Crypto art became all the rage in early 2021 ever since Beeple managed to sell his artwork ‘5000 Days’ for a whopping $69 Million. While it might seem like a sudden trend, the technology and the community behind it has been working on it for years.
Bitcoin was first introduced as a platform to facilitate blockchain payments. Years later, Ethereum came along and figured out ways to extend the use of the Blockchain protocol beyond payments.
It resulted in ERC-721, the non-fungible token (NFT) standard. It is this standard that powers all blockchain-based collectibles, including artworks.
How does Crypto Art Work?
Art has been sought after by both rich and the poor for centuries. As computers became more powerful in the late 1990s, there was a new type of art: digital art. The computer was the canvas, and the art was shared on the internet. However, none of the creators made it big like the traditional artists.
People still liked to own unique art. There was no way for people to buy and showcase unique digital artwork. Thus, digital artists often worked for companies that needed artwork done instead of creating their own pieces.
Crypto art changes all of that. It uses Non-Fungible Tokens to make the artwork unique, appealing to the collectors as rare art has done for centuries.
The ERC-721 standard was first published back in September 2017. It allows developers to tokenize the ownership of any data on the Ethereum chain. ERC-20 was the first token standard, where developers could create tokens through a smart contract. However, each smart contract could be used only for one kind of token. With ERC-721, developers can create multiple types of tokens, each with their own value using just one smart contract.
CryptoKitties was one of the first programs to make use of this new standard. Users could collect kitties, and for a small fee, mate them to create more kitties. Each cat was unique and had a token backing it. So the rare ones have a high value as their limited numbers are provable on the blockchain.
It is this same standard that is now being used for Crypto art. Artists create art, which is then backed by an ERC-721 token. This token is then sold to the buyer, who becomes the sole owner of that piece of art.
Marketplaces for selling crypto art
Anyone can create their artwork and tokenize it. However, the technical aspect of it is complex, and you’d have to be an Ethereum developer to do it. This is where the crypto art marketplaces come in. They take care of the tokenizing, listing, and bidding for a small fee.
Some platforms have even gone beyond the initial part. They have smart contracts where every time an artwork is re-sold, the original artist gets a percentage of the sale. Never before in the art world, this has ever been possible.
Here are some of the most popular platforms right now:
Each platform has its pros and cons. So it is important to weigh in your preferences and choose the one that best fits your purpose. Most platforms also have a verification system to make sure you’re selling original art and charge you a fee for listing.
Getting started with selling Crypto Art
While there are multiple platforms, we’re going to use OpenSea for this guide. It is one of the easiest platforms to use, and it should be easy to operate, even for those who’re new to crypto.
To get started, you’d need an Ethereum wallet and some Ether in it. We recommend using MetaMask. It is a browser plugin that works on Google Chrome and other major browsers. It is a straightforward process to set it up. Once you’ve set up Metamask, load your wallet with some Ether. If you don’t have any, check out our guide on how to buy Ether here in the UK.
Go back to OpenSea and click log in. Select meta mask and connect your wallet to the website. Once you’re logged in, you can now buy and sell crypto art.
Now, go back to the homepage and click create. The first step is to create a collection. Set a photo for your collection, the name of the collection and some description.
Once you’ve created a new collection, you can list your artwork in it by clicking on “Add Item.”
The first step is to upload your actual artwork. It can be any piece of digital art such as JPG image, MP4 video, or even MP3 music. OpenSea sets a limit of 100 MB for each piece.
Set a name for your artwork, and you can fill out other details if you want to. Towards the end, you get to set the supply limit, which is disabled by default. You can enable it by entering “?enable_supply=true” at the end of the URL and reload the page. The supply increases the number of people who can own your artwork. Increasing the supply means the price could come down as your art is not very rare. Hit create once you’ve entered all the details.
It is free to create NFT tokens on OpenSea. However, money is involved if you want to start selling.
Go back to your collection and press on the item that you want to sell. Set a fixed price or an auction model. You can even have both. Once this is done, you’ll have to pay a one-time gas fee. This fee does not go to OpenSea. Instead, this is the transaction fee that powers the Ethereum Blockchain. Due to the increasing demand right now, it is incredibly high. At the time of writing this article, the fee is as high as $50-200.
Once you’ve paid the gas fee, it takes a few hours for OpenSea to list your artwork. If a buyer likes it, they can bid on it or buy the artwork for the price you quoted. If you’re happy with a bid, you can accept it, and the ownership of the artwork is transferred from your wallet to the one who just purchased it. OpenSea takes a fee of 2.5% from the successful sale, and the rest of the money reaches your metamask wallet.
ERC-721 standard is just four years old, and we’ve already come so far. Everyone is taking notice. The bidding for the $69 million artwork by Beeple was organized by Christie’s, the world’s largest auction house that is 250 years old.
ERC-721 tokens allow anyone to tokenize anything digital. Twitter CEO Jack Dorsey tokenized and sold his first tweet for $2.9 million. Some have even started replicating the traditional art industry by organizing art galleries to display digital art. You can now even buy digital photo frames connected to your Ethereum wallet and display the art you own! Art world is just one of the many industries that is being disrupted by blockchain technology.
Profits from your crypto art are taxable in the UK. Click here for our complete guide to crypto taxes.