If there was a contest for the acronym of the year, 'NFT' would clearly be the favorite for 2021. Abbreviation for non-fungible tokens, NFTs are having a moment when fans struggle to “own” pieces of digital art or “instants” of pop culture.
Although many people are perplexed by the trend, no one can deny that it has been profitable. In recent weeks, buyers have deposited millions of dollars to purchase NFTs issued by artists such as Beeple and Grimes.
But along with money and exaggeration, the NFT craze has sparked a debate about what it means to own digital property and what the role of copyright on the Internet. Some suggest that NFTs can ease long-standing tensions between creators and technology platforms, while others point out that the trend has already given rise to new forms of piracy and fraud.
What exactly are people buying?
NFTs are not new. They have been around since 2017, when a company called Dapper Labs started selling NFTs in the form of exclusive digital cartoons of cats called CryptoKitties. These kittens became a craze in a short time, and some were sold for tens of thousands of dollars before fashion quickly failed. Now, in 2021, NFTs have returned strongly, as the phenomenon has expanded far beyond digital cats.
Today, the variety of NFTs for sale includes almost everything that can be captured as a digital file. Kings of Leon, for example, have released NFT versions of their new music album, while the NBA is selling memorable moments from NFT basketball games. An original work by street artist Banksy was burned and turned into an NFT. And last week, the NFT offer for Twitter founder Jack Dorsey's first tweet reached $ 2 million.
All of which begs the question: what are people buying? After all, any of these NFT artifacts can be easily copied – legally or not – by anyone with an Internet connection and basic software familiarity. Why pay to “own” Jack Dorsey's tweet when you can print or embed the same tweet on a website?
NFT enthusiasts will say that the artifact they bought may look (or sound) identical to copies on the Internet, but its version comes with a unique certificate of ownership. That certificate is inscribed on a blockchain to create a forgery-proof transaction record to show the world that the artwork – or music or sports highlight – belongs to someone. Think of it as a serial number or an artist signature.
What this means, at least for NFT enthusiasts, is that they have something unique. Just as an original painting signed by a famous artist is worth millions, although thousands of college students record the same image in their dormitory, NFT owners claim that their digital work of art is "real".
However, NFT owners may be surprised to find that what they “own” is very limited.
As law professors like to tell their students, property is like a ‘bundle of kindling’. Each stick in the package represents the right to do something, such as the right to sell the piece of property, plant it or destroy it, and so on. This is certainly true for copyrights, which contain more sticks in their package – such as the right to transmit and market an image – than many people realize.
In the case of sports leagues and music groups, lawyers are working hard to ensure that their clients retain most of the ownership of the copyright package. For fans, what they receive when purchasing an NFT is a license that allows them to do little more than display or transfer the work. Buyers of NBA-issued NFTs – called “Moments” – cannot, for example, modify the moment they buy or display it in a way that the league considers hateful or offensive.
Some of these limits go beyond those that accompany possession of a physical package of sports cards. In the case of these physical cards – which the NBA likes to invoke as a comparison to the NFTs – the owner is free to draw mustaches on players or stick the card in a controversial collage. This may not be the case with NFTs. One can imagine a situation in which pro-democracy activists use their NFTs to draw attention to the NBA's attempts to please China, and the league responds by excluding NFTs.
Of course, there are also limits to what you can do with a physical card. The intellectual property rights of sports leagues mean that you cannot replicate the card images to a t-shirt company, but the rights are certainly broader than those assigned to those NFTs.
A new form of ownership brings new forms of piracy
Tonya Evans, an intellectual property scholar at Penn State Dickinson Law, a rights scholar in Pennsylvania (USA), studies blockchains and NFTs and wrote an influential 2018 article on the CryptoKitties phenomenon. She believes that NFTs offer an important new way for creators to connect and earn money from their fans.
She notes that several black artists have been at the forefront of the NFT craze, using forums like the new Clubhouse social media audio app to market and sell their work. Evans says the technology underlying NFT provides a way to neutralize the Internet's ability to replicate infinitely and allows artists to prove that a digital work is unique.
"You can code for the integrity of the work," said Evans. "Technology has threatened the music industry, allowing anyone to make a perfect digital copy of the original, and now perhaps NFT is the technology that can cure that."
Evans is right to say that NFT technology offers new opportunities for creators. It's not just prominent artists like Grimes or Beeple who are making real money selling NFTs. Lesser-known artists, who are using platforms like Nifty Gateway and OpenSea to sell limited edition prints of sneakers and speakers, also benefit. In this sense, NFTs represent a new 'tap' of money that did not exist before.
But, like everything on the Internet that makes money, the NFT craze has attracted parasitic evildoers looking to profit from other people's work. It happened with an artist who creates digital images under the name of Weird Undead. She discovered that someone stole her images and sold them as NFTs:
In the past week, Weird Undead (who asked Decrypt not to use his real name) presented a flurry of legal notices at OpenSea – one of the biggest NFT markets – while his fans have been doing the same to stop what she calls “breach of insane and useless copyright ”. She also found that imitators have used a service called Tokenized Tweets to create and sell tweets based on their work and asked to stop.
Meanwhile, influential figures in the cryptocurrency industry, including CoinShares strategy director Meltem Demirors, and Coin Center communications director Neeraj Agrawal, complained about random people repackaging their tweets as tokens for sale:
'Street vendors' taking other people's tokens to sell – without authorization – are only part of the emerging piracy problems surrounding NFTs. A more serious problem is the emergence of competing blockchain services, each of which promises to provide the official record that a particular NFT is unique. The situation is similar to a city with two competing services to register property titles, or two auction houses, each claiming to have the legitimate title of a work of art. This is a major problem for the nascent NFT industry, which is betting its existence on being able to prove that a given token is unique.
So far, the main NFT markets are cooperating, with each one agreeing to recognize a token as unique, even when it moves from one forum to another. But that didn't stop Binance's blockchain users from hosting fake token stores on the network, which not only sold plagiarized works, but also clearly imitated the names of the existing Ethereum-based NFT store stores. Some examples of imitations are "Binance Punks" for "Crypto Punks and" Bashmasks "for" Hashmasks ".
Although trademark and copyright laws offer a remedy for theft, it is likely to be difficult for artists to find and prosecute an offender, since blockchains, by their nature, are designed to be decentralized and borderless. That would explain why some people upset about the recent behavior of the Binance network have resorted to non-legal measures to express their discontent – including posting images of the Tiananmen Square massacre (Tiananmen) on the company's Chinese blockchain.
These disputes raise the question of whether NFTs are just the last headache for creators trying to make a living from their work. But while NFTs can be a nuisance, some are optimistic that these problems will be overcome by the potential for artists to earn a new source of income – and that NFTs can reshape the way we view copyright and the Internet.
A breakthrough in the copyright debate?
Since consumers began using the Internet en masse in the mid-1990s, the network has been a mixed blessing for artists, writers and other creators. If, on the one hand, the web offers a huge new platform to reach fans and find new audiences, on the other it is flooded with pirates who copy an artist's work and sell or give it away for free. Meanwhile, giant tech platforms like Amazon and Spotify have come to enjoy virtual monopolies when it comes to selling digital works and, in the opinion of critics, have failed to pay a fair share to artists.
All of this has led to two decades of debate over copyright policy. The debate is often bitter with the entertainment industry accusing technology enthusiasts of supporting piracy and stealing artists – while opponents accuse the industry of lobbying Congress to pass copyright laws that they consider draconian and subject to abuse.
The rise of NFTs may help to transcend this debate, according to Aaron Wright, a blockchain expert at Cardozo Law School in New York (USA).
"I think the Internet has long offered massive media distribution, but there is no monetization scheme that works very well," he said, adding that NFTs help to correct this deficiency.
Specifically, Wright points out that NFTs finally offer a way for artists to sell digital versions of their works that are scarce and exclusive. This scarcity means that they can not only enjoy a new revenue stream, but also have a 'piece' of a resold NFT – an agreement that platforms like the Winklevoss-owned Nifty Gateway help facilitate.
From a broader perspective, Wright says that artists' ability to sell NFTs may take some of the grudge out of the copyright debate as the online distribution business model shifts from trying to sell as many copies as possible to selling less items for more money for dedicated fans.
Wright is not the only one who sees a change in the way creators are trying to make money from the Internet. In recent weeks, venture capitalists and technology watchers have shared an influential essay called “1000 True Fans”, in which Wired editor Kevin Kelly predicted that the future of the creative industries would revolve around artists who would sell their work to small communities passionate supporters. The rehearsal is from a decade ago, but with the arrival of the NFTs, Kelly's prediction seems to be coming true.
In related content, technology writer Will Oremus says an increasing number of Internet users have become exhausted by mega-platforms like Facebook, which rely on algorithms to show a steady stream of emotional or sensational content. He says they are turning to smaller forums like SubStack or Clubhouse, where "Super Fans" can connect in a more intimate community. If Oremus is right, the growth of these communities will offer creators new opportunities to make money from the Internet – including NFTs.
Of course, these optimistic scenarios will depend on NFTs proving that they are more than a fad. And many people are skeptical about this case. These skeptics include Litecoin creator Charlie Lee, a prominent cryptocurrency entrepreneur who threw cold water at the NFTs last week:
Lee's tweet highlights how the future success of NFTs depends on persuading a critical mass of people that they are worth having and that they will maintain their value in the future. Critics may point to the 1990s Beanie Babies phenomenon, when people paid hundreds or thousands of dollars for $ 10 worth of stuffed collectibles, just to see the market crash and never recover.
On the other hand, each day of 2021 brought new evidence that people think NFTs are valuable and will pay good money to have one.
The most recent example? This week, a bidder from the auction house Christie’s paid $ 69.3 million to own an NFT work of art from Beeple. It was the third biggest sale by a living artist to date.
* Translated and edited with authorization from Decrypt.co