By: Riley Grace Borden
What are NFT’s and Why Should the Art World Care?
NFTs are rapidly altering the digital art marketplace, as well as the arts marketplace at large. NFTs, or “nonfungible tokens,” are bits of code which are not interchangeable with each other (unlike bitcoin and Ethereum.) There can only be a single, non-divisible NFT per use, and they are traded and recorded on a blockchain, which is a digital public ledger that exists across a network. NFTs can include music, poetry, comics, digital art, and even tweets. NFTs do not actually include artwork, but only a link to artwork. However, platforms auctioning NFTs do display the artwork tied to the token, opening those sites up to copyright claims. Some NFTs contain a link to an interest address with a copy of an image, while others include a “hash” or short crypto code of an image. The NFT may contain the seller’s wallet address, and it may also contain a smart contract that manages its future transactions.
In 2016 and 2017, NFT art became increasingly mainstream, beginning with digital cartoon frogs and cats, specifically “Rare Pepes,” the first digital art to have intrinsic value, and CryptoKitties, which fans spent more than 32 million dollars trading. By 2021, NFTs grew from a sub-billion-dollar industry to a multi-decabillion industry.
In March 2021, a digital work of art by the artist Beeple entitled The First 5000 Days sold for 69.3 million dollars at Christie’s, in the first sale of its kind at the auction house. Later in the year, Sotheby’s recorded $7.3 billion in sales for 2021, a 46% jump from 2020 and the highest sales figure ever in its 277-year history. It credited NFTs stored on the Ethereum blockchain. Around 44% of all Sotheby’s bidders were new, and 80% of all NFT bidders were newcomers. Sotheby’s has since partnered with NFT artist, Pak, and NFT marketplace, Nifty Gateway, a partnership with brought in $16,825,999 in two days for Pak’s NFT collection, The Fungible. These early sales and increased acceptance of NFTs in establishments of the arts world, indicate that “even if art powerhouses might not [yet] understand the genre, they understand its financial potential.”
Acceptance of NFTs in the art industry varies. Some hold a cynical view of the growing industry, crediting its rise to decades of billions invested into cryptocurrencies and people with nothing to do with their crypto wealth other than buy digital art. This, of course, means fickle investment, as well as no obligation to exercise any judgment about the art itself. Some have summarized art NFTs as little more than commercially exploitable hype.
Those who are hopeful about NFTs in the art world foresee a flexible, more accessible, metaverse where art is more easily shared and disseminated. Former Christie’s co-chairman Loïc Gouzer stated, “The NFT sphere will be a catalyst that will give a voice to a new generation of artists and expand the palette of expressions for established artists that are not afraid to embrace paradigm shifts.”
NFTs and Copyright Law Gray Areas
The world is suddenly rife with NFT-based art cases, and courts are scrambling to keep up. Near the end of 2021, in Tarantino vs. Miramax, Miramax Studio, which produced the 1994 Pulp Fiction film, filed suit against Quentin Tarantino when he announced a planned sale of NFT’s based on original handwritten script of Pulp Fiction. Given the recent windfalls from NFT arts sales, Miramax preferred to benefit from any NFT sale, and accused Tarantino of breach of contract and copyright and trademark infringement. The case’s core question: Does Tarantino’s reserved right to screenplay publications cover the planned NFT sale? The still unresolved dispute raises more issues as to what happens if someone mints an NFT connected to the work of another filmmaker or musician without their consent, particularly because, with an NFT, a copy is not technically being made or distributed.
NFTs have been dubbed as solving digital art’s authenticity problem. However, NFTs, with their link and/or hash, identify a particular digital artwork only in the most general way, and they make distinguishing the actual original of a piece of work nearly impossible.
NFT marketplaces like HitPiece, SuperRare, and OpenMarket, among multiple others, face increased pressure to protect artists on their platforms. What exactly constitutes theft remains unclear, with some arguing that to right-click and save an NFT is “no more theft than taking a photograph of the Mona Lisa would be.” Regardless, multiple artists have come forward with complaints of their images being appropriated and monetarily exploited for the purpose of NFTs.
Some people from the art world counter the law’s confusion over NFTs and their regulation with optimism, harkening back to a time when “information imbalance was aided by the patronizing misconception that thinking too much about the market compromised an artist’s creative output.” Changing the means of financial transactions in the art world once seemed impossible, but now lawyers like Amanda Rottermund see being on the blockchain as a way to have control and prevent market fraud. Jeff Gluck, an attorney specializing in art and intellectual property issues, launched a beta version of CXIP, a platform that encourages artists to turn their copyright registrations into NFTs. Through such a platform, artists can “effortlessly control, monetize, and manage their IP.” Leading the way for artists to ensure royalties for themselves, artist Sarah Ludy at Bitforms has already used smart contracts to distribute percentages of sales to lower-paid workers at her gallery.
The enforceability of smart contracts in court remains an open question, no cases on whether NFTs constitute fair use or violate 1990 Visual Artists Rights Act have been decided, and it is likely to take much more trial and error before the arts world can equate the rise of NFT’s with comparably fewer “starving” (and properly credited) artists.