Non Fungible Tokens (NFTs) have exploded in popularity in the last year but what degree of solidity do they rest on? Are they the answer to the corrupt and broken commercial art world or do they only represent a dream that lacks substance? Let's poke around a bit...
NFTs are essentially crypto 'tokens' that are uniquely identifiable, meaning that they are not interchangeable in the same way that standard crypto coins are (e.g. Bitcoin or Hive). NFTs can be used to represent anything that we consider that it would be useful to represent on a blockchain, such as a physical object, an event, an offer or some kind of multimedia (art, photo, video or music).
This means that NFTs allow us to own and trade anything that can be expressed as digital information. We can also apply licensing terms to the NFT or other kinds of rules and logic, via smart contracts, that enable commercial features to be involved. For example, some NFT websites allow the original creator of the NFT to receive a cut of any sales that are made from the NFT in future, after it is originally sold from source by it's creator; essent-ally, meaning that all resales generate income forever!
So far, the biggest NFT websites, such as Rarible, Opensea, Maker's Place and Foundation tend to focus mainly on images, short animations and short videos. Some adventurous sellers have included extra bonuses along with the digital files too, such as event tickets or other special bonuses. For example, this item on Rarible combines free tickets and a few other perks too.
The Hive Blockchain also has it's own NFT markeplace in the form of NFT Showroom - currently growing nicely in the few months since it's launch, with a current Alexa.com ranking of 312,958.
Plenty of NFTs have sold for millions of US dollars and often under dubious circumstances. It is possible for money laundering and tax evasion to take place through the sale of wildly overpriced artworks, so next time you wonder why someone has paid $1 Million for a 50 pixel representation of a face that probably took 10 minutes to make - well, there's that!
None the less, artists such as 'Beeple' have sold NFTs for huge sums and their work is legitimately high quality.. So we have a combination of genuine commercial activity likely mixed in with some very dubious activity! This is essentially the same as with any commercial system of exchange, including Bitcoin and all fiat currencies such as US Dollars and UK pounds too.
A few sites are starting to offer music NFTs too, but none have really taken off yet to the same degree that visual art sites have.
Fun With the Gullible
The massive growth of NFTs has seen them collectively net Billions of US Dollars in sales in the last year and a half, yet there are some quite glaring challenges faced by NFT networks relating to copyright and them living up to their claim of being the ultimate form of record of ownership!
In many cases there isn't much stopping anyone from downloading an image from a website or some other source and then selling it as an NFT as if they own it. This means that there's a real chance of buyers paying for something that they cannot legally own or buy in the way that they believe they are when they pay. Larger NFT sites attempt to combat this by verifying sellers as best they can, but this does not guarantee that the sellers isn't breaching copyright of someone else when they create their work.
In a sense, these sites are facing the same kind of problem that record labels faced at the advent of music sampling being used in records. In theory, any revenues generated from sales of copyrighted material are forfeit and big fines can legally apply. Yet, as with the music industry, it seems that many artists and websites are happy to take the risk and gamble that they will not be caught or fined.
Breaches of copyright are one thing when someone is just selling one offs of a piece of art, but what if they are also claiming to sell rights of reproduction to allow others to sell merchandise or other kinds of rights? Then the problem can quickly spiral into a situation where huge profits are made by various people, some of whom think they are doing so legally - but in reality it is all illegal!
What is the answer to this?
As NFTs grow in popularity and become more and more common, the chances are that we will either see an increase in automated monitoring of artwork - perhaps leading to a government run repository of copyrighted creations that is easy/free to access and which any site can connect to in order to check copyright in realtime. Alternatively, we may see big sites employing very efficient legal teams to defend against a constant barrage of claims!
It may be that specialist agencies spring up to monitor rights specifically across NFT marketplaces.
Cross Chain Compatibility
On top of the copyright conundrum, there is a further issue of compatibility between marketplaces. In the real world, you can buy a piece of art and then sell it in a different auction house. NFTs generally don't allow this at present very easily. There are, however, several projects aiming to offer cross compatibility between NFTs, but who wins out will likely be down to which large NFT sites adopt the solutions first.
Protocols are also evolving to allow items in computer games to be moved between games! So you might earn or buy an item in Grand Theft Auto 10 and then still be able to use it in BurnOut 2035!
The Future of NFTs?
As with all digital technology, the future of NFTs is not just about technology, it is about our decisions, values, perceptions and creativity. The current problems with NFTs that arise from the inherent ease of duplication of digital assets may well be overcome with future fingerprinting technology, combined with legislation and human organisation. On the other hand, we may discover that actually, much of the NFT craze is just that - a craze - with serious collectors developing their own protocols for buying digital rights to high value items and everyone else losing interest.
At the very least, this massive boost of interest in creativity is motivating many people to try their hands at expressing themselves artistically in an attempt to get a piece of the action. Everything in life is creation in motion, so anything we can do to be more in tune with the creative impulse is inherently valuable in ways that go far beyond money!
What do you think? Are there any really key NFT projects, concepts or tech that I missed out? Would you prefer if we all just stuck to painting on cave walls with hands and blown ink? Let us know in the comments!
Wishing you well,
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