NFTs are basically digital containers which can hold IP but which liberated it to be owned and traded so creators have a world of new ways to produce, distribute, remix and monetize content. NFTs are understandably confusing for many people, so I’ll break it down in plain English.
The most important concept in NFTs is that, after decades of infinitely sharing creative output on the Internet, we finally have digital scarcity. That means that we can finally prove that a particular file or piece of content or piece of data is uniquely owned by a single person.
Why NFTs are so powerful
Here’s why that’s so useful for artists, using a simple example. Let’s say an artist has created a piece of digital artwork. In today’s world, those rights are usually stored in the server of some record label somewhere and backed up by a paper signature on some lawyer’s document or, if the creator is independent, it’s at least protected by copyright law so the artist just owns it. Every time the artist allows someone to use it (officially), they or their manager have to explicitly allow it to happen with some sort of signature, which really slows things down and limits how it can be used.
If the artist assigns the IP rights to an NFT, that NFT becomes like a bearer-bond because whoever holds it can now use the legal right. In the simplest case, that person can display it on their digital wall just like a piece of art in the real world and they can know that it’s truly *theirs* to display. But, unlike a painting in the real world which can be bought or sold in a smoke-filled room somewhere and the artist never knows, NFTs are digital objects that can be programmed to do anything and you can always know where they are.
In the physical world, the artist makes revenue from selling an original edition and maybe the rights to produce more. When these things are resold, the artist never knows about it and never earns any income from it. Because NFTs are digital objects that live on the NEAR blockchain, every time they are bought and sold, the artist can be notified and paid a commission. Every time, in every location. Not just that, but the NFT can be programmed to permanently split that revenue however you want — maybe 10% goes to the artist, 5% to the agency which helped create it, 4% to the artist’s union and 1% to a charity they support. Maybe 5% gets split among everyone who previously owned this NFT so they are incentivized to help it retain value. Anything is possible.
That’s not even the best part.
Because NFTs can send cash back to the artist automatically when they’re traded, they can be traded anywhere. Before today, digital items were stuck in centralized marketplaces because that was the only way that companies could pull revenue from their resales. For example, digital skins which are created and traded in the Fortnite ecosystem need to be purchased on Fortnite’s proprietary platform so they can get their cut. But now that the NFT itself will always send the money back home, it can be traded anywhere and the artist or original IP holder will always get paid.
Let me ask you — back when you were a kid and traded collectibles, did you do so on some official company marketplace or unofficially among your friends? Exactly. Now, everyone from artists to big IP-holding companies are incentivized to set their NFTs free so people can trade them anywhere in the world. Suddenly, everyone’s interests are aligned to set the art free! This will result in orders of magnitude more transactions. More trading.
Because NFTs are infinitely programmable, we don’t even know yet all the cool ways they can be used. It’s possible to use NFTs as membership cards which give people access to special events. The artwork becomes more than just a thing to display or a cash flow, they become a special designation of status that the artist or anyone else can use to give special privileges to the holder of. What else might be possible?