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Fad or the future? Business journalists need to know how NFTs work. Omar Gallaga explains...


Global Business Journalism reporter

Amid the rush to cryptocurrency stock in the COVID-19 era, the market for non-fungible tokens, or NFTs, has surged as well. Digital art piece Fidenza is one of the most popular and successful NFT collections so far. And it keeps attracting creators and users.

It's more important than ever for business journalists to understand the economics behind NFTs as potential investors explore the risks and rewards of riding the wave. If you’re interested in how art works can be monetized through NFTs, here are three approaches shared by Omar Gallaga, a technology culture reporter in the United States who’s written for NPR, CNN and The Washington Post, among others. He spoke recently about NFTs to students in the Global Business Journalism program at Tsinghua University.

Omar Gallaga

Gallaga, who lives in Austin, Texas, highlighted the way Tyler Hobbs, the generative artist who created Fidenza, builds his brand in the NFTs marketplace. Generative art is created by a machine algorithm. Hobbs created an algorithm that can spit out a thousand or even more, art pieces that are all unique and in different kinds of shapes and colors.

“Hobbs didn’t know it was going to be successful,” said Gallaga who interviewed Hobbs and wrote a story about Fidenza. "Before all this, he would print them out and sell them individually; this is something he’s been doing for a long time. But once his works were offered as NFTs online, his career took off."

What makes Fidenza different from printed art is that Hobbs, the owner, retains the ability to resell it.

Every time people trade his NFT art works, he gets 5% and continues to profit.

The second approach to monetizing art works involves building a sustainable NFT ecosystem and capitalizing on it. A famous example would be the Bored Ape Yacht Club, an NFT project made by Yoga Labs. The Club offers ape-themed characters with different traits and personalities for one to buy and own. Members will be able to play those characters in Metaverse games, which will be built around those characters.

“The way Yoga Labs approaches this is to make these characters collectibles. People purchase a character, hoping that it’s going to be worth far more than it was originally sold,” said Gallaga.

Dolly Parton has launched a collection of NFTs (Photo by Wes McPhee/Unsplash)

Another approach, especially for celebrities, is to make their own NFT collections. Dolly Parton, for instance, was in Austin for South by Southwest (SXSW), the annual event of music, film and tech convergence. She did a concert there and launched Dollyverse, a series of NFTs consisting of her digital posters and albums, among other collections for fans.

“That’s more of a souvenir type approach,” Gallaga explained, “If people sell those digital assets, they are selling them for pretty much what they paid for them simply because they’re not in huge demand outside the fan community. That’s not something you try to make a lot of money with, though you can hope one day it becomes much more sought after.”

It’s hard to tell whether NFTs are a passing fad or the future of art, he said.

“It’s constantly changing,” said Gallaga. “However, what we do know is that, in Austin, we have a lot of start-ups in this area; Bitcoin, for example, has been a big industry in Texas and it keeps growing. You need crypto currencies to trade NFTs.”

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