NFTs have arrived!
Blockchain technology and non-fungible tokens (NFTs) are bringing blockchain and art together and it’s a great match. When people first hear about Non-Fungible Tokens (NFTs) they’re often surprised to find that they’re related to the arts. But this form of cryptocurrency is a great way to monetize an art portfolio, and gives the buyer ownership of the art through the blockchain token.
Virtual products such as digital art are fast growing if not more popular than their physical counterparts. Talk to a true believer and you come away with the feeling that digital artworks have become valuable in their own right. Regardless of whether the digital art is purchased for personal enjoyment, to be exhibited in galleries or sold to investors, the monetary value of the art is undeniable. After all, beauty lies in the eyes of the beholder.
Read on as we tackle this fun, exciting topic of non-fungible tokens!
NFTs Cut Out the Middleman
Using NFTs is a brand new innovation that will help many artists by giving them a way to sell their art without the need for a middleman. Non-fungible tokens, a revolutionary way to store and sell digital items, including art, allows artists to transact directly with their buyers.
In addition, NFTs make it possible for artists to monetize their digital artwork in new ways never seen before, using cutting-edge blockchain technology. With NFTs, artists get the ability to sell any one of their digital pieces and not just a series of works. Art works can be unique, one-of-ones, or limited editions with a number of tokens representing the same art.
Fractional Ownership of Art through NFTs?
There is also fractionalization of artwork, i.e. turning artwork into fractions, each of which is represented by a single token. Buyers can choose how many fractions of an artwork they wish to support. They’re a way to take an artwork that might be too costly to sell, and turn it into something that the average person can afford to purchase. Artists can monetize their art using blockchain by attaching their work to the blockchain, which has proven to be a success for many different types of media.
NFTs provide Verifiability through Blockchain
These tokens are also beneficial because they can be used to verify authenticity. In the world of digital art, copy-and-paste artists are aplenty, lurking in the dark corners of the web, passing off the works of others as their own. In the digital art world, unsuspecting buyers who purchase art for the first time, often find that they had purchased fake art, sold by an anonymous scammer.
Now, non-fungible tokens are a great way to give value to an artist’s art work that has rarely been seen before – verifiable, traceable, provable, and transparent. Every transaction is verifiable, right from the minting (provenance) up to the sale and sub-sale of it, with the full glorious details of the selling price. Artists are now able to catalogue their NFTs within “collections” – essentially pages listing all NFTs belonging to the same theme – and allow buyers to view the entire catalogue with confidence.
Dangers for NFT Buyers
Art is one of the most traded commodities in the world, but buyers are often at risk without protection. Buyers need to be careful when buying NFT art. This is because the artwork relies on the blockchain for authentication, meaning that if the person is not buying authentic NFT artwork, then they are at risk of being sold counterfeit goods. And because blockchain transactions are final, there is often no recourse to reverse the transaction – meaning, the buyer will be left with a dud.
In time, there will be apps available to help buyers make sure they are buying authentic NFTs. Apps will be able to list down the authenticated, KYC’d accounts of NFT artists to help guide buyers to genuine sellers. With NFT prices hitting six and seven figures, buyers need to ensure that they avoid buying from scammers. And NFT artists also need to avoid getting scammed by scammers.
Eventually, technology will be able to catch up. Using forensic tools, artists and other stakeholders in the NFT space can (and will eventually be able to) identify criminals who infringe their NFT copyrights by selling fake artwork. There are still no known cases where a fake artist i.e. scammer has been sued by a victim, but this may happen in time.
There are many risks involved when buying NFT artwork, mostly on account of the fact that it can be difficult to identify a fake from an original. And for the artist who becomes popular, there will be many scammers looking to take advantage of his popularity in any way they can. From offering to giveaway an expensive NFT artwork to a lucky follower (considered a mild scam), to tricking NFT artists into revealing their Metamask and thereafter losing their crypto wallet, and all their artwork contained within (considered evil), the dangers are out there.
There are, of course, legal implications to NFT art, and for the NFT artist. NFTs are still a new form of art. NFT art may represent a valuable piece that will appreciate in value over time. But there will be those which never live up to their expectation. And there will be disappointed NFT buyers. What rights do NFT artists have, and what rights do NFT buyers have? We hope that we can explore the issues in due course.
What is clear is, virtual products such as digital art are protected by property laws and regulations. This means that the artist who created the product, and who has made it available for purchase, is protected by copyright regulations, and is also rightfully entitled to sell them according to contractual terms as they choose. This may include the right to a percentage of the resale price of such NFTs, more commonly known as “royalties”.
There are also emerging copyright issues in this space. A short list may include, whether or not the buyer of a digital artwork, in the form of an NFT, has the right to reproduce the work in physical form, or in digital form? And whether or not it includes the right to sell such reproductions? And even whether the buyer has the right to create derivative works from such digital art. These questions are exciting for both the producer of the digital artwork, as well as for the buyer.
Thanks for reading!
This article has been prepared for informational purposes only. Please do not consider it legal advice. If you are interested to seek advice on NFTs, art, copyright, or anything similar, please consider reaching out to a lawyer for advice — maybe even our firm. We’re bullish on NFTs and its potential for the future, but we also ask that you do not consider this article as financial or investment advice.
Also: Part of the copy for this article has been generated by artificial intelligence and subsequently edited by a human editor.
Also: We give thanks to Mr. Ivan Samkov for providing his artwork for free of charge under Creative Commons license.