Several days before the Full MCO came into effect in several states, artist Mark Winkelmann’s digital artwork made history for fetching $69 million at an art auction. It’s not uncommon for art pieces to command such eye-watering prices but what was notable about this auction was that the artwork that went under the hammer was a piece of NFT art which was paid in cryptocurrency. Closer to home, we have artists like Red Hong Yi and Katun who have also sold their NFT art for more than a tidy sum.
What are NFTs, and how are they related to digital artwork?
For starters, NFT stands for Non-Fungible Tokens. NFTs are non-fungible because they are unique and irreplaceable. For example, the Mona Lisa is non-fungible because there’s only one of it, and since Leo bit the dust 5 centuries ago, we can hardly expect him to paint another one. Conversely, money, like the Malaysian Cabinet, is fungible because it is not unique and easily replaceable, e.g.- the wrinkled 1 Ringgit bill in your back pocket is, for all intents and purposes, identical and replaceable with any 1 Ringgit bill currently in circulation.
NFTs are based on the blockchain technology, which is the same technology that makes cryptocurrency secure. Like cryptocurrency tokens or cryptocoins, each NFT is unique whereby no two NFTs are identical, and at any point of time, everyone knows who owns which NFT and which NFT has been transferred from one person to another. Because of this unique nature of NFTs, some very smart people have begun to use them as digital certificates to represent ownership of assets.
Now, in relations to digital artwork, while no one will question your ownership of the brick with the word ‘SUPREME’ on it proudly displayed in your man cave, folks may not really believe that you own the Nyan Cat GIF just because you have a copy of it in your hard drive. The reason for that is that all digital artworks are easily reproduced and downloaded.
NFTs solve this problem by allowing a digital art to be linked to a particular NFT so that a verifiable (and arguably unforgeable) digital ledger is created where each transfer of ownership and/or each license is recorded for posterity. In other word, NFT serves as a digitised provenance.
Since NFTs can do all these things, are they then a substitute for copyright?
What makes a piece of art valuable? There’s the quality of the work, the material used, the fact that it was made by so and so…but if you really think about it, the main factor dictating the number of zeros on a price tag is scarcity! And for digital art, scarcity is a real problem as there is practically no limit to the number of copies of the digital art which can be sold. Once your digital artwork is downloaded by someone else, how do you stop the downloader from selling more copies of your artwork? This is where copyright comes in.
Copyright are rights that belong to creators and owners (who may be one and the same) of a creative work, such as literary works, musical works, artistic works, films, sound recordings, and broadcasts. In Malaysia and many other countries, copyright is an automatic right which comes into existence upon creation of the work. And as the copyright owner, you have the exclusive right to control the reproduction and distribution of your work. You are given the rights to create as many or as few copies of your work as you would want, which basically give you the rights to create scarcity!
It may surprise you, but most NFTs are sold without the corresponding copyright to the work, even if you’ve paid $69 million! Instead, most buyers of NSTs are given a license to use or display the digital artwork while the creator retains that right to make more copies if they so wish. Some NFTs even come with the condition where the creator earns royalties for subsequent resales of the NFT. And all this licenses and agreements are made possible because of copyright.
Not everyone’s sold on the NFT hype though. Detractors point out that NFTs have no true value since you can just save a copy of an NFT artwork without buying the NFT or that the NFT bubble is one that’s about to burst.
Time will tell if NFTs are here to stay or just a fad that will die out in a couple of years' time. Given their diverse application, not just for digital artworks but for other digital objects like tweets, memes, videos and music. In spite of this, it’s undeniable that they’re a useful tool which helps artists to get their work out there, while helping them to monetise their creation and granting them a better leverage to assert their copyright. It's safe to say that NFTs are a useful and valuable complement to copyrights.
So, should you jump onto the NFT bandwagon? That’s for you to decide. But if you have copyright-related questions that need answering, why not give us a holler? After all, we’re here to help.