Digital collectibles or non-fungible tokens (NFTs), are cryptographic assets that use blockchain technology. Digital collectibles are unique as they cannot be duplicated unlike your typical media files on your personal computer, changing the way we think about ownership of digital art, music, video, and other digital assets.
The rise of digital collectible art has been largely driven by the increasing demand and interest in the new technology. In 2021, the global NFT market was worth USD 41 billion, placing it almost at par with the conventional art market which was then worth USD 50 billion. The most expensive NFT ever sold is the work of digital artist Pak, whose piece “The Merge” sold for USD 91.8 million in 2021.
Digital collectibles offer many benefits over traditional art, both for creators and collectors alike. These include transparency and ease of transactions, security, control over profit and royalties, and the ability to add utilities, among others.
But from the outside looking in, some people are still skeptical of the value of digital collectibles because they don’t fully understand what they are and how the digital collectible market works.
How does a digital collectible work?
The process of creating a digital collectible art involves uploading the artwork to an NFT platform to be “minted” onto a blockchain (like Ethereum or Polygon) with the use of smart contracts. Once minted, the creator can announce the sale and sell the artwork either for a fixed reserve price or to the highest bidder. The buyer will then receive the unique token which can be stored in one’s crypto wallet, verifying ownership of the artwork.
As with traditional art, the type of artwork, rarity, and quality are important considerations for digital collectible art. Additionally, some NFT collections attract a huge following, creating a robust online community of like-minded collectors that further increases the demand and value of the digital pieces.
What are the advantages of digital collectibles for creators and collectors?
Being blockchain-based, digital collectibles are able to combine the security features of cryptocurrencies, with the appeal and desirability of conventional art:
Authenticity and proof of ownership - With the use of blockchain technology, ownership and authenticity of the digital assets can easily be verified. This helps combat issues like plagiarism and unauthorized copying, as the ownership and provenance of every piece can be easily traced and is transparent to the public. Blockchain technology even allows for “fractional ownership” of digital collectibles, allowing many users to collectively own a piece and profit from its sales.
Direct artist-to-buyer interaction - Digital collectibles enable artists to directly engage with their audience and sell their work without intermediaries like galleries, agents, or publishers. This direct connection allows artists to establish a closer relationship with their fans, gain exposure faster, access a global audience, retain control over their creative output, and receive a larger share of the profits.
Speed and ease of transactions - Since NFTs are digital items, the cost to create, distribute, and store digital collectibles is relatively low. The most one would need to engage in the market is setting up an account on a trading platform, and having a wallet to store one’s collections.
Royalties and residual income - One huge appeal of digital collectibles for artists and creators is the ability to include smart contracts that automatically entitle artists to royalties every time their pieces are resold in the market. This can provide a continuous stream of residual income that may not be possible or practical in the traditional art market.
Added utilities - Creators can choose to add additional utilities to their artworks, providing more incentives for buyers than just having a static piece of art to look at. These utilities can include access to special content, exhibits, events, or even discounts and digital or physical merchandise.
Experimentation and new art forms - Digital collectibles have spurred the exploration of new art forms and pushed the boundaries of traditional artistic expression. Artists can utilize the programmability of digital collectibles to create interactive or dynamic artworks that can evolve over time, or even interact with other digital collectibles. Many artists are exploring digital collectibles as a medium to create “experiences”, combining different media formats in one package.
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