2021 has been a year of extremely rapid increase of popularity for NFTs in the music industry. Popular artists such as Grimes and the group Kings of Leon have been some of the big names that took advantage of it early on. This year has especially brought the rise of NFT popularity amongst Electronic Music Producers - Steve Aoki, 3LAU, Dillon Francis and Illmind - just to name a few. In today’s article we’ll explore what NFTs are, how to get started with buying them, as well as discuss pros and cons of buying NFTs. Let’s dive into it!
Introduction to buying NFTs
Once a digital work of art is bought, the owner can receive a token of ownership in the form of an NFT. It works similarly to buying a “signed copy” of a work of art - but the digital signature cannot be faked. The abbreviation “NFT” stands for “Non Fungible Token” - they are signed to only one work of art and make validation of ownership super secure.
NFTs can be bought on special, digital marketplaces. The most popular marketplace is Opensea.io - often compared to “an eBay for NFTs” - which allows you to buy images, videos and audio files for a cryptocurrency - Ethereum.
Before you create an account at Opensea, you need a special cryptocurrency wallet. One of the most popular is a digital wallet called Metamask, which can be accessed directly from Opensea. To use it, you’re going to need a special Google Chrome extension, but once it’s installed and you have created your wallet, you’re ready to create an Opensea account.
Every transaction on Opensea - no matter if you’re selling or buying - comes with something called a “gas fee”. That’s an extra amount you’re going to need to pay to complete the transaction.
What makes NFTs valuable?
With many big-name artists who are starting to sell NFTs, the buyers pay for the artists’ reputation - and not necessarily for getting the actual content, as many of the works of art are available to download without purchasing. The buyers hope that they will be able to later sell their NFT once its value increases.
The value of NFTs also comes from its rarity aspect. They can be compared to “limited edition” items - like super rare trading cards. The item in itself is rarely special in any way, but because it exists in a very small quantity, its market value goes through the roof. Similarly with NFTs - often only one token is released, which is what increases its value so much.
Often NFTs are compared to owning an actual work of art (like a Picasso) instead of getting a printed copy of it (or in the digital world, downloading the JPEG file). And just like in the traditional art world, you can later sell your Picasso to another collector or keep it in your own collection. For example, in October 2020, an art collector spent 67,000 $ on a digital animation by an artist named Beeple, only to resell the NFT for $6.6 million.
An additional value for NFTs might come from something called “added utility”. That depends on the NFT itself - some of them might come with unique perks - like getting a limited edition, super rare item in real life. For example - the DJ and Producer 3LAU announced that the top bidder for his NFT auction gets a chance to collaborate with him on new music.
Why should you buy NFTs?
There are several reasons why buying NFTs in 2022 might be for you:
You might be investing in crypto art because you find the art interesting or aesthetically pleasing. No matter if it’s a photo, digital painting, a video, or a clip of music - chances are that in NFT Marketplaces you’ll find more interesting art than anywhere else. The crypto art scene is very innovative - new kind of items are added every day to push the boundaries of what can be called art.
You might be interested in buying NFTs as a way of supporting the artists. Instead of making a traditional donation, by buying an NFT you might be getting something extremely unique and exciting - and by doing so, you are helping out the artists that matter to you.
NFTs are often bought because the buyer wants to have the right to brag about it. They are often released by hot artists with a certain hype around them. In that case, owning an NFT (released by a popular artist) is the ultimate flex. After all, it gives you undeniable proof that the digital token belongs to you and no one else.
The cons of buying NFTs
Unfortunately, buying NFTs comes with certain risks. First of all, there’s the question of the currency that’s used by NFT Marketplaces - Ethereum. Its value constantly fluctuates, and if it does rapidly go down, there’s a chance of an unsuccessful investment.
It’s also important to acknowledge that the likelihood of seeing significant returns from buying an NFT from an artist that does not have a large following is quite low. Sure, you can just go on OpenSea and buy art that you find great, but it is not guaranteed that with time its value is going to increase.
The art of investing in NFTs therefore seems to be about predicting which artists are going to get big in the future. If you truly find someone’s art (or music) outstanding, you might be interested in buying some of their NFTs to support them - and maybe, after some time, you might get spectacular return on your investment.
Good luck with your NFTs!