When the year 2021 came to a close, non-fungible token (NFT) sales around the globe amounted to an impressive $25 billion. According to a study by Finder.com, Asia saw a rise in NFT adoption that year, with the Philippines raking in the highest adoption rate across 20 countries studied around the world. Singapore similarly saw a rise in NFT adoption, one that is projected to double in the coming years.

This demand has pushed many digitally-enabled platforms to grow their offerings for creators and innovators in the new creator economy, giving creators all over the world the platform to feature their intangible assets or intellectual property (IP) online. Despite providing more opportunities for artists, many of these platforms are falling short in a common aspect: ensuring buyers are making legitimate purchases of digital ownership. 

Because of this, more artists dabbling in the space are falling victim to the plagiarism of their work on NFT marketplaces. While traffic and purchases boom on these platforms, artists are now speaking out about their art being sold on these without their permission. To create a safer space for artists to thrive in this fairly new environment more has to be done to educate both artists and buyers about NFT copyright, and to provide greater IP protection for artists.

Copyright in the NFT space

It’s clear during our conversations with NFT artists that there is a general lack of knowledge in the community around how copyright works with NFTs. To effectively hinder the spread of NFT piracy, buyers and artists must first understand this tricky concept. Because NFTs are not actual images but are digital receipts that point to an image, the act of selling these technically does not come as a violation of artist copyright. What would constitute copyright infringement is uploading these images and hosting them on an NFT marketplace – many of which are not heavily regulated.

As complaints of plagiarism are streaming in from artists, NFT marketplaces are taking the necessary steps to remove stolen images from their platforms. However, the onus still remains on artists themselves to take action against such acts of plagiarism. For instance, to start an auction on one of the world’s most popular NFT marketplaces, OpenSea, sellers need not provide proof of ownership or use of their real name. Artists filing a copyright claim, however, are required to share personal information such as their real name and proof that they created the original artwork.

How NFT artists can take protection into their own hands

Today, artists need to take IP protection into their own hands. A small step they can take is to firstly use secure passwords or store their NFTs in hard wallets. They can look into using cold storage – an offline wallet used specifically for storing blockchain-based items, be it a cryptocurrency or an NFT. Unlike internet-connected hot storage, cold storage does not act as a virtual safe for NFTs – one scammers can break into.

The use of a VPN to hide one’s IP address and internet traffic data can also help prevent leaking your identification, giving bad actors less leverage to hack into your system. Lastly, avoiding NFT drops is key. When you see situations wherein developers promise a bulk of goods, run the other way, because it’s likely they’ll disappear with your money shortly after payment.

Enhanced protection through blockchain

Beyond encouraging artists to take preventative steps to keep their art safe from the internet’s pirates, leveraging the power of blockchain can also make NFT marketplaces a safer place for artists. A large selling point of NFTs is the royalties. This is done through a wonderful feature of blockchain called the smart contract, which is printed into NFT codes. Through this, the circulation of royalties are paid to NFT ownership every time the underlying work is sold. This function has shifted the power over to artists and has allowed them to continuously turn intellectual property into an investment.

While beneficial for artists, this function also comes with its own challenges. If NFTs are resold on different platforms, the default royalty payments unfortunately will not be handed over to the actual owners of these NFTs. This loophole has allowed the spread of NFT piracy across marketplaces. To hinder piracy, smart contract development for NFTs must be improved and the efficiency of royalty payment mechanisms must likewise be enhanced through the diversification of platforms and enhancement of networks.

Much like what we do at CADChain, blending law with technology can help innovative companies come up with solutions that transcend regional boundaries. Oftentimes, when disputes occur, NFT buyers will have to abide by the laws of an NFT marketplace’s home country. Someone from Singapore filing a dispute for an NFT marketplace in the US, for instance, will have a difficult and costly experience bringing down an infringer. Even when filing a “takedown notice” with a platform, the burden of proof lies with the NFT owner, who will then have to provide ample proof of their ownership.

Now, if they had taken the right precautions and carried out their copyright registration via blockchain at the time of asset creation, this could serve as indisputable proof of their ownership. This could cut downtime spent going back and forth with NFT marketplaces, or even lower costs linked to this.

Hindering piracy beyond blockchain

That said, leveraging blockchain alone will not put an end to NFT piracy. We continually talk to NFT artists and stumble upon the same issue: lack of legal knowledge and trust in platforms like OpenSea to take care of all the copyright dilemmas. Education of buyers and artists alike can make all the difference.

For example, if buyers go into a transaction without a clue of what they’re actually purchasing, the probability of scammers preying on them would be higher. Having basic knowledge on due diligence such as how they can verify the rightful owner of an asset to ensure they’re making a purchase from its actual creator can protect buyers from being scammed or from purchasing a pirated NFT.

Blockchain is key to this. However, at its current stage, the use of blockchain to prevent plagiarism isn’t exactly user-friendly. Users will need prior knowledge of how to leverage a block explorer to make the most out of this technology.

Safeguarding the future of NFTs

NFTs were once created with the aim of protecting the rights of artists. These days, piracy issues have been showing us otherwise – that there are loopholes in the model. To continue putting artists at the heart of the ecosystem, platforms need to enforce more security measures to ensure the continuous growth of the industry, and the nature of blockchain can do just that. It can ensure entire chains are traceable, providing both confidentiality and transparency. Through our blockchain solutions, we’ve seen just how effective blockchain can be in keeping CADfiles secure, and we know it can protect NFTs in a similarly effective way. By keeping NFTs secure, more artists and buyers alike can continue turning art into investments.

Violetta Shishkina is the Co-Founder of CADChain.

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