If the concept of an NFT sends your head into a spin and you frankly can't tell one end of a blockchain from the other, don't panic: you're not alone. For the uninitiated, NFTs – that's non-fungible tokens, but we'll get onto all that later – seemed to spring up overnight, suddenly dominating news headlines and catching the eye of dozens of our favourite artists. First the skateboarding guy with the cranberry juice was doing it, then Slipknot's Clown joined the fray, and now everyone from Mike Shinoda to Megadeth are in on the act.
Like it or not, it seems like music fans are going to have to get to grips with NFTs at some point. Even if you have no interest in ever owning one, with the rate they're catching on in the music world, a vague understanding of how they work is going to serve you well.
Here, we try answer key questions about NFTs, breaking down everything you need to know as simply as possible.
What is an NFT?
The music and tech industries love an unhelpful acronym, in part to bamboozle outsiders. NFT stands for “non-fungible token”. But that doesn’t get us any closer to what it actually means. OK – a “fungible” item is a commodity that is identical to others and therefore interchangeable (e.g. stocks or a pound coin are fungible as one is basically the same as another). So the “non-fungible” part here means something unique and the “token” part can be taken, in the case of music, as shorthand for a digital item such as a song, an image or a video. NFTs can be sold or re-sold and sales primarily happen on the Ethereum blockchain (this is a decentralised network for trading with Ether which, in cryptocurrency terms, is Pepsi to Bitcoin’s Coca-Cola). They come with certificates of ownership and authenticity which, as they exist on the blockchain, cannot be hacked, tampered with or cloned.
What is the point of an NFT?
What is the point of anything? That’s a snippy answer. Sorry. As NFTs can effectively be anything, they can be treated as a creative canvas where the artist uses them as they see fit. They can be used as a creative extension of a song (in the same way that sleeve art or a promo video is a creative extension of a song) or they can become an entirely new format. Also, they can be sold – and that’s a critical part of the hype around them today. They are a way to make money and, in some cases, make a lot of money. Think of them like Andy Warhol – where half of what he was doing was about the art while the other half of what he was doing was about making as much money as he could.
Why are they so popular with artists right now?
The simple answer would be money – as some people have made a lot of money selling NFTs (more of which below). The timing of the hype around NFTs is not coincidental, coming as it does when musicians have not been able to tour (how they normally make most of their money) for a year, so this represents a potentially critical new form of income for them. Yet the mammonist angle is only part of it as they can – at their very best – be an entirely new creative outlet for all kinds of artists, especially for musicians, as they mean visuals (both still and moving images) can be interwoven with music in whole new and exciting ways. That said, some are glorified PDFs or GIFs and it doesn’t always follow that if you have made one it’s actually art. Just, in a way, like making records.
Can anyone make/release an NFT?
In theory, yes. In practice, well… There are a huge number of hoops to jump through in order to do this and it costs you money at several of the critical stages. Neil Claxton (the electronic music producer behind Mint Royale) posted a fascinating and funny thread on Twitter in March all about how convoluted and frustrating it is to get something ready for sale as an NFT and what it cost him to do so at each stage. It meant buying cryptocurrency (which is a lot harder than it sounds) and then setting up smart contracts to enable transactions. This involves what are termed “gas fees”; these allow all the necessary processes to happen and what they cost will vary based on demand as well as what it is you want the NFT to do. Oh, and you need a digital wallet set up first. After four days, Claxton was kind of set up to sell his NFT, but then it turned out he couldn’t trade it as it was on a test network and he was still in the dark as to what exactly he owned or could do with it. It all reads like Kafka writing the assembly instructions for your Ikea wardrobe.
I’m now the owner of one of the first Music Copyright NFTs (terms and conditions apply). It was a very painless process!March 23, 2021
If I buy an NFT, what can I do with it?
As with any other object or piece of art, you can keep it because you enjoy owning that item; or you can treat it as an investment, hold onto it for a while and then look to sell it when it has hopefully increased in value. Some NFTs, however, go beyond digital items and become what marketing executives like to call “experiences”, crossing from the virtual world into the real world. Electronic artist 3LAU, for example, sold an NFT recently that included a limited-edition vinyl record being sent to buyers and the top bidder was able to collaborate with him to make a new track from scratch. Kings Of Leon, meanwhile, sold a “golden ticket” as part of their recent NFT that gave the buyer four front-row tickets to any of the band’s headline shows for life.
Where and how can I buy NFTs?
There are a huge number of marketplaces dedicated to the sale of NFTs. These include OpenSea, Rarible, Nifty Gateway and SuperRare – so think of them like different auction houses that sell physical items such as Christie’s, Sotheby’s or Julien’s Auctions. Before you can acquire one, however, you need a digital wallet set up with enough cryptocurrency in it to buy what you are after. As most NFT sales happen on the Ethereum blockchain you will most likely need to invest in Ether. This does not come cheap. On the day I was writing this, one ether was trading at £1,564.51 – or $2,149.83. That is not a typo. One-thousand-five-hundred-and-sixty-four-pounds-and-fifty-one-pence. For one (1) ether. Plus there are transaction and network fees on top of that. When you have cleared these hurdles, you can go and spend on the items you want. Some NFTs (generally the top-tier and unique ones) are put on open auction with a reserve price and you have to hold your nerve if it gets into a bidding war; whereas others (generally where there are unlimited versions made available, but for a limited time) have a set price and can be bought immediately.
Are NFTs a good investment?
It really depends. Not every NFT purchase today is being done with an opportunistic eye on being able to “flip” it a few years down the line. Some people are there simply for the associated bragging rights; being able to say they own something unique or rare (even if, in most cases, it’s an intangible object) comes with its own cultural value and worth. If it is a favourite artist selling the NFT, the fan might just want to own it and hold onto it in the same way they would if they got a star’s autograph or a selfie with them. But, as with the wider art world, it is also a speculative market and there is a hope that by buying something early it will only increase in value and therefore it is just a matter of sitting it out. As this is all incredibly new it is hard to say if the value will increase significantly a year or a decade from now. Just like buying a painting from a first-year art student, you hope they will become famous so that owning an early example of their work will eventually be worth a lot more than you originally paid for it. You could be sitting on a potential fortune or you could be sitting on digital landfill.
Can bands release music through NFTs?
Bands can release anything they want through NFTs. They can create new artwork or new videos. They can embed static pieces of art with music. They can include clips of music across a range of digital files that, collectively, make up the entire song. They can, as The Weeknd has recently done, sell a single piece of digital artwork that includes the full recording of a brand new song that he says will never be released anywhere else in the future. It all depends if they sell a handful of unique items (commanding huge prices) and spread music across them or if they sell unlimited NFTs that include a brand new song or album and say that the music contained within will not be made available elsewhere so fans have a short window of time to make their purchase. So some pieces of music could end up being owned by just one person who paid a lot for it – or by potentially millions of people who all own the same tracks but who paid a relatively small amount of money for them. They are both technically scarce items, but one is much scarcer than the other.
Is it feasible NFTs could replace conventional formats?
The utopians of the cryptocurrency world would argue that, yes, NFTs could become a whole new format that, because they can combine all manner of digital elements as well as real-world experiences, make more familiar formats like vinyl, CD and even a Spotify stream redundant. The problem, of course, is that they are not going to be viable (either technologically or economically) for the vast majority of music fans. Also they are not going to create (many) new fans as, really, who is going to pay to own a rare musical NFT by an act they do not know or love already? Some acts will opportunistically see the marketing and media angle in releasing their new album only as an NFT while some acts who are NFT evangelists will genuinely believe this is a bold new format and insist their music is only sold this way. For the most part, however, acts will treat it as an interesting add-on to existing formats – almost like a high-end digital box set that includes something unique. It is, frankly, too much of a faff to limit your music to NFTs and nothing else.
What’s the most an NFT has sold for?
At the moment it is a gold rush, so some genuinely ludicrous figures are being tossed about here. Digital artist Beeple (or Mike Winkelmann as his family call him) sold Everydays: The First 5000 Days as an NFT earlier this year. It was a collage of 5,000 digital images and made headlines not just because it was sold by Christie’s (and therefore came with a certain level of authority and gravitas) but also because it sold for $69.3 million. This made it one of the most expensive pieces of art sold by a living artist. As for musicians, Grimes sold a range of digital artworks (some unique, some running into the thousands) for $6 million in February, electronic producer 3LAU reportedly made $11.6 million from his NFT the following month and The Weeknd is said to have made over $2 million in his recent NFT sale. So there’s a lot of money to be made. But mostly by a handful of musicians who are already successful and rich. Plus ça change…
Are NFTs just a fad, or here to stay?
The short answer is… maybe… or maybe not. It’s certainly a boom market and musicians are getting really excited about the possibilities here (both monetary and artistic). As with everything in the music business, there will be a wild scramble to get on the bandwagon and squeeze as much money out of it as possible before jumping onto the next trend. What happens after that really depends. The phase we are in right now is starting to look like the desperate/opportunistic stage where all manner of stuff – good and bad – is dressed up in NFT bunting in the hope that the cash comes rolling in. This could damage the long-term perception of NFTs where they will be dismissed as digital snake oil or a giant Ponzi scheme. But hopefully the fly-by-night grifters will pack up and leave, meaning that the people doing interesting and innovative things here are left to get on with it. Ideally NFTs become a creative and commercial tool that they put time and effort into rather than pumping out because they feel they have to be seen to have had an NFT.
Is it true they use as much energy as Argentina? Are there any plans to reduce their energy use?
There is a huge amount of debate at the moment around the precise environmental impact of NFTs (which relates to the wider debate about the environmental impact of server farms and connected devices in general). Those operating in the area have scrambled to try and put carbon offsetting measures in place – but their actions have been met with mixed feelings by environmental campaigners. Both Ethereum and Bitcoin rely on vast networks of computers running advanced cryptography to keep the whole shebang operational and secure (through a rolling process called “mining”). Wired suggested earlier this year that they burn through energy “on the scale of a small country”, but added that how that translates into carbon emissions is a highly contested area. Some suggest that 70% of “mining” can be powered by clean sources. There is the added complication that it can fluctuate through the year. Any technology that uses large amounts of energy (and cryptocurrency uses a lot of energy) is never going to be great news environmentally. In short, the green credentials of NFTs are poor – the question is just how poor.
Do NFTs work with a Mac computer? Do they work with all computers? Do you need any special technology to own or buy NFTs?
They theoretically work anywhere you can connect to the blockchain (i.e. they should work on any web-enabled device). The item is not normally stored on the Ethereum blockchain for cost reasons so the NFT works as a super-powered link that directs the owner to where their purchase actually resides. You just need to have a digital wallet set up (see above) and have invested in some cryptocurrency for the big-ticket items. It depends on what digital items are being sold as part of the NFT, but any device that can handle audio and video playback should play nicely with it. That said, it is yawningly inevitable that some hipster will eventually sell an NFT that is only compatible with a ZX Spectrum, an Atari 2600 or a Goblin Teasmade.