Can NFTs really help most artists make money?

Original: Most artists are not making money off NFTs and here are some graphs to prove it

Original Author: Kimberly Parker

Translation: 0x13, Rhythm BlockBeats

The current artist community has shown a clear polarization in their views on NFTs. Some artists strongly advocate for NFTs, believing that they can earn more income from them; while others are not optimistic about NFTs, or more accurately, the current NFT market. They believe that the current NFT market is not much different from the traditional art market and is far from the spirit that crypto art promotes.

So what is the reality? Does the NFT market really benefit all artists, and how much can artists earn from their sales? What are the costs involved in issuing an NFT work?

NFT researcher Kimberly Parker has used statistical research methods to visually present the costs and income that artists need to pay, and has deeply analyzed the problems existing in the current NFT environment. The article is compiled as follows:

Before the NFT market rapidly cooled in April, I heard people say similar things more than once: "NFTs have brought too many artists to the forefront." "This is a revolution that allows artists worldwide to make money." "Artists can finally earn money now."

So I am very curious, are artists really making money?

There are several websites that aggregate NFT sales market data, such as nonfungible.com, cryptoartists.io, and the "Activity" pages of trading platforms like OpenSea and Superrare, which display recent sales conditions. According to recent data from nonfungible.com, the "average transaction price" of NFTs is astonishingly high, reaching thousands of dollars. So I thought carefully about whether the so-called "average" data has any reference value. The "average" you get by adding all the numbers in the list and dividing by their quantity can easily be severely affected by extremely low or high transaction prices, making it unreliable. What is a reliable indicator? It is the "median." You need to arrange the numbers in the form in order (from smallest to largest or vice versa) and then find the value in the middle, which can give you a better understanding of what "being in the middle" looks like.

So, what is the median transaction price of NFTs? Is it higher or lower compared to the average value people often mention? Some people often liken selling NFTs to "guessing," as no one knows how much it can sell for. However, we can try to obtain sales information from some data websites and calculate the median to help artists understand how much they can actually earn.

A friend helped me find a set of code that can access the public API of the largest NFT trading platform, OpenSea, as well as sales information from other trading platforms like SuperRare, Rarible, Nifty Gateway, and MakersPlace.

You can imagine that this data is incredibly vast, and we cannot process all of it. However, we can choose to process the most representative portion of the data. So we narrowed the scope down to the week when the NFT frenzy peaked, from March 14 to March 24, 2021.

Note: The number of sales for each NFT, with each color representing a different number of times an NFT has been sold. The size of the ring area represents the proportion of NFTs with that number of sales in our collected sample.

The above image shows how many NFTs were sold at least once or more on OpenSea. When you sell an NFT for the first time, it is called a primary sale, and all subsequent resales are called secondary sales. Currently, 67.6% of NFTs have not experienced secondary sales, and 19.5% of NFTs have only experienced one secondary sale.

Therefore, we decided to focus our research on primary sales, as this is what most NFTs can experience, and it clearly shows how much artists can earn when they sell their NFTs for the first time.

Here are our findings.

The number of primary sales at a certain price (adjusted for historical prices). The taller the bar, the more NFTs were sold at that price (referring only to primary sales), with $100 as a unit.

Another chart showing the number of primary sales at a certain price (adjusted for historical prices)

The most common primary sale amount is $100 or below. (All prices are converted to historical dollar values. For information on how we calculated prices and currency conversions, see the notes section below.)

Here are the data details:

33.6% of primary sales are $100 or below

20.0% of primary sales are $100–200

11.1% of primary sales are $200–300

7.7% of primary sales are $300–400

3.9% of primary sales are $400–500

3.3% of primary sales are $500–600

2.5% of primary sales are $600–700

However, most NFT trading platforms will suggest that you set the price at 0.5 ETH, which was about $894 on March 19, and the number of NFTs that completed primary sales at the platform's suggested price was only 1.8%.

You might say: "Don't jump to conclusions too early; this data doesn't account for multiple editions of NFTs. An artist can choose to sell 100 NFTs at $1 each, thus earning $1,000. You have to consider this situation."

So, we also analyzed this situation.

Median primary sale prices categorized by series; the median sale price of a few collectibles is very high, but the average price of most collectibles on OpenSea is much lower

Well, most collectibles earn so little that you can't even see them in the image above, so let's use a logarithmic scale on the Y-axis to represent them.

The same chart, but using a logarithmic scale on the Y-axis

OpenSea refers to all NFTs under a contract as a collection. So Beeple's Everydays is a collection, and Pak's open edition NFT collectibles are a collection. This is a convenient way to categorize all related multiple sales. As you can see, the distribution of higher median sales values among collections is also extremely uneven. If you were to create a chart showing the wealth earned by a very small proportion of multiple edition NFTs, we have a chart that can serve as a reference.

We also hope to find the same information from all other mainstream NFT trading platforms, such as Makersplace, Rarible, Superrare, Foundation, and Nifty Gateway. But strangely, accessing their APIs is quite difficult. These websites, including nonfungible.com, no longer display data such as "average sale price," and it is likely that they plan to list this data as "paid projects" in the future.

I previously wrote a document listing all the fees that the top five crypto art platforms deduct.

The largest proportion of primary sales (34%) is $100 or below. If your NFT is priced at $100, the expected fee proportion will reach 72.5%–157.5%, averaging 100.5%, meaning you might have a deficit of $0.5 or more.

The second largest proportion of primary sales (20%) is $100–200. If your NFT is priced at $200, the expected fee proportion will reach 37.5%–80%, averaging 54%, and you can earn only $92 or less.

The third largest proportion of primary sales (11%) is $200–300. If your NFT is priced at $300, the expected fee proportion will reach 25.8%–54.2%, averaging 38.5%, and you can earn only $223 or less.

The other sales amounts account for only 7.7% or less, which are very few cases, so I won't bother calculating those.

The numbers above do not reflect the wealth democratization brought about by the so-called technological revolution; they show that a very small number of artists have earned a lot of wealth through a very small number of sales, while most artists are told they can earn huge profits, but in reality, they do not. Hiding this information from artists manipulates the market, robs them of their dreams, and causes them great harm. Those NFT data statistics websites have a responsibility to make this information public, but they have not done so.

Responses to Possible Counterarguments

If you are thinking: "Of course, I understand this; OpenSea has not promoted its artists, so of course, there isn't much money to be made in this inflated market."

(1) The data above includes some websites that promote artists, such as SuperRare and Nifty Gateway, with cross-referenced sales data.

(2) Ask yourself, do you still believe that exclusive NFT trading platforms are a great force for democratization and decentralization, as you were told? Perhaps quite the opposite; they are replicating all the worst parts of the traditional art market: galleries charging fees, established artists making big money, while those who need income the most, struggling artists, cannot enter those platforms due to a lack of connections. Moreover, what these websites sell may not be artworks but just receipts; real artworks can disappear at any time.

You might say: "This is just the situation for that one week and does not represent the success of artists in the NFT space at other times, nor does it reflect the future trends of NFTs. It is just a bubble, and after the bubble bursts, the market order will return to normal."

For this idea, I believe that no matter which week's data we choose, we will face this criticism. Whether it is during the peak of the craze, the week after the peak, or the week when the market rapidly calmed down, you can say that this week cannot represent the whole. Although we would love to process all the sales information from the birth of NFTs to now, we really do not have the energy to do so. What I want to say is that every choice we make can reflect the overall trend of the market at that time. If the market is equal for all artists, then the decline in prices or sales should appear across all works by all artists, but as seen from the data above, the NFT market is clearly not like that.

In fact, I think it is more regrettable that there are those who have the ability to process all the data and share it but choose not to do so than it is to only process data from one week and share it. This information should be used to help artists decide whether to join the NFT world; the data we share opens a window for artists, while those websites could have opened a door, but they did not. However, the good news is that you can also join our ranks. If you still believe that you can make a lot of money in these markets, then you should urge those websites to keep their sales data transparent.

Finally, I often hear the phrase: "This is the business world." When artists cannot make money, some people always use this phrase to argue. "Business" is anything you want to do and any terms you agree to. There are many other digital art markets that do not charge such high fees. Some business models pay digital artists directly the prices they set. Do you want to pay $10,000 for an artist's work? There is nothing stopping you.

This is not surprising

In fact, what is most shocking about these digital trading platforms is how ordinary they appear; they look just like other traditional trading platforms. Everything about this is ordinary, mediocre, and predictable capitalism. That is the problem. Despite the promises of revolution, equality, and "elevating the status of artists," this technology has not changed anything: the few at the top continue to hold the greatest wealth.

In fact, all technologies are like this; blockchain and other technologies are no exception. Decentralization never means equal opportunity. Technologies deployed within the framework of capitalism will never be released; the only way out is to break this framework.

Artists are, from many perspectives, perfect targets: they have long struggled to earn big money, trying to shine in an increasingly saturated attention economy on social media platforms that have trained artists to produce endless fast-consumption content. However, amidst this darkness, there are also glimmers of light. More studios are shifting towards worker-owned models and unions, such as Soft Not Weak, Wild Blue Studios, The Glory Society, KO-OP, and Floyd County Productions Guild. The Art Babbitt Appreciation Society helps artists understand unions and recently assisted the large animation company Titmouse in advancing their union process. The Canadian government is now considering implementing Universal Basic Income (UBI).

Among the recruiters of these websites, there is a popular saying that NFTs are bound to be our future. But an exploitative structure, where most artists are treated as cannon fodder, is not necessarily our future. The success of NFTs depends on public perception; as artists, we have the ability to educate ourselves and decide whether we want to be used as fuel for neoliberal hype. Perhaps, with a bit of luck, we can work together to build better systems that can truly change everyone's lives.

Finally, quoting Ursula K. Le Guin: "We live in capitalism. Its power seems inevitable. The divine right of kings is also so. The power of any person can be resisted and changed by humans. Resistance and change often begin in art."

Thanks to Cabeza Patata, David Gerard, Amy Castor, Arturo Castro, Mitchell Malloy, and Stephen Diehl for their assistance in writing this article.

Notes:

Github Project

Click here to view the code and process used to generate these charts.

Cryptocurrency to Dollar Conversion

OpenSea calculates total sales prices in cryptocurrency. However, they do not convert to dollars based on real-time cryptocurrency prices. Therefore, to calculate more accurate sales prices, we group transaction times by the hour and use the CoinGecko API to convert cryptocurrency to dollars.

Explanation about Nifty Gateway

Nifty Gateway is an exception among other Ethereum-based crypto art websites because it uses Ethereum but allows users to purchase NFTs using credit cards instead of having to use ETH. Like other websites, Nifty Gateway makes money by taking a percentage of all sales. Nifty Gateway claims this percentage is solely for maintaining the website, but even if that is true, it is worth noting that Nifty Gateway and its cryptocurrency trading platform Gemini are owned by the Winklevoss Twins, who are early investors in Bitcoin and will undoubtedly benefit from any speculative increase in cryptocurrency value.

Explanation about PoS

Have I heard of the Tezos platform hic et nunc? Yes.

I did not mention any other issues with NFTs in this article, such as environmental impact or scarcity, because others have discussed them more deeply than I have. You will inevitably hear someone ask if you have heard of a certain blockchain using PoS and assure you that technological advancements will solve all these problems. First, the key is to separate NFTs from their current situation and potential situations. To be trivial, there may be many things NFTs can do in the future (certainly not just art). In this article, I am only critically reviewing how NFTs are currently being used, particularly in relation to art.

Fee Calculations

For a comprehensive explanation of these fee calculations, including gas fees, please refer to this article.

Superrare

Minting an NFT requires gas fees.

Primary Sale: 15%

Primary Sale Price: $300

Minting Cost: $70

Superrare Fee: $45

Total Fees: $115

Artist Net Profit: $185

Fee Proportion: 38.3%

Primary Sale Price: $200

Minting Cost: $70

Superrare Fee: $30

Total Fees: $100

Artist Net Profit: $100

Fee Proportion: 50%

Primary Sale Price: $100

Minting Cost: $70

Superrare Fee: $15

Total Fees: $85

Artist Net Profit: $15

Fee Proportion: 85%

Rarible

Minting an NFT requires gas fees.

One-time "wallet approval" fee, which allows Rarible to connect with your wallet.

No fee for auction listings.

Pricing sales require a "list for sale" fee.

Gas fees are charged to the buyer when purchasing NFTs at a set price.

When an NFT is sold via auction, the artist is charged gas fees. For example, a piece sold for $5 might require $40–80 in gas fees.

All sales fees: 2.5%

These calculations assume this is the artist's first primary sale, including the one-time "wallet approval" fee. If you want to assume this is not the first time, subtract $15 from the total fees.

I divided Rarible's example into two parts: auction and pricing sales.

Auction

Primary Sale Price: $300

One-time Wallet Approval Fee: $15

Minting Cost: $70

Rarible Fee: $7.5

Artist pays $70 in gas fees upon sale.

Total Fees: $162.50

Artist Net Profit: $137.50

Fee Proportion: 54.2%

Primary Sale Price: $200

One-time Wallet Approval Fee: $15

Minting Cost: $70

Rarible Fee: $5

Artist pays $70 in gas fees upon sale.

Total Fees: $160

Artist Net Profit: $40

Fee Proportion: 80%

Primary Sale Price: $100

One-time Wallet Approval Fee: $15

Minting Cost: $70

Rarible Fee: $2.5

Artist pays $70 in gas fees upon sale.

Total Fees: $157.50

Artist Net Profit: -$57.50

Fee Proportion: 157.5%

Pricing Sales

Primary Sale Price: $300

One-time Wallet Approval Fee: $15

Minting Cost: $70

Rarible Fee: $7.5

Pricing Sale Listing Fee: $15

Total Fees: $107.5

Artist Net Profit: $192.5

Fee Proportion: 35.8%

Primary Sale Price: $200

One-time Wallet Approval Fee: $15

Minting Cost: $70

Rarible Fee: $5

Pricing Sale Listing Fee: $15

Total Fees: $105

Artist Net Profit: $95

Fee Proportion: 52.5%

Primary Sale Price: $100

One-time Wallet Approval Fee: $15

Minting Cost: $70

Rarible Fee: $2.5

Pricing Sale Listing Fee: $15

Total Fees: $102.50

Artist Net Profit: -$2.50

Fee Proportion: 102.5%

OpenSea

One-time account setup fee.

Account Initialization Fee: $60

Wallet Approval Fee: $10

Gas fees are charged when the work is sold.

For example, a piece sold for $5 might require $40–80 in gas fees.

If the artist accepts bids before the auction ends, they need to pay gas fees.

When a work sells for 1 ETH or more, OpenSea will cover the artist's gas fees (at the time of writing, 1 ETH = $2018).

If the buyer wins the auction, the buyer pays the gas fees.

Primary Sale Fee: 2.5%

These calculations assume this is the artist's first primary sale, including the one-time account setup fee. If you want to assume this is not the first time, subtract $70 from the total fees.

Primary Sale Price: $300

Account Setup Fee: $70

OpenSea Fee: $7.5

Total Fees: $77.50

Artist Net Profit: $222.50

Fee Proportion: 25.8%

Primary Sale Price: $200

Account Setup Fee: $70

OpenSea Fee: $5

Total Fees: $75

Artist Net Profit: $125

Fee Proportion: 37.5%

Primary Sale Price: $100

Account Setup Fee: $70

OpenSea Fee: $2.5

Total Fees: $72.50

Artist Net Profit: $27.50

Fee Proportion: 72.5%

MakersPlace

Minting an NFT requires gas fees.

Primary Sale: 15%

Primary Sale Price: $300

Minting Cost: $70

MakersPlace Fee: $45

Total Fees: $115

Artist Net Profit: $185

Fee Proportion: 38.3%

Primary Sale Price: $200

Minting Cost: $70

MakersPlace Fee: $30

Total Fees: $100

Artist Net Profit: $100

Fee Proportion: 50%

Primary Sale Price: $100

Minting Cost: $70

MakersPlace Fee: $15

Total Fees: $85

Artist Net Profit: $15

Fee Proportion: 85%