An article by Adi Robertson at The Verge looks at a recent study by The Galaxy, which examines the top 25 most valuable NFT projects and examines what the buyer is obtaining in terms of copyright or other intellectual property rights.
The answer is, quite simply, not much. According to the study, only one in 25 even attempts to transfer copyright ownership with the purchase of the NFT and even that may be ineffective.
The “vast majority” of NFT projects did not attempt to convey any ownership of intellectual property rights. In those that did, the language was often confusing and, even when the language was clear, it’s still unclear how those transfers would hold up in court.
In that regard, The Galaxy study mirrors one by Cornell University and the Initiative for CryptoCurrencies and Contracts that was published in January. Simply put, the legal issues of copyright ownership are complicated even under the best of circumstances, and NFTs are far from the best of circumstances. This may explain why most NFT projects aren’t even attempting to spell out those rights.
Though there are definitely ways that NFTs and blockchain technology can be useful for handling copyright issues, especially in countries where copyright registration is not required, it should not shock anyone that NFTs, as they exist today, aren’t the path.
However, from the perspective of NFT sellers, this isn’t a bug, it’s a feature. NFTs were never meant to address copyright issues, they had a different purpose altogether.
Scarcity, Not Copyright
As I said in my post earlier this month, blockchain technology has a long history of being a solution looking for a problem to solve. To that end, blockchain and cryptocurrency supporters have long looked to copyright as an area where they could make an impact.
However, as we’ve seen time and again, those pushing blockchain technology as a solution to copyright issues, rarely understand the issues that they are trying to solve. Though there are potential uses for blockchain in this space, they are niche uses and are largely incompatible with the current marketplace.
To that end, NFTs have long been heralded as a great solution for transferring copyright in a simple, elegant way. However, NFTs were never designed for this purpose. Despite the confusing language that many still use, buying an NFT does not (necessarily) convey any rights to the work.
But that shouldn’t be a big deal. NFTs weren’t meant to transfer copyright, they were meant to create scarcity.
The problem is that, in our digital world, one digital work is the same as any other. This is an especially large problem for photographers and visual artists, whose works are trivially copied and reshared. Since there is no difference between an original digital photograph and a copy of that photography, there’s no scarcity online. This is why such images are considered fungible.
NFTs, as per their name, are non-fungible. A photographer or an artist can mint a limited number of NFTs based on a work and, theoretically, only that number will exist. So, while anyone and everyone can download the image an NFT is based on, only those that purchase the NFT will own that token.
However, the token itself is of limited value. Outside of limited uses, such as Twitter’s octagonal profile pictures, the token is just a line sitting in a blockchain. It’s easy to verify ownership, but it doesn’t give anyone special rights over the work the NFT is based upon.
Still, any scarcity could have been a boon for a wide variety of artists, in particular those that work with digital media. Unfortunately, that ended up not happening either.
Why Scarcity Failed
The big problem with NFTs turned out to be a dead obvious one. There’s nothing stopping anyone from minting NFTs based on anything they want.
HitPiece, for example, started making NFTs based on music that they did not have the license to use. Cent, one of the largest and most important NFT marketplaces, halted sales due to widespread copyright infringement. In short, it wasn’t artists making money from NFT sales, it was scammers and infringers.
NFTs failed to create scarcity because there is no limit on who can create NFTs. Some blamed artists for not jumping on the bandwagon fast enough, but those infringers were always going to be there, especially in a boom market, and they would always outnumber the legitimate creators.
So, if NFTs can’t fulfill their meager promise of creating digital scarcity, how can they be useful in handling copyright issues? The answer is simple: They can’t.
This is why we need a complete reimagining of how Blockchain is used. The current approach is useful for speculative investing and private money transfers, and not much else. More controls and checks could expand that usefulness, but those concepts go against the very ethos of blockchain and cryptocurrency.
In short, as long as blockchain and NFTs are so heavily unregulated, they are likely to be little more than a headache for artists. It’s not a place where they can reliably make money, but it’s a place that their work can and will be regularly exploited by others.
This is especially true now that the NFT market has shrunk so profoundly. Legitimate artists only have a limited number of works that they can sell, namely, works they created. For infringers, the sky is the limit and there are no such restrictions. This means that, even if they make only a small amount per transaction, they can still take in a decent amount of money.
With the boom over, NFTs will not be a financial windfall for artists. The only people that can reliably profit from it, are either those that ignore the rules around copyright, or those that automatically generate a large volume of works.
Simply put, as the value of NFTs have dropped, it’s become more a matter of quantity over quality and that is not only disadvantageous for legitimate artists, but counter to the idea of scarcity that NFTs were supposed to represent.
I believe that many crypto supporters genuinely want to help artists. They see the struggles that I see and want to help just as badly as I do. However, for crypto and blockchain to provide any real solutions, it’s going to require a complete overhaul of not just the technology, but of how people think about the technology.
Sadly, there’s no motivation to do that.
Blockchain cannot be both a speculative investment and a solution to real-world problems. We have seen this time and time again. NFTs failed to create digital scarcity. Blockchain technology has not solved a single copyright issue.
In fact, all attempts at using blockchain to address copyright issues have come from outside and have been hacks overlaid on top of the blockchain rather than pure blockchain approaches.
With that in mind, it’s little surprise that virtually no NFT projects make any mention of copyright. NFTs were not designed to be a copyright panacea, they were designed to create scarcity, something they failed to do.
In the end, the confusion over the rights NFT holders have is very much by design. NFTs were never meant to transfer copyright and likely couldn’t even if they were. As such, leaving the issue ambiguous was probably the best thing that NFT creators could do, at least in terms of keeping the value high.
This new study simply highlights that, making it incredibly clear that NFTs will never be a copyright panacea, but that they were never meant to be at all.