Securing Artworks with Non-Fungible Tokens

Artist Mike Winkelmann cashes in $69.3 million on his latest artwork, making the third largest sale of artwork by a living artist. It wasn’t a fancy canvas watercolour painting or made by articulate grains of sand, but in fact, a collection of digital tokens.

These digital tokens are non-fungible tokens (NFTs), and they’ve spread waves of interest throughout the blockchain and artwork community. It essentially guarantees the uniqueness of a piece of work of art by issuing a token for it. This token cannot be replicated, so authors can then retain ownership rights over their work, hence the term “non-fungible”. This allows them to also collect royalties over their work, so that their work can be recognised and correctly attributed to them.

This is powerful because the internet today simply will store files online such as jpeg or mp3, which can easily be modified or stolen, and you are dependent on the security and integrity of the website that you uploaded your artwork to.

NFTs are based upon the Ethereum network, which is a decentralised network like bitcoin to run applications, smart contracts and transactions. NFTs can be bought and sold on the network and royalties can be programmed in so that artists owning the token are paid royalties every time the token associated with their artwork is sold and bought.

It is also up to the artist to decide the “scarcity” or the maximum number of tokens they want to sell with respect to the same artwork. For example, they can sell 200 tokens for the same piece of artwork and each token will still be different yet still attribute the same owner. It is like selling 200 tickets for the same event on Eventbrite – each ticket holder is different – but the event organiser is the same. Scarcity plays a role in determining the value of the artwork.

There is no sense of ownership if you have a copy of an image from the internet. Anyone can do that, and it’s by far not the same as if you actually own the artwork. You can download the Mona Lisa off of google images – do you feel that mean you own the Mona Lisa? Of course not!

NFTs aim to change all this. By having a token, it’s as if you have some ownership of the artwork, and the more people try to obtain a copy of the artwork, the higher the value it will have (which is similar in the way bitcoin’s value fluctuates).

NFTs are also not limited to just artworks, but it can be extended to many different types of content, like games, domains, or even investments and contracts. Since this is a relatively new concept developed in 2010 but really took off only in 2017 onwards, there is still some time before it is even more widely adopted to become mainstream.

It is also planned to try and link NFTs with physical items too, such as real-estate properties. There is substantial potential for NFTs which is why it has been trending of late, and as blockchain networks expand, there are even more use cases to be found and explored.