The NFT gold rush has brought some discomfort in the art industry. Some spammers and infringers are simply making bots or taking URLs of tweets and other digital content and posting it on NFT sites without permission from the author of the work. This is possible because literally, anyone can create an NFT for any file or digital object. Doing so is certainly a copyright infringement.
NFTs or non-fungible tokens first gained attention as part of the brief craze of the blockchain game CrypoKitties in 2017, which allowed users to, create, adopt, buy, collect and sell NFTs of digital versions of kitties. In the same year, the company Dapper Labs experimented with selling digital animated cartoons called “Cryptopunks” in the form of NFTs.
The market for collectible digital kittens and digital cartoons skyrocketed for certain rare collectible digital items and then declined rapidly, but NFTs remained and their use increased dramatically by 2021.
Another reason why NFTs have become popular is in the context of a series of million-dollar NFT sales that occurred in the first quarter of 2021. This includes the sale for $69.3 million dollars of the original Beeple artist’s work at the traditional Christie’s auction house. “Everydays: The First 5000 Days” was ranked as the third most expensive work of art ever sold by a living artist. The NFT consists of a digital collage of 5,000 works that the artist created over 5,000 days from May 2007 to January 2021.
Some cryptocurrency and art enthusiasts have pointed to the NFT technology as a game changer for the online commerce and art world. Other industries, from the NBA to sneaker manufacturers like NIKE, and food brands like Taco Bell, have also noted. Mark Cuban, the billionaire owner of an NBA franchise, for example, told USA Today that NFTs “could become one of the top three sources of revenue for the NBA in the next 10 years.”
On the other hand NFTs or non-fungible tokens also raise regulatory issues. Sellers, digital artists or creators and buyers, investors or collectors should be aware that these digital tokens may be subject to trade and compliance regulations, copyright law, anti-money laundering laws and other rules.
Because most NFT markets are based in the U.S, the buyer or seller of an NFT token can be anywhere in the world. Users of NFT markets should evaluate whether these digital art trading platforms comply not only with U.S. laws, but also with European Union or other global and regional laws.
Being a new digital asset class, the ownership of NFTs is much more complicated than one might imagine. This is because they seem to be disconnected from current regulatory systems. But when NFTs are joined with art, there are issues to be considered. So as a buyer or artist the first step is to understand the legal issues of the NFT ecosystem.
On the other hand, some believe that NFTs have the potential for copyright protection, others believe that NFTs themselves are copyrighted.
What are NFTs and how do they work?
NFT stands for non-fungible token, and is basically a digital file on a blockchain (Ethereum, Flow, or Wax) that shows who owns a unique collectible piece of art.
In theory, any digital content can be turned into an NFT: photographs, images, and other digital artwork, video clips, music, tweets, and even memes. On the other hand, NFTs are not fungible because, unlike cryptocurrencies such as Bitcoin (BTC) and Ether (ETH), non-fungible Tokens are not interchangeable with each other. Instead, NFT is a unique token. In other words each NFT has its own market and value although there may be multiple “copies” or “editions” of the same item available for sale.
The main difference between traditional works of art and digital works proven and sold using NFT technology is that the “work of art” must be a work of art created in a digital medium (such as the digital image collage like Beeple’s original work sold for $69.3 million) or a digital image representing a physical artwork (such as a fine art, painting or sculpture).
Nike for example has patented a system called “Cryptokicks” in which a customer purchases a virtual version of a physical shoe. In conclusion, an NFT or non-fungible token can be linked to a physical object or physical work, but not the object in question.
When someone “creates” or transforms a digital item into an NFT, they automatically create a digital token that contains a smart contract that resides on a blockchain, which means it cannot be edited or deleted. On the other hand, anyone can verify in real-time, the creator of the token, all transactions as well as the new owner of the token.
When you buy an NFT, you just own the same hash on the Ethereum blockchain with a transactional record and a hyperlink to the digital art file.
However, the ownership of an NFT is not very practical. When you buy an NFT for example, you do not own the copyright. On the other hand, when you own an NFT, you do not have the right to print or distribute a digital copy without the permission of the artist, creator, or copyright holder.
This means that any internet user can download the digital artwork or share it on social media, and the copyright owner or artist is free to continue to distribute it to the public.
Most NFTs are created on the Ethereum blockchain, although NFTs can also be minted or created on other blockchain systems and protocols such as Wax, Flow, Tezos, and Binance Smart Chain (for example, the NBA Top Shot platform is powered by the Flow blockchain).
Can NFT be pirated?
Even with legal advice, parameters or legal issues, fraud is inevitable.
Blockchain technology is designed to be a perfect tool when it comes to decentralization, as well as resolving or protecting copyright ownership issues and helping prove ownership of digital assets, products or digital creations.
NFT stands for “Non-Fungible Token.” In other words, an NFT is a token that is uniquely owned by an artist or the person who purchased it. This means that the digital token is unchangeable, but digital artwork or any digital content attached to the token can be copied, downloaded, distributed, or shared on the Internet.
However, the ownership of an NFT is recorded in a distributed ledger, usually the Ethereum blockchain, so the ownership of an NFT as well as the records can be viewed in real-time by anyone.
In conclusion, the NFT token is immutable, but the digital objects or digital files attached to the token can be shared on the internet by anyone.
Can you make an NFT with someone else’s art?
Making NFT material with someone else’s artwork is not the right thing to do, but many NFTs sold recently have been made with popular artwork, and comic book characters without the permission of the artist, graphic designer, content creator, or copyright holder.
The question of copyright ownership can become even more complex.
Possible claims and allegations can arise when artists, brands or companies that initially created a particular work on-demand or with a work contract with someone else then try to create digital works based on the original work using digital tokens or NFTs.
This happened last March when comic book publisher DC Comics warned its freelancers that intellectual property (IP) and characters owned by Marvel Comics were prohibited from selling NFTs.
Other artists have already made it clear on social media that their works were turned into NFTs and offered for sale on platforms without their permission.
On the other hand, the biggest NFT marketplaces have redoubled efforts to improve their approach on potential infringement (OpenSea for example, through the “Terms of Service” section on its website, invites artists or rights holders to submit complaints, and the OpenSea team states that the site “will remove works in response to formal claims of intellectual property (IP) infringement and terminate a user’s account to the platform Services if the user has deemed an infringer or is using someone else’s artwork, property or fake art. “).
A digital artist may express concern about materials or works that appear to be very similar to their creations, even if they are not exact copies. But this has nothing to do with infringement or abuse since a digital artist or graphic designer can do creative work using other freely accessible sources or images that an artisan has used in their work.
For example, an artist might use animations or videos from other existing artwork, or even use existing collages in another work. Determining whether or not such artworks transformed into NFT constitute fair use will require a “context-sensitive investigation or observation of the context at hand” of the legal fair use factors.
Can you make an NFT from copyrighted material?
Making NFTs and selling based on material you do not own the rights holder to is certainly a wrong thing and a violation. However, you cannot make a copyrighted NFT because auction sites sell only NFTs of original artist and artwork.
This is why NFT auction platforms have built into their systems DMCA (Digital Millennium Copyright Act) processes to remove unauthorized NFTs. However, this is only a drop in the ocean, as many new sites do not have clear guidelines, which allows people to create or tokenize digital content that they do not own. Other markets like Nifty Gateway, Foundation and SuperRare only do “NFT drops” of verified artists and works.
At first there were not many problems reported, considering that many people found NFTs useless, however, during late 2020 and early 2021, there were only purchases of original NFTs. On the other hand, artists and content creators can create derivative works based on their creations or products and sell them at the same time.
As with any financial and money market, where there is an opportunity for new business models, there are also scams, frauds and pyramid schemes, but it is not clear that NFTs have caused a significant change in the market. Where before the NFT craze and headlines were dominated only by established artists making big money from their artistic works, now during the hype we are seeing reports and concerns about copyright infringement.
Finally with this emerging technology, digital artworks can include smart contracts that can determine the rights of the buyer and the artist themselves – unlike traditional art sales – NFTs allow the creator or artist to receive a percentage of the resale of their NFT in the secondary market. Marketplaces, including Nifty Gateway, Rarible, SuperRare and OpenSea, allow primary sales and secondary sales of NFTs.
Is NFT bad for artists?
The growth of NFT technology in art has been fueled by its unique properties and attributes.
These digital tokens can allow artists and digital creators to better monetize their digital work by selling NFTs directly on online marketplaces without intermediaries. Direct access to a readily accessible digital art resale marketplace for everyone can also mean that artworks gain value quickly.
Unlike the marketplace for traditional art, fine art, and other classic collectible items, the artist can benefit from the increased value of their digital work by incorporating royalties into the smart contracts that accompany NFTs (for example, the Rarible and SuperRare platforms allow creators and artists to receive a 10% commission when art is traded on the secondary market).
For classical or contemporary artists, connecting their physical works or physical objects to the blockchain in the form of an NFT or non-fungible token can mean a secure, trackable, and verifiable way to sell art online.
A traditional artist can use NFT to create artificial scarcity, which means that they can create a new NFT to represent a physical art, meaning that the “ownership” of a digital artwork can be aligned or attached with the ownership of an existing work in the physical world.
One example of this is WePlay Collectibles, which are for people who want to be part of Esports events and show that they like players and talent in a different way, as well as merchandising. The WePlay Collectibles are part of a platform, where you can buy items with NFT technology – both digital and physical. They are rewards and items associated with a specific tournament.
Find more information about the platform and NFTs at weplaycollectibles