NFT and the art of the deal

This last year has been a tough one for anyone whose primary source of income was through photography. 

Any face to face activity, often the bread and butter of full time photographers, has been severely curtailed by Covid-19 leaving photographers to rely on things like print sales to make ends meet.

However, just when things were at their bleakest, a new proposed saviour appeared over the horizon with the letters NFT printed on their tee-shirt. 

But what is a NFT, and is it the new messiah or just a very naughty boy?

So what is this NFT?

Simple put  an NFT is a new way to monetise the sale of digital images. It has come largely to the fore through some photographers like Neil Burnell selling digital prints for prices for the kind of money that traditional print sellers could only dream off.

Since then social media has been awash with photographers trying to get to grips with NFT's, with some resorting to almost evangelistic zeal in extolling others to get on board. As a result, there has been somewhat of a schism formed between photographers who see this as the next great thing, and others who have doubts and feel more cautious.

So what is exactly is an NFT, and why is it being sold as the future of photography? 

NFT stands for Non-fungible token, which rather than a method of selling photos sounds like a foot disease. 

To explain what it is, lets ask a simple question. Which of the two images below is more valuable?

If you said the image on the left, I'm afraid no playtime for you

The answer is that they are in fact both equally valuable being purely digital images and in themselves contain no intrinsic value.

This is because although such images take effort to make, in a world where both creation and delivery of photographs is now a purely digital exercise they can be easily duplicated and disseminated. This means in economic terms, supply constantly outstrips demand and as everyone knows not all rare things are valuable, but all valuable things are rare.

Unlike say a print whose reproduction can be limited and controlled, there has not been up to now a similar method to put limits on a digital image. This is where NFT's come in. 

An NFT is a digital document that due to the process in which it is created (which we will not go into here, because it involves a lot of maths and very few people understand it anyway) is guaranteed to be unique and non-reproducible. This is what the Non-fungible means. Not only that, but it contains an unchangeable ledger where each token is linked to a previous copy and therefore can record a chain of ownership. A NFT can be associated with a digital item and uniquely identify it. 

So what does that have to do with photography? 

Well, a photographer can now attach link an NFT permanently to a single instance of a digital image and in doing create an unique image and sell or auction that image. One (bad) metaphor used of a signed baseball card (or pannini football sticker to the majority of the world). There maybe 1000's in existence, but only one signed by a sportsman it represents.

If you are thinking why would anyone want to buy a digital image, that looks like all the other copies  just because it has a unique signature, join the club. But that is what is happening on websites setup to trade these things, and significant amounts of money are being used to purchase them so clearly there is a demand.

NFT's are intractable linked to the concept of electronic money. You mayof heard of bitcoins, the  payment method of coice for ransomware proponents. Well NFT's are linked with a similar currency called Etherium and these are used to purchase NFT's which can then be converted to the sort of hard currency banks etc are happy to deal with.

Money, Money, Money

So we can now raid our back catalog of digital images, attach a NFT, auction them off and retire happily, right? 

Well maybe, and certainly some commentators have suggested that if you are not doing this you are 'crazy' . However like any get rich quick scheme, it is worth investigating exactly what you are getting into before jumping in with both feet.   

So what follows are my thoughts on what things you may need to think about and where this might be going in the future.

First thing to think about is who is actually buying these items and where is all the money coming from?

Caveat emptor

So why are people purchasing digital prints by spending the kind of money that would allow them to buy 20 physical versions?

My guess is that, like most new things, the purchasers will come in 3 waves. 

Firstly, are those idle rich who always want to be first just for bragging rights. i.e. the kind who queue up to buy the first iPhone, limited edition records etc. While money being used to purchase these images may look a lot to a starving artist, to some people a couple of thousands is the kind of money they spend on a good lunch and certainly no hardship if you want to brag on your next super yacht meeting with Bill Gates and Roman Abramovich

The second wave will be investors and speculators. The kind of people who are not so interested in the art, but the hope that its price will increase over time. However, both these groups are the early subscribers and limited in number. 

The 3rd wave will be the vast majority people who buy into things like this as it becomes part of normal behaviour.

However, to anyone hoping to get rich, there is a danger that the first wave has already moved on, and the second wave are now holding back to see where the market is going. Whether the vast majority of people will ever come to see a digital print as anything other than a curiosity is open to question. Maybe it is just my age, but the idea of getting the kids round in 20 years’ time to download my original Burnell, doesn't seem likely. 

Maybe I'm behind the times with this, but the point is that I would not mortgage the house on the ability to sell photos this way. The market could already be saturated, and there is anecdotal evidence that after the initial enthusiasm (see wave 1 and 2), the market has cooled considerable.

To see why this maybe the case, let me introduce you to the hype curve. This is a known phenomenon in the tech world and basically almost all new technology follows it.

The first stage is where everyone gets excited about some new technology. Early evangelists extoll its virtues and tell everyone that they need to get in on it, creating a huge wave on enthusiasm. This reaches a peak, where people start finding that the initial promises are not met and people move onto the next big thing. Then eventually after the hype has died, a better, more realistic expectations are formed and some use is made of the product, but not to the extent originally envisioned. 

 

My thoughts are that at the moment we are just below the peak of inflated expectations, and maybe anyone who wants to get into this, needs to be aware that the hype and good times may not last forever.

But why should you care, as long as there is money to be made? Well, the point is that none of this is free. Websites advertising NFT's aften charge an upfront fee, and if the hype crashes you may find you are spending money in a dying market.

Also, because you are buying and selling in a so called crypto currency, there is also a danger that any value will fluctuate wildly as the valuation of the currency changes. Because such currencies are not backed by things like government bonds, they are more prone to variation. For an Ethereum coin has reduced in price from $4000 to $1700 in just over a month so it is well to be aware that markets are extremely volatile

Legal Eagle

Another problem is whether buyers actually understand what they are buying? 

Purchasing always involves some manner of contract between buyer and seller, but NFT's and the whole concept of ownership of digital items creates a whole range of new issues that national laws have not caught up with yet. 

Take the issue of copyright. The assumption is that when you sell a picture, you are selling a single image, but you retain its copyright.

Problem is with all copyright questions; it is based on a concept developed 100 of years ago which does not sit well in the digital era. Firstly, is the buyer aware of this or is there an implied right when someone buys an image.  Secondly which law does this come under? The jurisdiction of the seller, the buyer, where the auction site is hosted?  

These legal questions will now doubt in time be answered, but for now it is worth being aware that we are in uncharted territory legally about what rights the seller and buyer actually have and while the market remains buoyant this maybe moot, if the prices drop (or plummet), speculators might actually come back and ask what their money has actually bought. 

Another legal grey area is what happens if a photographer mints (NFT jargon for create) a second image exactly the same as the 1^{st one}. Is there anything in the rules which indicates uniqueness? Where does enforcement responsibility lie?

Then, there is the issue of what happens if someone sells an image which is not theirs? Again, you would hope the original artist can use copyright law to protect their rights, but like we stated above, where would you sue?

However, the more likely problem in the short term is the rise in scams. Take a population that are in need of money, add something which promises easy access to said money, add a touch of incomprehensible technology, and you have an area ripe for exploitation by fraudsters and scam artists. No doubt we will see  the rise fake sites, people offering non-existent consultancy, or other such rich quick scams (A Nigerian prince wishes to help you sell your image, etc).

So basically, be very careful you understand the terms and conditions you are signing up for, what fees are due, and whether the site is valid. 

The Environment

 A lot of photographers I know, especially those working in wildlife and environment are very conscious of their responsibility to the world around them.

One big area of concern has been on how NFT's affect the environment. To explain this you have to look at how NFT’s are generated.

Unlike normal money whose value is based on some intrinsic value, things like NFT are based on making computers do work to generate them to locate a secret code. The codes are so designed so that as computers get faster, the work required to generate them increases, therefore limiting supply.  

 However as anyone who has run a rendering program with a laptop sat on their legs, work requires energy. How much energy? well, recently police raided a house they thought was a Marijuana farm by its heat signature and the fact they were illegally siphoning a large amount of electricity from the grid. Instead of a normal farm however, they found a server farm searching for bit-coins. 

As another sign of how much power is being used to sustain things like NFT's, China recently cracked down on bit-coin farming. As well as causing the price of crypto currencies to drop, the electricity consumption in China dropped virtually overnight by the equivalent of the production of 7 nuclear reactors.

So this activity is taking a lot of energy to basically generate nothing physical and there are serious questions whether if you care about the environment you should be encouraging it so that you can sell a few pictures? 

Conclusion

So should photographers buy into the NFT hype and start auctioning of there digital prints? There is no doubt the rewards of some of the early users have been spectacular and I'm as keen as anyone to see photographers and other digital creators gain their just reward from their efforts.

but...

As well as Caveat emptor we have Caveat Venditor or seller beware. Any transaction involves risk, but the problem with NFT's is that it is too early to really understand what risks you are taking on.

Also it has to be said I am a bit concerned that the debate about NFT's has been distilled down to two camps, those who evangalise it and others who are very negative. As photographers we should all understand there are many shades of grey, and so it is with this debate.

The danger is that hyped expectations will in the end back fire, so If you want to go down this path, make sure you understand what you are selling, your legal exposure. Make sure the sites you using are valid and trusted and you use common sense cyber security principles such as good one time use passwords. Do not pay large upfront fees, and be aware of any ongoing costs.

More importantly, do not assume that you will sell much or in fact anything. There is nothing wrong in dipping your toe into new technologies, but do not assume that things will change overnight, if at all.

In short, like any undertaking, do not get pushed by others to take risks you do not fully understand, and be wary of any claims of instant riches.

And yes, I still feel uneasy of living in a world where digital objects are given equal value to physical representations, and I don't think I'm alone in that. Maybe we are entering a brave new world where value is only represented in 0 and 1's rather than ink and paper, but part of me feels I would not like that world, but maybe it is only a sign of age and the next generation brought up on Instagram and Facebook have no issues with it. 

My biggest worry is that I have reached an age, where I would dismiss something just because it is new.  However my gut feeling is that this is not one of those occasions. However if I'm wrong, contact me in 20 years to tell me how stupid I was.  You can even attach a NFT and sell it to me :)