Blockchain in 2021 is not only bitcoin and digital currencies of all types but also an important trend in the world of modern creativity, including the rapidly growing NFT industry. How will copyright work in the NFT industry? What is NFT’s legal framework? The Boosty Labs company focuses on NFT marketplace development, and its team provides answers to these questions.

NFT (Non-Fungible Token), as the name suggests, is a non-fungible token. It is unique, not split, and cannot be replaced by another NFT. This is the main difference between NFT and Bitcoin, which became the basis for the success of the technology.

The nature of NFT can be illustrated by the following example: a certain art teacher is very fond of the work of his students and respects copyright. Over the years of teaching, he saved many drawings, assigned each a unique number, signed the author’s full name, date of creation, and indicated the materials with which the work was done. The data were entered into a special table, which eventually turned into a register of all works created in his lessons. Then he sent out his archive to everyone who wanted to become part of the network and set up automatic synchronization of changes: each new entry immediately appeared in copies of the file. Now his students can prove their copyright for the drawing without direct contact with the teacher.

This is a simplified example that does not include many details, but it illustrates a fundamental idea: a painting or work of art can be published on the Internet, assigned to a specific author, and also indicated what is allowed to be done with it. This information cannot be lost, destroyed, or replaced — only supplemented with sales details as any edits must be community-approved.

nft industry and copyright

NFT and Copyright

On the Internet, many people ignore the concept of copyright and use the images they find as they see fit. At the moment, artists have very few ways to defend their work and bring unscrupulous users to justice. After creating the legal framework for NFT, a person will be able to legally confirm authorship, the illegality of using the object and deservedly take advantage of the fruits of fame.

The fact that digital authors do not always have a big name and a team of lawyers who are ready to fight for their work does not mean that other Internet users can dispose of other people’s work at their own discretion.

When it comes to well-earned fame, the story of reproductions is exactly the opposite: duplicating copies helps to increase the recognition of the work and the author, as well as increase the value of the original as the images circulate. “Mona Lisa”, “Sistine Madonna” — many people first saw these paintings and only then got acquainted with the work of artists. In NFT, the mechanism is the same: the original piece can always be installed using a token. Then it remains to find the author and, if desired, find out how often his works were bought and how much they cost now.

It is important to understand that by selling the image, the artist will not lose copyright. This will only happen if he is employed or the transfer of copyright is a written condition of the sale. Moreover, the author can continue to use his work, for example, as self-promotion. The only limitation is that the same or completely identical work cannot be sold as NFT anywhere else.

Thus, the same attitude to digital drawings is formed as to physical paintings. The bonus is the decentralization of the asset, which does not depend on third parties (developer company, platform owner, etc.) and the system in which it is located. At the same time, you can sell NFT on any suitable platform, not limited to Steam or the marketplace of game creators and specialized platforms, which is useful in the segment of computer games and 3D design.

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NFT History

The history of NFT started with a desire to experiment and play. In 2017, the Internet was blown up by CryptoKitties — they could be bought and sold at an auction for ether. For a week, users spent more than $2.5 million on virtual kittens, and then the same story was repeated with crypto-banks, the price of which now ranges from $10 000 to $16 million. The phenomenon is simply explained: it is much more fun to bet on cute pictures than a set of numbers like 0001 and 0002. Both options contain unique tokens, but in the second case, we get emotions and entertainment.

The theme with cards and pictures has turned into many projects of varying value and popularity, fulfilling its main task — the attention of the market has been attracted. Users nodded, scratched their chins, and wondered what else could be tokenized. So we got an NFT with Jack Dorsey’s first tweet, a Beeple collage in which he collected five years of his work, a gif with Nyan Cat, and several platforms for hosting crypto objects, including SuperRare, NiftyGateway, Rarible, Mintable, OpenSea, and Foundation. Some projects abstracted from the blockchain (https://boostylabs.com/blockchain) by offering to buy directly via bank cards, someone switched to Flow, and someone continues to use Ethereum.

Possible Pitfalls

Can I download someone else’s image, make an NFT out of it and sell it as my own? Basically, yes. Despite the fact that many platforms that sell tokenized art now only allow verified sellers to drop (create and then post NFTs on the site), some do make such deals. But it is not profitable for the market. The NFT community is still quite interested in supporting authors, as copyright compliance and honesty attract collectors, that is, mainstream buyers. Scammers, meanwhile, are actively banned, as a result of which the percentage of such sales decreases every month.

In addition, one should not forget that creating tokens costs money, the work of a famous author will not be simply acquired, and an attempt to make money on a small artist will hardly recoup the costs, but will certainly lead to blocking on the platform. The cost of creating an NFT depends on the commission, which is determined by the workload of the Ethereum network due to the increase in the number of transactions. At the moment, its percentage daily fluctuates in the range of $5-150.

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Lack of Legal Framework

While the trend on NFT is most active in the West, China, with the exception of a few collectors, prefers to stay on the sidelines.

Despite the wave of crypto hype, the legislative side continues to restrict the scope of the blockchain. Many countries define NFT not as a cryptocurrency, but as digital content due to the indivisibility and irreplaceability of tokens. It is also interesting that some payment systems, including Visa, apply the same rules to NFTs as to the sale of photos on photo stocks.

The NFT market continues to grow and will not stop developing in the coming years. It is worth gradually getting used to the idea that blockchain ideas will penetrate into many areas, and the coming reality will connect us more firmly with the digital world.

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