Non-Fungible Tokens: how blockchain technology is breaking the norms of the art industry

Since last month, ‘Non-Fungible Tokens’ (NFTs) have become a trend of an inherently controversial nature, the prolongations of which are far exceeding the traditional boundaries of the art world, raising legal concerns and observations that are relevant for the commercial and tech industries.


gif

One may, thus, recall the digital illustration of a flying rainbow cat, the ‘Nyan Cat’, a ‘GIF’ which was recently sold for 590.000 US dollars. It is noteworthy, that although this GIF had already been duplicated ‘in millions of identical copies’, it was sold at such a price, simply because the buyer could get an indisputable certificate affirming its authenticity because it is registered (and it will forever be) on a blockchain.[1]


‘Crypto art’ is, no doubt, ‘a thing’, and it has been with us for quite some time. Already, numerous ‘digital marketplaces’ have emerged, transcending even the boundaries of cryptocurrency by accommodating sales through credit card, and become dedicated forums accommodating transactions of ‘digital art’ and anything that might fall under this bracket, including other imagery such as GIFs, stickers, memes, etc.[2]


Auction Houses are also following the trend, and it is intriguing (just not to say shocking), that a digital artwork by an artist with the pseudonym ‘Beeple’ – ‘a collage of 5000 art pieces [(thumbnails)] in JPG form’ titled ‘Everydays: The first 5000 Days’ - was sold at auction in March 2021 for 69.300.000 US dollars.[3]


The above may sound absurd, not only for the sums paid, as establishing ownership (not copyright or any other IP right) over ‘digital assets’, i.e. a digital piece of art or other illustrations that can be easily reproduced digitally, seems utopic. NFTs, however, are aiming at changing the status quo as registering digital art on blockchain confers online content creators recognition and ‘a way to directly profit off of work that has otherwise spread freely across the web’.[4]


Within this spectrum, it is noteworthy to mention that the painting of Leonardo Da Vinci titled Salvador Mundi, which was sold at auction in 2017 for 450.000.000 US dollars, has an NFT counterpart too, titled Salvador Metaversi.[5] From the prices paid for NFTs, one can clearly see that the ‘frenzy’ shown for art and its ‘transformation’ as an asset for investment keeps growing, even for art and other imagery in digital form. Along with the criticisms over the overcommercialisation of art, the astronomic sums paid for NFTs which on many occasions have been described as of doubtful artistic quality are further fuelling this debate.


But first, what are we talking about?


NFTs are digital entries – tokens - that are entered on a blockchain like other cryptocurrencies. The difference with NFTs is that unlike bitcoins which are described as ‘fungible’: all coins are the same and of equal value; NFTs are ‘unique’ and attract a variable degree of financial value. The most important element about NFTs is their authenticity, as their ‘entry’ on blockchain makes them ‘unquestionably authentic.’[6] The shared ledger of blockchain means that the issuing of NFTs renders the ‘deposited’ digital imagery part of a transparent permanent public record, which affirms the work’s provenance and authenticity, as all the information that is stored there cannot be deleted or adjusted.[7]


The argument becomes even more prevalent when dealing with digital assets. Put simply, as anything digital, i.e. a digital photograph, can be easily copied and reproduced flawlessly, NFTs step in to incentivise the copyright holder/owner to register/store their work on blockchain to receive an NFT, whereby ‘proving […] [to the public that they hold] the one-and-only “original”’.[8] In effect, NFTs encourage the designation of an ‘official copy of a piece of digital media’ so the author can profit from it, as it would otherwise circulate freely or cheaply on the internet across several platforms. This newly acclaimed method of ‘digitally selling and buying’ affords the buyer an ‘unerasable ownership record’ of the asset in question.


NFTs are attractive for contemporary artists because they directly accommodate returns upon consecutive sales of their work. This is important as artists have traditionally struggled to receive revenue upon resales, through which their artworks usually increased significantly in value. This mirrors the ‘Artists Resale Right’, which similarly allows a fraction of any consecutive sale of an artwork to be given to the artist. But NFTs are more than that. In the words of Robert Alice, an artist who sold an NFT for 131.250 US dollars, ‘NFTs are the single biggest reorientation of power and control back into the hands of the artist…’.[9]


NFTs and Intellectual Property Rights


Owning digital art does not mean that one exclusively ‘owns’ and ‘possesses’ the digital artwork because digital imagery is ‘endlessly reproducible’.[10] Such artworks, are usually accompanied by licenses that regulate the use and display of the work itself. The artist of any digital work, just like in any physical work, as the copyright holder reserves all their intellectual property rights to protect their work, including the right to object any treatment that he/she deems derogatory.


Within this spectrum, one cannot dismiss the likelihood of individuals who might act dishonestly by registering as NFTs the copyrighted works of third parties as their own, when in fact they have no such rights whatsoever, i.e. they did not even purchase the work. To avoid such issues, many online platforms ask the ‘creators to affirm that any images they are uploading don't infringe on others' intellectual property rights.’[11] In case of, i.e. copyright infringement, the allegedly infringing ‘item’ is taken down.


But NFTs have taken a kind of a radical turn. How? Just hear this: A Banksy artwork was burnt just to make its way to the digital NFTs realm. Reportedly, a representative of the people behind the ‘BurnBanksy’ act stated:


“If you were to have the NFT and the physical piece, the value would be primarily in the physical piece. By removing the physical piece from existence and only having the NFT, we can ensure that the NFT, due to the smart contract ability of the blockchain, will ensure that no one can alter the piece and it is the true piece that exists in the world. By doing this, the value of the physical piece will then be moved onto the NFT.”[12]


One cannot help but wonder whether there has been copyright infringement because of the artwork’s reproduction as an NFT, and derogatory treatment because it was burnt. Clearly, if Banksy agreed to it, either directly or indirectly by transferring his copyright to them, then he has no claim. But if he retains copyright over the work then he may very well sue them for unauthorised reproduction and derogatory treatment of his artwork. As Carolyn Toto observes, ‘if Banksy’s own prior conduct is any indication, this author is inclined to believe he approves’.[13]


Aside from the controversies, NFTs can indeed be beneficial for digital artists/authors, etc., to ensure they profit from their work whilst maintaining recognition and avoiding instances of third parties abusing their rights. Even though NFTs are mostly for digital articles, they could encompass physical items, i.e. artefacts, serving as ‘digital records of ownership’, providing transparency in art transactions. This is important for the troubling and largely unregulated art industry, as it provides a solution that could efficiently wither away a large proportion of the problems it is currently facing.


While there is an increasing interest in this new digital art market, buyers should be cautious that ‘the excitement around NFTs could easily fizzle out’[14], as the public may soon lose its interest, especially if the flooding market leads to its assets’ sudden devaluation.


But, as this digital market is currently in full swing, it is not just digital art that has been registered as NFTs and sold for ‘eye popping prices’, but also ‘digital music’. D.J. 3LAU sold unreleased songs as NFTs and received revenues worth more than 1.100.000 US dollars. He is also planning to release a full digital music album as an NFT.[15] While copyright is clearly retained by the D.J., his fans were more than willing to buy the original songs and receive the respective NFT.


At this point, it seems that NFTs have taken the digital world by storm, whilst exhibiting an all-expansive reach which is, in turn, raising controversies to the already controversially susceptible infrastructure of the art industry.





Endnotes

[1] Blake Kopnig, 'The NFT craze encapsulates the absurdity of the art world—and its obsession with authenticity' (The Art Newspaper, 1 March 2021) ? [2] Jacob Kastrenakes 'Nyan Cat is being sold as a one-of-a-kind piece of crypto art' (The Verge, 18 February 2021) [3] Phoebe Sennett, 'Non-Fungible Tokens: Latest Fad or the Future of Art?' (London Young Professionals)

[4] Kastranakes (n2) [5] Gareth Harris, 'Leonardo da Vinci’s Salvator Mundi—the world's most expensive work of art—to be turned into an NFT' (The Art Newspaper, 1 April 2021) [6] Abram Brown, 'What Is An NFT—And Should You Buy One?' (Forbes, 26 February 2021) [7] Erin Griffith, 'Why an Animated Flying Cat With a Pop-Tart Body Sold for Almost $600,000' (The New York Times, 22 February 2021) [8] Brown (n6) [9] Brown (n6) [10] Kastreankes (n2) [11] Megan E. Noh, ‘Noh Opines Issues Raised by NFT Rise' (Pryor Cashman, 2 April 2021) [12] Anny Shaw, '‘Art enthusiasts’ burn a Banksy print then sell it as an NFT' (The Art Newspaper, 4 March 2021) [13] Carolyn S. Toto, 'Fungible Banksy: NFTs, Copyright and Digital Art Collide with the Burning of Morons' (Pillsbury, 8 March 2021) [14] Griffith (n7) [15] Griffith (n7)

Recent Posts

See All