One of the most popular purposes for non-fungible tokens (NFTs) is to collect interesting and unique digital art.
Art Blocks is one platform using this interest to offer access to generative, on-demand digital art. If you’re interested in NFT art, this might be the platform for you.
Let’s take a look at Art Blocks, how it works, and what you need to know if you want to invest in NFTs through this platform.
What Is The Art Blocks Platform?
Art Blocks was founded by an artist that goes by the name "Snowfro." Inspired as a collector of CryptoPunks, he set up his own platform on the Ethereum blockchain for generative art.
The Art Blocks project focuses on a type of collectible that deals with randomly-generated attributes. Digital artists can use a generative algorithm to create art. An artist makes a “drop” using a generative script. Then, a collector can “mint” a piece of artwork through a purchase (made with ether). The script generates a unique piece of digital artwork as an NFT.
Basically, Art Blocks is like being able to commission a piece of art from a digital artist. Later, it’s possible to sell the NFT on the secondary market. Some pieces of art generated from Art Blocks have sold for millions of dollars on markets like OpenSea.
It’s important to note that licensing is part of Art Blocks projects. In some cases, you may receive a fully unrestricted license, but other artists may only license the piece for personal use. Carefully consider how you want to use your artwork before you make your purchase.
Art Blocks Curated
The Art Blocks platform is based on having three different tiers of artists and releases. The top tier is called Art Blocks Curated. These curated collections are arranged in series and must be approved by the Art Blocks curation board. Artists and collaborators can submit their artwork and script for approval.
Once a series is approved, it’s dropped on the Art Blocks platform. Each set has an approved maximum number of iterations. So, once enough people have minted something by an artist in the series, there are no more new works in that set.
Because of the limited nature of the drops, many people try to be first when a drop takes place. You can find out more about when a drop is likely to happen by following the Art Blocks Twitter account or joining the Art Blocks Discord server.
Art Blocks Artist Playground
While the Curated works are considered part of an official Art Blocks collection, there are other opportunities for artists to create drops and experiment with their digital art.
The Artist Playground is exclusively for artists that have been featured in the Curated collection. Here, artists can also experiment further with on-chain art.
If you miss out on a drop as part of the Curated Art Blocks, you could potentially purchase some unique artwork by going through the Playground. Once again, after you purchase the NFT, you'll have the option to keep it or to sell it on the secondary market.
Art Blocks Factory
Rather than waiting to be accepted as one of the Curated Art Blocks artists, it’s possible to launch your collection in the Factory. You’ll use your script to offer different versions of your generated art and people can buy it.
The NFTs aren’t always as valuable when they come from the Factory, but they can still be interesting. And some Art Blocks Factory NFTs sell for tens of thousands of dollars.
How Much Are Art Blocks NFTs Worth?
As with any asset — and especially with art and other collectibles — Art Blocks are only worth what someone is willing to pay for it. In general, art released as part of the Curated Art Blocks collection will fetch higher prices than those released from the Artist Playground or from the Factory.
One example from the Curated collection, Chromie Squiggle #3784 from Snowfro, sold for the equivalent of about $2 million in August 2021. When buying something from Art Blocks on the secondary market, the floor price is often in the thousands of dollars, no matter which type of project it comes from.
How To Buy Art Blocks Pieces
There are two ways to buy Art Blocks: through an initial drop or on the secondary market. You’re likely to get a better price if you’re able to buy through an initial drop.
NFT art continues to rise in price, especially for rare and unique tokens. So if you want to buy on the secondary market, you might have to pay more.
Buying Art Blocks NFTs During Initial Drops
In order to mint your own NFT from a particular Art Blocks project, you need to have Metamask as a browser extension. Start by installing Metamask if you don’t already have it. When you have Metamask connected to Art Blocks, you’ll be able to see a purchase button next to available projects.
Remember: many artists limit the number of iterations available from their script. If a project has reached its iteration limit, you won’t see a purchase button.
If there’s still availability, you can use the purchase button, and then the transaction will pop up. You’ll see your purchase price and the gas fees involved. Once you confirm, the transaction will be completed and the NFT will be sent to your wallet.
Buying Art Blocks NFTs On The Secondary Market
If you want to purchase something from a collection that’s already reached its iteration limit, you can check to see if there’s something on the secondary market. Many of the Art Blocks tokens are sold on OpenSea.
Even if something isn’t listed for sale, you can make an offer. Pay attention to the price history, though. In many cases, an owner isn’t likely to sell their NFT artwork to you if you offer less than they paid for it.
If you have an OpenSea account and a connected wallet, buying the NFT of your choice is as simple as making the offer or completing the purchase. As long as you have enough ether in your wallet to cover the purchase price and gas fees, you should be able to carry out the transaction
Taxes Consequences Of NFTs
It’s important to note that there are likely tax consequences associated with purchasing (and later selling) Art Blocks NFTs.
First of all, whenever you use cryptocurrency to buy something, you create a taxable event. For example, let’s say you bought 10 ether for $500. Now, you’re buying something from an Art Block collection for six ETH. However, ether is now worth closer to $3,000. Your original ETH has a cost basis of $3,000 (6 x $500), but now it’s worth $18,000 (6 x $3,000). You’ve got a capital gain of $15,000.
Because you’ve likely held that ETH for more than a year, you’ll probably pay the long-term capital gains rate — but you’re still paying taxes.
Later, if you sell the Art Blocks NFT for more than you bought it for, you’ll be taxed on any potential gain. The IRS hasn’t issued any guidance about NFTs like it has for cryptocurrency. But there's speculation that NFTs will be treated as collectibles and taxed at the appropriate collectible capital gains rate.
Pros & Cons Of The Art Blocks Platform
Should You Invest In Art Blocks NFTs?
Before you invest in any asset, it’s important to consider your financial goals and your portfolio strategy. Crypto assets offer new and interesting opportunities to diversify your portfolio and even help you create wealth.
However, assets like cryptocurrencies and NFTs are new and untested. As always, only invest what you can afford to lose. And be prepared for a wild ride as these new assets continue to be integrated into the investing landscape.
Miranda Marquit, MBA, has been covering personal finance, investing and business topics for more than 15 years, and covering crypto topics for more than 10 years. She has contributed to numerous outlets, including NPR, Marketwatch, U.S. News & World Report and HuffPost. She is an avid podcaster, co-hosting the podcast at Money Talks News. Miranda lives in Idaho, where she enjoys spending time with her son playing board games, travel and the outdoors.