborators such as co-writers or backing musicians are compensated. To top it all off, we have no idea how royalties might be calculated.
A potentially even larger issue is the impact of NFTs on the environment. In 2018 it was estimated that Ethereum mining used more energy validating its blockchain than the whole country of Iceland used that year.
Whether NFTs are categorically a good or a bad thing is hard to say while we're still in the dawn of music being sold in this way. In an article asking that very question, Stereogum conclude that 'With even slight skepticism, it’s easy to see NFTs de-incentivizing new art.' Pitchfork agree that 'For now, NFTs look less like the antidote than a way for venture capitalists and their friends to buy feelings.'
NFTs are certainly a controversial new trend and whether they'll change the industry permanently or be forgotten as a phase remains to be seen. The general consensus is that if they're to take off more broadly, some evolution of the current system is required. In which case, we'll be keeping an ear to the ground.