The NFT (Non-Fungible Token) is a relatively young technology that has, in the past year, demonstrated its potential, value, appeal, and staying power. The size of the NFT market exploded in 2021. The sharp upward trajectory that began last winter reached $10.7 billion in Q3, compared to $28 million in Q3 of 2020, and shows no sign of slowing. This growth isn’t solely driven by ballooning prices; most NFTs actually cost less than a thousand dollars. The community of NFT buyers is growing — and with it, opportunities for technology dealers.
NFTs have no physical form – how, then, do they represent an opportunity for hardware dealers? It all comes down to how NFTs are being used, and how those use cases are, in turn, altering customer behaviors and shaping future needs. Looking at the past year’s exponential growth and digging into the categories driving it, we can make some pretty reliable predictions about how NFTs will drive future hardware requirements. Dealers should be learning everything they can about this market now in order to service these forthcoming demands.
First, let’s establish the basics of what an NFT actually is: a blockchain-based digital token. Blockchain technology is one of the most secure forms of digital ownership – a public ledger of transactions that is nigh-immune to hacking or alteration. Currently, most NFTs are based on the Ethereum (ETH) cryptocurrency blockchain, though other cryptocurrencies are beginning to develop NFT support as well; this is why you often see the prices for NFTs listed in ETH.
Unlike fungible cryptocurrencies such as Ethereum or Bitcoin, an NFT is attached to something unique, such as a work of art, a collectible icon, or a video. Fungible items can be traded like for like: if I trade my Bitcoin for your Bitcoin, we both still have a Bitcoin. If I trade my CryptoPunk NFT for your Bored Ape Yacht Club NFT, however, we both end up with something fundamentally different than we started with. That’s what “non-fungible” means.
Because an NFT can be attached to basically any kind of digital file, they’ve always been a fertile ground for experimentation. NFTs have been used to trade sports clips, tweets, and New York Times articles. They’ve granted access to new television shows. Sony and AMC gave them out to advance ticket purchasers for the most recent Spiderman film. All of this variety can make it seem like the NFT market is too difficult to pin down – too much in flux – to plan around. Don’t get distracted by boundary-pushing at the margins, though. The core of the NFT market is and will continue to be visual artwork, both in the form of collectibles (like the aforementioned Bored Apes and CryptoPunks) and in the form of fine art. Together, art and collectibles account for nearly 85% of recent NFT transactions. This is the use case dealers should be thinking about as they look to supply solutions to NFT-owner customers.
Once someone buys an NFT, it is stored in a digital wallet, such as Metamask. And… then what? Many NFTs are status symbols online – owners like Jay-Z use them as social media profile pictures, and they act as de facto access cards to exclusive owner communities on platforms like Discord. However, when a customer has made an (often significant) investment in a unique visual artwork, it’s only natural to want to display and enjoy their prize with friends and family in real life as well as online. They need technology solutions to bring their NFT collections out of the cloud and into their home.
In practice, this means that they need:
All that may sound complicated, but it doesn’t have to be. Purpose-built digital art canvases are available from a growing number of manufacturers, and many smart TVs are compatible with digital art apps. Be forewarned, though: not all digital art software can integrate with a digital wallet or support the management of NFTs. When recommending solutions for the display of NFTs, make sure these unique assets are supported end to end.
For many individual collectors, purchasing an NFT was the first time they ever considered buying digital art. The experience has opened their minds: Through NFTs, people are beginning to grasp the broader possibilities of displaying and enjoying digital art in their own homes.
“NFTs created a budget for digital art,” says Jess Conatser, contributing curator for Blackdove. “Now, people understand that this kind of artwork – which they once regarded as something you might see only as a public installation or in an immersive gallery or museum – is available for ownership and collection.”
This is new behavior for homeowners and art aficionados, and it will have a lasting impact on the way art is created, sold, and enjoyed. Just as the digital revolution permanently changed the music industry even as early-day sharing sites like Napster and Bearshare fell by the wayside, this shift in perception on digital art will outlast even the current wildfire interest in NFTs themselves.
“Now that the value of digital art has been established in the marketplace, that value doesn’t have to remain tied to NFTs as a sales mechanism,” says Conatser. “NFTs have opened people’s eyes to the value of digital art, but not everything needs to be an NFT to have value. Open editions and limited additions of digital works have an intrinsic value of their own.”
NFTs are revolutionizing the art world. More people are collecting than ever before. More people are incorporating digital art into their homes and lives. The marketplace for NFTs is extremely strong right now, but the broader marketplace for digital art continues to evolve. For dealers, this means that being future-ready requires them to look for flexible technologies. You need solutions that can manage and display any kind of media asset, including NFTs.
You also need a way to stay connected to the art market as it evolves so you can anticipate collectors’ needs. If you’re not personally passionate about art, look for a technology partner who is. At my own company, Blackdove, we offer not just technology services, but art advising and curation services. There will undeniably be an ongoing market for digital art, and an ongoing need to track ownership of digital art as time goes by. Make sure you have the partners, expertise, and technologies lined up to serve this valuable and growing category.
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