<Exploring the Intersection of Fundraising and NFTs for Nonprofits>
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Fundraising & NFTs
This article examines a theoretical case study on how art museums can utilize non-fungible tokens (NFTs) for fundraising.
NFTs have recently captured significant media attention within the tech sphere. What potential does this present for nonprofit and public sector fundraising?
First, I will provide a concise overview of NFTs, using art as a focal point, and share resources for further reading. Following that, I will present a hypothetical NFT fundraising scenario involving an art museum, chosen for its substantial profit potential in the NFT market.
A recent discussion I had revolved around a New York Times article titled "The World Knows Her as ‘Disaster Girl.’ She Just Made $500,000 Off the Meme." Artists and musicians expressed a range of responses: some were angered that a digital asset could eclipse traditional art in value, while others struggled to comprehend the appeal of NFTs. A few exhibited cautious curiosity about this emerging trend.
It's important to recognize that NFTs are a new concept, and the overall understanding of them remains low. While cryptocurrencies, blockchain technology, and digital content have existed for years, the notion of establishing digital originals is still gaining traction.
However, given the rapid growth of NFTs, overlooking this trend could result in lost opportunities for investors and organizations. Current statistics reveal that:
- The top ten crypto artists have collectively generated over $320 million in NFT art sales.
- The overall market value for NFT art is approximately $773 million.
- Most of this activity has occurred since early 2021. (Source: https://cryptoart.io/)
The NFT market is thriving, and it is time for organizations to consider the potential benefits.
Understanding NFTs
To begin, a digital asset is necessary, which can include anything from images to audio files. While these assets exist as files, more abstract digital concepts can also be turned into NFTs. For instance, Jack Dorsey sold his first tweet for $2.9 million.
In keeping with our art focus, I created a digital painting of my daughter’s dog, Lupin, as an example. Here it is:
This image illustrates the concept of a digital asset that is not yet an NFT. It already exists in multiple formats:
- It remains in my Photoshop file.
- It is displayed in the graphic posted here.
- It is cached on Medium.com, which holds copies across various locations for quick loading.
- It is temporarily stored on your device as you read this.
- Visitors can easily copy it if desired.
Once a digital artist shares their work online, it can replicate rapidly. This contrasts sharply with tangible art, where a physical painting exists as a single original (unless prints are made). The distinction between physical and digital art has traditionally been clear.
Enter NFTs, initially conceptualized in 2014 by tech innovator Anil Dash and artist Kevin McCoy, aimed at supporting artists. For those artists frustrated by the perception that NFTs prioritize investment over artistry, it's worth noting that their inception was intended to empower creators.
With an NFT, an artist can assert that THIS ONE specific copy is the official original. (For those versed in crypto, I simplify this for clarity; technical aspects of NFTs' storage can be complex.)
Converting Art into NFTs
This section will be brief, as the goal is not to serve as a comprehensive guide for minting NFTs. Numerous platforms allow users to create NFTs. Three prominent options include:
- OpenSea.io
- Mintable.app
- Rarible.com
These platforms enable buying, minting, and selling NFTs. Users must create an account, which can range from straightforward to quite complex for those unfamiliar with crypto. The process is generally user-friendly, though questions may arise along the way.
I have personally tested OpenSea and Mintable; both are similar, but Mintable offers a more intuitive user experience. I opted to use Mintable for simplicity in our example. Within minutes, I created and listed my NFT for sale. It appears as a typical e-commerce page, featuring a price of $1,000, and allows purchases via cryptocurrency or credit card.
Art Museum NFT Fundraising Scenario
Recently, I visited the St. Louis Art Museum and took photos of several artworks, including Van Gogh’s "Vineyards at Auvers," painted in June 1890, shortly before his death.
This painting is noted to be in the public domain on the museum's webpage. However, the photo used by the museum may not be public domain due to copyright complexities. A painting can be public domain, while the rights to photographs of it can vary.
If the painting is public domain, anyone can take their own photo and use it as they please—such as for book covers, fabric design, or framed prints.
What is the museum's value in this context?
The exciting aspect is that the museum can provide an official museum-sanctioned version of the NFT. Let’s compare two potential NFT scenarios for Van Gogh:
Scenario One: Bob Jones visits the museum, takes a similar photo, and creates a "Van Gogh NFT" priced at .25 ETH (around $1,000).
Value of Scenario One: Essentially none. Bob Jones adds no unique value; anyone could create this.
Scenario Two: The museum creates an official, authorized version of the painting. This NFT could include enhancements that only the museum could provide. Some possibilities include:
- Bundling the NFT with real-world benefits such as lifetime passes, event tickets, or merchandise.
- Incorporating it into the museum's online database, showcasing it on the painting's webpage.
Imagine if the NFT included additional features, or even physical displays in the museum next to the painting, celebrating significant sales milestones.
These ideas are limited only by the creativity of the teams involved in bringing them to fruition. Integrating the NFT into the museum's database could gamify fundraising, creating a quest for collectors interested in securing unique digital assets.
Engaging New Donors
While I have not served on a museum board, I have experience on the board of the Pittsburgh Botanic Garden, where donor cultivation was a key topic.
This NFT initiative could help cultivate a new, potentially younger demographic of donors. Many tech-savvy individuals possess significant cryptocurrency wealth and are eager to invest in innovative projects. Although they cannot own a real Van Gogh, owning a museum-issued NFT could be appealing.
Unprecedented Publicity
For museums, garnering media attention can be challenging. However, an NFT fundraising initiative could generate international headlines, especially since no museums have undertaken such efforts yet. Boards often prefer to avoid leading in untested waters, balancing the potential for significant financial and PR gains against the risks involved.
Ongoing Fundraising Opportunities
NFTs also present the possibility of earning royalties. When minting an NFT, the original creator’s identity is recorded on the blockchain, allowing for stipulations on future sales that benefit the original artist. This was one of the foundational ideas behind NFTs.
When pricing NFTs, various methods can be employed—auctions, set prices, etc. Suppose the museum holds an auction for the official NFT of the Van Gogh painting with a minimum bid of $10,000.
Even if it sells for that amount, the NFT remains in circulation, with resale opportunities for future collectors. Should the NFT be resold for a higher value, the museum could receive a percentage of that sale.
Art-World NFT News
- Via Artnet (March 10, 2021): “The Surging Demand for Digital Collectibles Could Offer a Lifeline for Cash-Strapped Museums — Here’s How.”
- Via Fortune (April 13, 2021): “Crypto millionaires’ love of NFTs is a boon for the aging art market — but galleries may miss out.”
- Via Artnet (March 22, 2021): “A Collective Made NFTs of Masterpieces Without Telling the Museums That Owned the Originals. Was It a Digital Art Heist or Fair Game?”
- Via MuseumNext (March 13, 2021): “NFT 'Art Heist' sees famous artworks sold online.”
Proposed Next Steps for Art Museums: Discovery
The entirety of this article aims to provide a foundational vision of available opportunities. While I used a single Van Gogh painting as an example, many NFTs could be offered during an organized fundraising event.
To determine the feasibility of such an initiative, a discovery project is essential. This study would address various questions that will inevitably arise during the planning process. Below are some considerations for different teams:
- EXECUTIVE & BOARD: Is this initiative worthwhile? What are realistic financial goals? What might the funds support? Who will manage this project?
- LEGAL and IP: Are there copyright concerns, even for public-domain works? What legal policies need to be in place?
- FINANCE: How will payments be processed? What financial controls are needed? Can the museum hold cryptocurrency?
- TECH: What platform will be used for minting and selling? What payment policies must be implemented?
- MARKETING & DEVELOPMENT: What will the NFTs look like? What real-world benefits can be offered? What kind of event could accompany the launch?
- PR and COMMUNICATIONS: How to address concerns about crypto? How will results be communicated to the public?
- OVERALL PROJECT MANAGEMENT: Who will lead this initiative?
These questions require thoughtful consideration. If you’re interested in exploring these possibilities further, I’m available to assist.
Jim Dee is a writer, developer, and multimedia creator based in Portland. More about him and his work can be found at JPD3.com. Thank you for reading!