## Empowering Creators

## Source details

**Canonical URL:** [Empowering Creators](https://www.imf.org/en/publications/fandd/issues/2022/06/empowering-creators-currency-notes)

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## Bibliographic details
- Authors: ANALISA R BALA
- Published: June 2, 2022

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### Overview
- NFTs (nonfungible tokens) are digital items that are not interchangeable and can represent artwork, videos, music, and in-game purchases.
- NFTs record ownership through unique IDs and metadata on a blockchain, making ownership verifiable even when the digital work can be copied.
- NFTs have opened potentially lucrative opportunities for artists, particularly in developing economies that previously struggled to access the multibillion-dollar traditional art market.

### How NFTs work
- Creators "mint" an NFT by executing code stored in smart contracts that assign ownership through a unique ID and metadata.
- Ownership information is recorded on the blockchain, a public distributed ledger, enabling easy verification of ownership of the associated metadata.
- NFTs allow creators to sign self-executing agreements that ensure royalties on future resales.

### Market scale and noteworthy prices
- Trading in NFTs hit $17.6 billion last year, according to Nonfungible.com.
- Chainalysis estimates trading at more than $40 billion.
- One Larva Labs CryptoPunk sold for $23.7 million.
- As of May 14, the cheapest available CryptoPunk was ETH 60.95 (about $128,000 as of May 14).

### Economic impacts for creators
- NFTs can bypass traditional gallery business models that typically take 40 to 50 percent of sales, enabling artists to trade directly online with only a small transaction fee.
- NFTs commonly program royalties on resales, often between 10 and 30 percent, providing ongoing income to creators.
- For creators in developing economies, NFTs reduce barriers to market access and can provide financial security that traditional markets often do not.
- Example: Rich Allela now runs a company working with 157 artists across Africa and aims to generate $2–$5 million from sales this year.

### Benefits and behavioral changes
- NFTs enable real-time royalties as works are resold and flipped, which artists like Osinachi view positively compared with the traditional art market where artists often lose visibility on ownership changes.
- The ability to capture royalties even after an artist's death (through access to the artist’s wallet by relatives) is highlighted as a significant financial advantage.

### Risks and challenges
- Environmental concerns: crypto’s environmental track record is described as dismal.
- Scams and cybersecurity risks are significant:
  - "Rug pulls"—projects where creators cash out and abscond with investors’ funds—are a major problem; crypto investors lost over $2.8 billion to rug pulls last year, according to Chainalysis.
  - Cybercrime risks include account takeovers and fake marketplaces.
- Practical barriers for artists include complexity, difficulty building a following, and gas fees (the cost of a transaction on the blockchain), which can hinder participation—particularly among African artists.

### Practical guidance and community considerations from practitioners
- New entrants are advised to do their own research and seek out a community to mitigate security risks and navigate the space.
- Practitioners view flipping less negatively in the NFT context because artists can receive royalties from resales and have greater transparency over ownership changes.

*Empowering Creators, F&D Magazine, ANALISA R. BALA, June 2022*

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## Content in this bundle

- **Empowering Creators**
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_Source: https://www.imf.org/en/publications/fandd/issues/2022/06/empowering-creators-currency-notes_