![NFT diagram](https://upload.wikimedia.org/wikipedia/commons/c/c2/NFT_diagram.png)
A non-fungible token (NFT) is a unique digital identifier that cannot be copied, substituted, or subdivided, that is recorded in a
blockchain
A blockchain is a type of distributed ledger technology (DLT) that consists of growing lists of records, called ''blocks'', that are securely linked together using cryptography. Each block contains a cryptographic hash of the previous block, a ...
, and that is used to certify authenticity and ownership. The ownership of an NFT is recorded in the blockchain and can be transferred by the owner, allowing NFTs to be sold and traded. NFTs can be created by anybody, and require few or no coding skills to create. NFTs typically contain references to
digital file
A computer file is a computer resource for recording data in a computer storage device, primarily identified by its file name. Just as words can be written to paper, so can data be written to a computer file. Files can be shared with and transfe ...
s such as photos, videos, and audio. Because NFTs are uniquely identifiable assets, they differ from
cryptocurrencies
A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank
A bank is a financial i ...
, which are
fungible
In economics, fungibility is the property of a good or a commodity whose individual units are essentially interchangeable, and each of whose parts is indistinguishable from any other part. Fungible tokens can be exchanged or replaced; for exam ...
.
Proponents of NFTs claim that NFTs provide a public
certificate of authenticity
A certificate of authenticity (COA) is a seal or small sticker on a proprietary computer program, t-shirt, jersey, or any other memorabilia or art work, especially in the world of computers and sports. It is commonly a seal on paper authentic ...
or
proof of ownership, but the legal rights conveyed by an NFT can be uncertain. The ownership of an NFT as defined by the blockchain has no inherent legal meaning and does not necessarily grant
copyright
A copyright is a type of intellectual property that gives its owner the exclusive right to copy, distribute, adapt, display, and perform a creative work, usually for a limited time. The creative work may be in a literary, artistic, education ...
,
intellectual property
Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. There are many types of intellectual property, and some countries recognize more than others. The best-known types are patents, cop ...
rights, or other legal rights over its associated digital file. An NFT does not restrict the sharing or copying of its associated digital file and does not prevent the creation of NFTs that reference identical files.
The NFT market grew dramatically from 2020 to 2021: the trading of NFTs in 2021 increased to more than $17 billion, up by 21,000% over 2020's total of $82 million. NFTs have been used as
speculative
Speculative may refer to:
In arts and entertainment
*Speculative art (disambiguation)
*Speculative fiction, which includes elements created out of human imagination, such as the science fiction and fantasy genres
**Speculative Fiction Group, a Per ...
investments and they have drawn increasing criticism for the energy cost and
carbon footprint
A carbon footprint is the total greenhouse gas (GHG) emissions caused by an individual, event, organization, service, place or product, expressed as carbon dioxide equivalent (CO2e). Greenhouse gases, including the carbon-containing gases carbo ...
associated with validating blockchain transactions as well as their frequent use in
art scams. The NFT market has also been compared to an
economic bubble
An economic bubble (also called a speculative bubble or a financial bubble) is a period when current asset prices greatly exceed their intrinsic valuation, being the valuation that the underlying long-term fundamentals justify. Bubbles can be c ...
or a
Ponzi scheme
A Ponzi scheme (, ) is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. Named after Italian businessman Charles Ponzi, the scheme leads victims to believe that profits are comin ...
. By May 2022, the NFT market was seen as beginning to collapse.
Characteristics
An NFT is a unit of data, stored on a type of digital ledger called a blockchain, which can be sold and traded. The NFT can be associated with a particular digital or physical asset such as images, art, music, and sports highlights and may confer licensing rights to use the asset for a specified purpose.
An NFT (and, if applicable, the associated license to use, copy, or display the underlying asset) can be traded and sold on digital markets.
The extralegal nature of NFT trading usually results in an informal exchange of ownership over the asset that has no legal basis for enforcement,
and so often confers little more than use as a status symbol.
NFTs function like
cryptographic
Cryptography, or cryptology (from grc, , translit=kryptós "hidden, secret"; and ''graphein'', "to write", or '' -logia'', "study", respectively), is the practice and study of techniques for secure communication in the presence of adve ...
tokens, but unlike cryptocurrencies such as
Bitcoin
Bitcoin ( abbreviation: BTC; sign: ₿) is a decentralized digital currency that can be transferred on the peer-to-peer bitcoin network. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distr ...
or
Ethereum
Ethereum is a decentralized, open-source blockchain with smart contract functionality. Ether (Abbreviation: ETH; sign: Ξ) is the native cryptocurrency of the platform. Among cryptocurrencies, ether is second only to bitcoin in market capita ...
, NFTs are not mutually interchangeable, and so are not
fungible
In economics, fungibility is the property of a good or a commodity whose individual units are essentially interchangeable, and each of whose parts is indistinguishable from any other part. Fungible tokens can be exchanged or replaced; for exam ...
. NFTs are created when blockchains concatenate records containing
cryptographic hashes—sets of characters that identify a set of data—onto previous records, creating a chain of identifiable data blocks.
This cryptographic transaction process ensures the authentication of each digital by providing a
digital signature
A digital signature is a mathematical scheme for verifying the authenticity of digital messages or documents. A valid digital signature, where the prerequisites are satisfied, gives a recipient very high confidence that the message was created b ...
that tracks NFT ownership.
Data links that are part of NFT records, that for example may point to details about where the associated art is stored, can be affected by
link rot
Link rot (also called link death, link breaking, or reference rot) is the phenomenon of hyperlinks tending over time to cease to point to their originally targeted file, web page, or server due to that resource being relocated to a new address ...
.
Copyright
![NFT ownership diagram](https://upload.wikimedia.org/wikipedia/commons/7/78/NFT_ownership_diagram.png)
An NFT solely represents a proof of ownership of a blockchain record and does not necessarily imply that the owner possesses
intellectual property
Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. There are many types of intellectual property, and some countries recognize more than others. The best-known types are patents, cop ...
rights to the digital asset the NFT purports to represent.
Someone may sell an NFT that represents their work, but the buyer will not necessarily receive copyright to that work, and the seller may not be prohibited from creating additional NFT copies of the same work.
According to legal scholar
Rebecca Tushnet
Rebecca Tushnet (born April 4, 1973) is an American legal scholar. She serves as the Frank Stanton Professor of First Amendment Law at Harvard Law School. Her scholarship focuses on copyright, trademark, First Amendment, and false advertising.
...
, "In one sense, the purchaser acquires whatever the art world thinks they have acquired. They definitely do not own the copyright to the underlying work unless it is explicitly transferred."
Certain NFT projects, such as
Bored Ape
Bored Ape Yacht Club, often colloquially called Bored Apes, Bored Ape or BAYC, is a non-fungible token (NFT) collection built on the Ethereum blockchain. The collection features profile pictures of cartoon apes that are procedurally generated by ...
s, explicitly assign intellectual property rights of individual images to their respective owners. The NFT collection
CryptoPunks
''CryptoPunks'' is a non-fungible token (NFT) collection on the Ethereum blockchain. The project was launched in June 2017 by the Larva Labs studio, a two-person team consisting of Canadian software developers Matt Hall and John Watkinson. The ex ...
was a project that initially prohibited owners of its NFTs from using the associated digital artwork for commercial use, but later allowed such use upon acquisition of the collection's parent company.
History
The first known "NFT", ''Quantum'', was created by Kevin McCoy and
Anil Dash
Anil Dash (; born September 5, 1975) is an American technology executive, entrepreneur, Prince scholar and writer. He is the Head of Glitch and VP of Developer Experience at Fastly.
Career
In 1999, Dash launched his personal weblog, dashes.com ...
in May 2014. It consists of a video clip made by McCoy's wife, Jennifer. McCoy registered the video on the
Namecoin
Namecoin (Abbreviation: NMC; sign: \mathbb) is a cryptocurrency originally forked from bitcoin software. It uses proof-of-work algorithm. Like bitcoin, it is limited to \mathbb21 million.
Namecoin can store data within its own blockchain ...
blockchain and sold it to Dash for $4, during a live presentation for the ''Seven on Seven'' conferences at the
New Museum
The New Museum of Contemporary Art, founded in 1977 by Marcia Tucker, is a museum in New York City at 235 Bowery, on Manhattan's Lower East Side.
History
The museum originally opened in a space in the Graduate Center of the then-named New Sc ...
in New York City. McCoy and Dash referred to the technology as "monetized graphics".
This explicitly linked a non-fungible, tradable blockchain marker to a work of art, via on-chain metadata (enabled by Namecoin). This is in contrast to the multi-unit, fungible, metadata-less "
Colored Coins
Colored Coins is an open-source protocol built on the Bitcoin 2.0 that allows users to represent and manipulate immutable digital resources on top of Bitcoin transactions. They are a class of methods for representing and maintaining real-world ...
" of other blockchains and
Counterparty
A counterparty (sometimes contraparty) is a legal entity, unincorporated entity, or collection of entities to which an exposure of financial risk may exist. The word became widely used in the 1980s, particularly at the time of the Basel I deliberat ...
.
In October 2015, the first NFT project, Etheria, was launched and demonstrated at DEVCON 1 in London, Ethereum's first developer conference, three months after the launch of the
Ethereum
Ethereum is a decentralized, open-source blockchain with smart contract functionality. Ether (Abbreviation: ETH; sign: Ξ) is the native cryptocurrency of the platform. Among cryptocurrencies, ether is second only to bitcoin in market capita ...
blockchain. Most of Etheria's 457 purchasable and tradable hexagonal tiles went unsold for more than five years until March 13, 2021, when renewed interest in NFTs sparked a buying frenzy. Within 24 hours, all tiles of the current version and a prior version, each hardcoded to 1 ETH ( at the time of launch), were sold for a total of million.
The term "NFT" only achieved wider usage with the ERC-721 standard, first proposed in 2017 via the Ethereum
GitHub
GitHub, Inc. () is an Internet hosting service for software development and version control using Git. It provides the distributed version control of Git plus access control, bug tracking, software feature requests, task management, continuous ...
, following the launch of various NFT projects that year.
The standard coincided with the launch of several NFT projects, including ''
Curio Cards
Curio Cards are collectible digital artworks located on the Ethereum blockchain. Created in 2017, Curio Cards are commonly viewed as the first digital art collectibles on the Ethereum blockchain. In October 2021, a complete collection of Curio C ...
'', ''
CryptoPunks
''CryptoPunks'' is a non-fungible token (NFT) collection on the Ethereum blockchain. The project was launched in June 2017 by the Larva Labs studio, a two-person team consisting of Canadian software developers Matt Hall and John Watkinson. The ex ...
'' (a project to trade unique cartoon characters, released by the American studio Larva Labs on the Ethereum blockchain),
and
rare Pepe
A rare Pepe or RarePepe is a variation on the "Pepe the Frog" internet meme, itself based on a character created by Matt Furie. The related Rare Pepe crypto project, created by various artists worldwide between 2016 and 2018, was based on the afo ...
trading cards.
The 2017 online game CryptoKitties was made profitable by selling tradable cat NFTs, and its success brought public attention to NFTs.
The NFT market experienced rapid growth during 2020, with its value tripling to million.
In the first three months of 2021, more than million were spent on NFTs.
In 2020, the U.S Patent and Trademark Office received three trademark applications for NFTs. In 2021, the number of trademark applications jumped to more than 1200.
In January 2022, the U.S. Patent and Trademark Office received 450 NFT-related trademark applications.
The growing list of brands being trademarked for NFTs includes the NYSE, Star Trek, Panera, Walmart, Elvis Presley, Sports Illustrated, Ticketmaster, and Yahoo. In the early months of 2021, interest in NFTs increased after a number of high-profile sales and art auctions.
In May 2022, ''
The Wall Street Journal
''The Wall Street Journal'' is an American business-focused, international daily newspaper based in New York City, with international editions also available in Chinese and Japanese. The ''Journal'', along with its Asian editions, is published ...
'' reported that the NFT market was "collapsing". Daily sales of NFT tokens had declined 92% from September 2021, and the number of active wallets in the NFT market fell 88% from November 2021. While rising interest rates had impacted risky bets across the financial markets, the ''Journal'' said "NFTs are among the most speculative."
Uses
Commonly associated files
NFTs have been used to exchange digital tokens that link to a digital file asset. Ownership of an NFT is often associated with a license to use such a linked digital asset but generally does not confer the copyright to the buyer. Some agreements only grant a license for personal, non-commercial use, while other licenses also allow commercial use of the underlying digital asset.
Digital art
Digital art
Digital art refers to any artistic work or practice that uses digital technology as part of the creative or presentation process, or more specifically computational art that uses and engages with digital media.
Since the 1960s, various names ...
is a common use case for NFTs. High-profile auctions of NFTs linked to digital art have received considerable public attention. The work entitled ''Merge'' by artist
Pak was the most expensive NFT, with an auction price of million and ''
Everydays: the First 5000 Days'', by artist
Mike Winkelmann (known professionally as Beeple) the second most expensive at million in 2021.
![VeKings](https://upload.wikimedia.org/wikipedia/commons/b/be/VeKings.png)
Some NFT collections, including
Bored Ape
Bored Ape Yacht Club, often colloquially called Bored Apes, Bored Ape or BAYC, is a non-fungible token (NFT) collection built on the Ethereum blockchain. The collection features profile pictures of cartoon apes that are procedurally generated by ...
s,
EtherRock
EtherRock also called EthRock is an early Ethereum based non-fungible token (NFT) project from 2017 that depicts various-colored rocks. There are 100 EtherRocks.
Background
In December 2017, 100 EtherRocks were produced via a smart contract, us ...
s, and
CryptoPunks
''CryptoPunks'' is a non-fungible token (NFT) collection on the Ethereum blockchain. The project was launched in June 2017 by the Larva Labs studio, a two-person team consisting of Canadian software developers Matt Hall and John Watkinson. The ex ...
are examples of
generative art
Generative art refers to art that in whole or in part has been created with the use of an autonomous system. An autonomous system in this context is generally one that is non-human and can independently determine features of an artwork that wo ...
, where many different images are created by assembling a selection of simple picture components in different combinations.
In March 2021, the blockchain company Injective Protocol bought a $95,000 original screen print entitled ''Morons (White)'' from English graffiti artist
Banksy
Banksy is a pseudonymous England-based street artist, political activist and film director whose real name and identity remain unconfirmed and the subject of speculation. Active since the 1990s, his satirical street art and subversive epigrams ...
, and filmed somebody burning it with a
cigarette lighter. They uploaded (known as "minting" in the NFT scene) and sold the video as an NFT.
The person who destroyed the artwork, who called themselves "Burnt Banksy", described the act as a way to transfer a physical work of art to the NFT space.
American curator and art historian
Tina Rivers Ryan
Tina Rivers Ryan is an American curator, researcher, author, and art historian. Her expertise is in new media art, which includes digital art, and internet art. She is an assistant curator at the Albright–Knox Art Gallery in Buffalo, New York s ...
, who specializes in digital works, said that art museums are widely not convinced that NFTs have "lasting cultural relevance." Ryan compares NFTs to the
net art
upright=1.3, "Simple Net Art Diagram", a 1997 work by Michael Sarff and Tim Whidden
Internet art (also known as net art) is a form of new media art distributed via the Internet. This form of art circumvents the traditional dominance of the phys ...
fad before the
dot-com bubble
The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet.
Between 1995 and its peak in March 2000, the Nasdaq Compo ...
. In July 2022, after the controversial sale of
Michelangelo
Michelangelo di Lodovico Buonarroti Simoni (; 6 March 1475 – 18 February 1564), known as Michelangelo (), was an Italian sculptor, painter, architect, and poet of the High Renaissance. Born in the Republic of Florence, his work was insp ...
's
''Doni Tondo'' in Italy, the sale of NFT reproductions of famous artworks was prohibited in Italy. Given the complexity and lack of regulation of the matter, the
Ministry of Culture Ministry of Culture may refer to:
*Ministry of Tourism, Cultural Affairs, Youth and Sports (Albania)
* Ministry of Culture (Algeria)
*Ministry of Culture (Argentina)
*Minister for the Arts (Australia)
*Ministry of Culture (Azerbaijan)
* Ministry of ...
of Italy temporarily requested that its institutions refrain from signing contracts involving NFTs.
No centralized means of authentication exists to prevent stolen and counterfeit digital works from being sold as NFTs, although auction houses like
Sotheby's
Sotheby's () is a British-founded American multinational corporation with headquarters in New York City. It is one of the world's largest brokers of fine and decorative art, jewellery, and collectibles. It has 80 locations in 40 countries, and ...
,
Christie's
Christie's is a British auction house founded in 1766 by James Christie (auctioneer), James Christie. Its main premises are on King Street, St James's in London, at Rockefeller Center in New York City and at Alexandra House in Hong Kong. It is ...
, and various museums and galleries worldwide started collaborations and partnerships with digital artists such as
Refik Anadol,
Dangiuz
Leopoldo D'Angelo (born 11 July 1995 in Turin, Turin, Italy, better known by the pseudonym "Dangiuz" (), is an Italian people, Italian contemporary Visual arts, visual artist, digital art, digital artist and art director specializing in sci-fi th ...
and
Sarah Zucker.
NFTs associated with digital artworks could be sold and bought via NFT platforms.
OpenSea
OpenSea is an American online non-fungible token (NFT) marketplace headquartered in New York City. The company was founded by Devin Finzer and Alex Atallah in 2017.
OpenSea offers a marketplace allowing for non-fungible tokens to be sold directly ...
, launched in 2017, was one of the first marketplaces to host various types of NFTs.
In July 2019, the
National Basketball Association
The National Basketball Association (NBA) is a professional basketball league in North America. The league is composed of 30 teams (29 in the United States and 1 in Canada) and is one of the major professional sports leagues in the United S ...
, the NBA Players Association and Dapper Labs, the creator of
CryptoKitties
''CryptoKitties'' is a blockchain game on Ethereum developed by Canadian studio Dapper Labs, a company spun-off from Axiom Zen, that allows players to purchase, collect, breed and sell virtual cats. It is one of the earliest attempts to deploy bloc ...
, started a joint venture NBA Top Shot for basketball fans that let users buy NFTs of historic moments in basketball. In 2020, Rarible was found, allowing multiple assets. In 2021, Rarible and
Adobe
Adobe ( ; ) is a building material made from earth and organic materials. is Spanish for ''mudbrick''. In some English-speaking regions of Spanish heritage, such as the Southwestern United States, the term is used to refer to any kind of e ...
formed a partnership to simplify the verification and security of metadata for digital content, including NFTs.
In 2021, a cryptocurrency exchange
Binance
Binance is a cryptocurrency exchange which is the largest exchange in the world in terms of daily trading volume of cryptocurrencies. It was founded in 2017 and is registered in the Cayman Islands.
Binance was founded by Changpeng Zhao, a deve ...
, launched its NFT marketplace. In 2022, eToro Art by
eToro
eToro is an Israeli social trading and multi-asset investment company that focuses on providing financial and copy trading services. Its headquarters are located in Central Israel, and the company has registered offices in Cyprus, the Unite ...
was founded, focusing on supporting NFT collections and emerging creators.
Sotheby's and Christie's auction houses showcase artworks associated with the respective NFTs both in virtual galleries and physical screens, monitors, and TVs.
Mars House, an architectural NFT created in May 2020 by artist
Krista Kim
Krista Kim is a Canadian-Korean contemporary artist whose works frequently use light, digital technology and sound. Kim produced a number of touring installations and displays, along with other works which have been sold as non-fungible tokens (N ...
, sold in 2021 for 288 Ether (ETH) at that time equivalent to US$524,558.
Games
NFTs can represent
in-game assets, such as digital plots of land. Some commentators describe these as being controlled "by the user" instead of the
game developer if they can be traded on third-party marketplaces without permission from the game developer. Their reception from game developers, though, has been generally mixed, with some like
Ubisoft
Ubisoft Entertainment SA (; ; formerly Ubi Soft Entertainment SA) is a French video game publisher headquartered in Saint-Mandé with development studios across the world. Its video game franchises include '' Assassin's Creed'', ''Far Cry'', '' ...
embracing the technology but
Valve
A valve is a device or natural object that regulates, directs or controls the flow of a fluid (gases, liquids, fluidized solids, or slurries) by opening, closing, or partially obstructing various passageways. Valves are technically fittings ...
and
Microsoft
Microsoft Corporation is an American multinational technology corporation producing computer software, consumer electronics, personal computers, and related services headquartered at the Microsoft Redmond campus located in Redmond, Washing ...
formally prohibiting them.
* CryptoKitties was an early successful blockchain online game in which players adopt and trade virtual cats. The monetization of NFTs within the game raised a $12.5 million investment, with some kitties selling for over $100,000 each.
Following its success, CryptoKitties was added to the ERC-721 standard, which was created in January 2018 (and finalized in June).
A similar NFT-based
online game
An online game is a video game that is either partially or primarily played through the Internet or any other computer network available. Online games are ubiquitous on modern gaming platforms, including PC game, PCs, Console game, consoles and ...
,
Axie Infinity
''Axie Infinity'' is a non-fungible token-based online video game developed by Vietnamese studio Sky Mavis, known for its in-game economy which uses Ethereum-based cryptocurrencies.
Players of Axie Infinity collect and mint NFTs which represent ...
, was launched in March 2018.
* In December 2021,
Ubisoft
Ubisoft Entertainment SA (; ; formerly Ubi Soft Entertainment SA) is a French video game publisher headquartered in Saint-Mandé with development studios across the world. Its video game franchises include '' Assassin's Creed'', ''Far Cry'', '' ...
announced Ubisoft Quartz, "an NFT initiative which allows people to buy artificially scarce digital items using cryptocurrency". The announcement was heavily criticized by audiences, with the Quartz announcement video attaining a dislike ratio of 96% on YouTube. Ubisoft would later unlist the video from YouTube. The announcement was also criticized internally by Ubisoft developers. The
Game Developers Conference
The Game Developers Conference (GDC) is an annual conference for video game developers. The event includes an expo, networking events, and awards shows like the Game Developers Choice Awards and Independent Games Festival, and a variety of tutori ...
's 2022 annual report stated that 70 percent of developers surveyed said their studios had no interest in integrating NFTs or cryptocurrency into their games.
* In July 2022, Mojang Studios announced that NFTs would not be permitted in ''
Minecraft
''Minecraft'' is a sandbox game developed by Mojang Studios. The game was created by Markus "Notch" Persson in the Java programming language. Following several early private testing versions, it was first made public in May 2009 before being ...
'', saying that they went against the game's "values of creative inclusion and playing together".
* In October 2021,
Valve Corporation
Valve Corporation is an American video game developer, video game publisher, publisher, and digital distribution company headquartered in Bellevue, Washington. It is the developer of the software distribution platform Steam (service), Steam an ...
banned applications from their
Steam
Steam is a substance containing water in the gas phase, and sometimes also an aerosol of liquid water droplets, or air. This may occur due to evaporation or due to boiling, where heat is applied until water reaches the enthalpy of vaporization ...
platform if those applications use
blockchain
A blockchain is a type of distributed ledger technology (DLT) that consists of growing lists of records, called ''blocks'', that are securely linked together using cryptography. Each block contains a cryptographic hash of the previous block, a ...
technology or NFTs to exchange value or game artifacts.
* Some luxury brands minted NFTs for online video game cosmetics. In November 2021, investment firm
Morgan Stanley
Morgan Stanley is an American multinational investment management and financial services company headquartered at 1585 Broadway in Midtown Manhattan, New York City. With offices in more than 41 countries and more than 75,000 employees, the fir ...
published a note claiming that this could become a US$56 billion dollar market by 2030.
Music
In February 2021, NFTs reportedly generated around million in the music industry, with artists selling artwork and music as NFT tokens. On February 28, 2021, electronic dance musician
3LAU sold a collection of 33 NFTs for a total of million to commemorate the three-year anniversary of his ''Ultraviolet'' album.
On March 3, 2021, an NFT was made to promote the
Kings of Leon
Kings of Leon is an American rock band formed in Nashville, Tennessee, in 1999. The band is composed of brothers Caleb, Nathan and Jared Followill, and their cousin Matthew Followill.
The band's early music was a blend of Southern rock and gar ...
album ''
When You See Yourself
''When You See Yourself'' is the eighth studio album by American rock band Kings of Leon. It was released on March 5, 2021, by RCA Records. The album was again produced by Markus Dravs. It was preceded by the singles "The Bandit" and " 100,000 Pe ...
.'' Other musicians who have used NFTs include American rapper
Lil Pump
Gazzy Garcia (born August 17, 2000), better known professionally as Lil Pump, is an American rapper. He is one of the most prominent artists of the SoundCloud rap scene and is known for his minimalist music and hyperactive public persona.
Li ...
,
Grimes
Claire Elise Boucher (; born March 17, 1988), known professionally as Grimes, is a Canadian musician, singer, songwriter, and record producer. Her early work has been described as extending from "lo-fi R&B" to futuristic dance-pop, and has in ...
, visual artist
Shepard Fairey
Frank Shepard Fairey (born February 15, 1970) is an American contemporary artist, activist and founder of OBEY Clothing who emerged from the skateboarding scene. In 1989 he designed the " Andre the Giant Has a Posse" (...OBEY...) sticker cam ...
in collaboration with record producer
Mike Dean, and rapper
Eminem
Marshall Bruce Mathers III (born October 17, 1972), known professionally as Eminem (; often stylized as EMINƎM), is an American rapper and record producer. He is credited with popularizing hip hop in middle America and is critically acclai ...
.
Film
* In April 2021, an NFT associated with the score of the movie ''
Triumph
The Roman triumph (Latin triumphus) was a celebration for a victorious military commander in ancient Rome. For later imitations, in life or in art, see Trionfo. Numerous later uses of the term, up to the present, are derived directly or indirectl ...
'', composed by Gregg Leonard, was the first NFT minted for a feature film score.
* In May 2018,
20th Century Fox
20th Century Studios, Inc. (previously known as 20th Century Fox) is an American film production company headquartered at the Fox Studio Lot in the Century City area of Los Angeles. As of 2019, it serves as a film production arm of Walt Dis ...
partnered with Atom Tickets and released limited-edition ''
Deadpool 2
''Deadpool 2'' is a 2018 American superhero comedy film based on the Marvel Comics character Deadpool. Distributed by 20th Century Fox, it is the sequel to ''Deadpool'' (2016) and the eleventh installment overall in the ''X-Men'' film series. ...
'' digital posters to promote the film. They were available from
OpenSea
OpenSea is an American online non-fungible token (NFT) marketplace headquartered in New York City. The company was founded by Devin Finzer and Alex Atallah in 2017.
OpenSea offers a marketplace allowing for non-fungible tokens to be sold directly ...
and the GFT exchange. In March 2021
Adam Benzine's 2015 documentary ''
Claude Lanzmann: Spectres of the Shoah'' became the first motion picture and documentary film to be auctioned as an NFT.
* In November 2021, film director
Quentin Tarantino
Quentin Jerome Tarantino (; born March 27, 1963) is an American film director, writer, producer, and actor. His films are characterized by stylized violence, extended dialogue, profanity, Black comedy, dark humor, Nonlinear narrative, non-lin ...
released seven NFTs based on uncut scenes of ''
Pulp Fiction
''Pulp Fiction'' is a 1994 American crime film written and directed by Quentin Tarantino, who conceived it with Roger Avary.See, e.g., King (2002), pp. 185–7; ; Starring John Travolta, Samuel L. Jackson, Bruce Willis, Tim Roth, Ving Rhame ...
''.
Miramax
Miramax, LLC, also known as Miramax Films, is an American film and television production and distribution company founded on December 19, 1979, by brothers Harvey and Bob Weinstein, and based in Los Angeles, California.
It was initially a leadi ...
subsequently filed a lawsuit claiming that their film rights were violated and that the original 1993 contract with Tarantino gave them the right to mint NFTs in relation to ''
Pulp Fiction
''Pulp Fiction'' is a 1994 American crime film written and directed by Quentin Tarantino, who conceived it with Roger Avary.See, e.g., King (2002), pp. 185–7; ; Starring John Travolta, Samuel L. Jackson, Bruce Willis, Tim Roth, Ving Rhame ...
''.
* Other projects in the film industry using NFTs include the announcement that an exclusive NFT artwork collection will be released for ''
Godzilla vs. Kong'' and director
Kevin Smith
Kevin Patrick Smith (born August 2, 1970) is an American filmmaker, actor, comedian, comic book writer, author, YouTuber, and podcaster. He came to prominence with the low-budget comedy buddy film ''Clerks'' (1994), which he wrote, directed, co ...
announcing in April 2021 that his 2022 horror movie ''
KillRoy Was Here'' would be released as an NFT. The 2021 film ''
Zero Contact
''Zero Contact'' is a 2021 American thriller film directed by Rick Dugdale and starring Anthony Hopkins. It was the first feature film to be released via Vuele, a non-fungible token platform.
''Zero Contact'' was released internationally on Sept ...
'', directed by
Rick Dugdale
Rick Dugdale is a Canadian film producer. He is the President and CEO of Enderby Entertainment, an independent film finance and production company. He is also co-founder of Vuele
Career
Dugdale joined Daniel Petrie, Jr. & Company as Vice Presi ...
and starring
Anthony Hopkins
Sir Philip Anthony Hopkins (born 31 December 1937) is a Welsh actor, director, and producer. One of Britain's most recognisable and prolific actors, he is known for his performances on the screen and stage. Hopkins has received many accolad ...
, was also released as an NFT.
Other associated files
* A number of
internet meme
An Internet meme, commonly known simply as a meme ( ), is an idea, behavior, style, or image that is spread via the Internet, often through social media platforms. What is considered a meme may vary across different communities on the Internet ...
s have been associated with NFTs, which were minted and sold by their creators or by their subjects. Examples include
Doge
A doge ( , ; plural dogi or doges) was an elected lord and head of state in several Italian city-states, notably Venice and Genoa, during the medieval and renaissance periods. Such states are referred to as " crowned republics".
Etymology
The ...
, an image of a
Shiba Inu
The is a breed of hunting dog from Japan. A small-to-medium breed, it is the smallest of the six original and distinct spitz breeds of dog native to Japan. Its name literally translates to "firewood dog".
A small, alert, and agile dog that c ...
dog, as well as
Charlie Bit My Finger
"Charlie bit my finger - again !", more simply known as "Charlie Bit My Finger" or "Charlie Bit Me", was a 2007 internet viral video famous for being at the time the most viewed YouTube video. As of October 2022, the video received ov ...
,
Nyan Cat
Nyan Cat is a YouTube video uploaded in April 2011, which became an internet meme. The video merged a Japanese pop song with an animated cartoon cat with a Pop-Tart for a torso flying through space and leaving a rainbow trail behind. The video r ...
and
Disaster Girl
"''Disaster Girl''" is a name given to a photograph of a young girl staring at the camera with a structure fire behind her.
The girl in the photo, Zoë Roth, was four years old when the photo was taken in 2005. A non-fungible token (NFT) based ...
.
* In 2020, CryptoKitties developer Dapper Labs released the NBA TopShot project, which allowed the purchase of NFTs linked to basketball highlights. The project was built on top of the Flow blockchain.
* In March 2021 an NFT of
Twitter
Twitter is an online social media and social networking service owned and operated by American company Twitter, Inc., on which users post and interact with 280-character-long messages known as "tweets". Registered users can post, like, and ...
founder
Jack Dorsey
Jack Patrick Dorsey (born November 19, 1976) is an American Internet entrepreneur and programmer who is a co-founder and former CEO of Twitter, Inc., as well as a co-founder and the CEO and chairperson of Block, Inc., the developer of the Squar ...
's first-ever tweet sold for $2.9 million. The same NFT was listed for sale in 2022 at $48 million, but only achieved a top bid of $280.
* In May 2021,
UC Berkeley
The University of California, Berkeley (UC Berkeley, Berkeley, Cal, or California) is a public university, public land-grant university, land-grant research university in Berkeley, California. Established in 1868 as the University of Californi ...
announced that it would be auctioning NFTs for the patent disclosures for two Nobel Prize-winning inventions:
CRISPR-Cas9
Cas9 (CRISPR associated protein 9, formerly called Cas5, Csn1, or Csx12) is a 160 kilodalton protein which plays a vital role in the immunological defense of certain bacteria against DNA viruses and plasmids, and is heavily utilized in genetic ...
gene editing and
cancer immunotherapy
Cancer immunotherapy (sometimes called immuno-oncology) is the stimulation of the immune system to treat cancer, improving on the immune system's natural ability to fight the disease. It is an application of the fundamental research of cancer im ...
.
The university will continue to own the patents for these inventions; the NFTs relate only to the university patent disclosure form, an internal form used by the university for researchers to disclose inventions.
* On December 15, 2022, former
President of the United States
The president of the United States (POTUS) is the head of state and head of government of the United States of America. The president directs the executive branch of the federal government and is the commander-in-chief of the United Stat ...
Donald Trump
Donald John Trump (born June 14, 1946) is an American politician, media personality, and businessman who served as the 45th president of the United States from 2017 to 2021.
Trump graduated from the Wharton School of the University of Pe ...
announced a line of NFTs featuring art of himself for $99 each.
* Some
pornographic
Pornography (often shortened to porn or porno) is the portrayal of Human sexual activity, sexual subject matter for the exclusive purpose of sexual arousal. Primarily intended for adults, works have been sold as NFTs, though hostility from NFT marketplaces towards pornographic material has presented significant drawbacks for creators.
* Some virtual worlds, often
marketed
Marketing is the process of exploring, creating, and delivering value to meet the needs of a target market in terms of goods and services; potentially including selection of a target audience; selection of certain attributes or themes to emph ...
as
metaverse
In science fiction, the "metaverse" is a hypothetical iteration of the Internet as a single, universal, and immersive virtual world that is facilitated by the use of virtual reality (VR) and augmented reality (AR) headsets. In colloquial usage, ...
s, have incorporated NFTs as a means of trading virtual items and virtual real estate.
* The first credited political protest NFT ("Destruction of Nazi Monument Symbolizing Contemporary Lithuania") was a video filmed by Professor Stanislovas Tomas on April 8, 2019, and minted on March 29, 2021. In the video, Tomas uses a sledgehammer to destroy a state-sponsored Lithuanian plaque located on the
Lithuanian Academy of Sciences
The Lithuanian Academy of Sciences or LMA ( lt, Lietuvos mokslų akademija) is a state-funded independent organization in Lithuania dedicated for science and research. Its mission is to mobilize prominent scientists and initiate activities that ...
honoring Nazi war criminal
Jonas Noreika
Jonas Noreika (8 October 1910 – 26 February 1947), also known by his post-war nom de guerre Generolas Vėtra (), was a Lithuanian anti-Soviet partisan, military officer, and Nazi collaborator.
In July 1941, he was the leader of the Lithua ...
.
Speculation
NFTs representing digital collectables and artworks are a
speculative asset. The NFT buying surge was called an
economic bubble
An economic bubble (also called a speculative bubble or a financial bubble) is a period when current asset prices greatly exceed their intrinsic valuation, being the valuation that the underlying long-term fundamentals justify. Bubbles can be c ...
by experts, who also compared it to the
Dot-com bubble
The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet.
Between 1995 and its peak in March 2000, the Nasdaq Compo ...
.
In March 2021
Mike Winkelmann called NFTs an "irrational exuberance bubble".
By mid-April 2021, demand subsided, causing prices to fall significantly.
Financial theorist
William J. Bernstein
William J. Bernstein (born 1948) is an American financial theorist and neurologist. His research is in the field of modern portfolio theory and he has published books for individual investors who wish to manage their own equity portfolios. He live ...
compared the NFT market to 17th-century
tulip mania
Tulip mania ( nl, tulpenmanie) was a period during the Dutch Golden Age when contract prices for some bulbs of the recently introduced and fashionable tulip reached extraordinarily high levels. The major acceleration started in 1634 and then ...
, saying any
speculative bubble
An economic bubble (also called a speculative bubble or a financial bubble) is a period when current asset prices greatly exceed their intrinsic valuation, being the valuation that the underlying long-term fundamentals justify. Bubbles can be c ...
requires a technological advance for people to "get excited about", with part of that enthusiasm coming from the extreme predictions being made about the product. For regulatory policymakers, NFT has exacerbated challenges such as speculation, fraud, and high volatility.
Money laundering
NFTs, as with other blockchain securities and with traditional art sales, can potentially be used for
money laundering
Money laundering is the process of concealing the origin of money, obtained from illicit activities such as drug trafficking, corruption, embezzlement or gambling, by converting it into a legitimate source. It is a crime in many jurisdictions ...
.
NFTs are often used to perform
Wash Trading by creating several different
wallets
A wallet is a flat case or pouch often used to carry small personal items such as paper currency, credit cards; identification documents such as driver's license, identification card, club card; photographs, transit pass, business cards and oth ...
for one individual, generating several fictitious sales and consequently selling the respective NFT to a third party. According to a report by
Chainalysis
Chainalysis is an American blockchain analysis firm headquartered in New York City. The company was co-founded by Michael Gronager and Jonathan Levin in 2014. Its customers have included the United States's Federal Bureau of Investigation, Drug ...
these types of wash trades are becoming increasingly popular among money launderers especially due to the largely anonymous nature of transactions on NFT marketplaces.
''Looksrare'', created in early 2022, came to be known for the large sums generated through the sale of NFTs in its earliest days, amounting to on a daily basis. These large sums were generated to large parts through wash trading.
As stated in a report by the
Royal United Services Institute
The Royal United Services Institute (RUSI, Rusi), registered as Royal United Service Institute for Defence and Security Studies and formerly the Royal United Services Institute for Defence Studies, is a British defence and security think tank. ...
any risks in relation to money laundering through NFTs could be mitigated through the use of "
KYC best practices, strong cyber security measures and a stolen art registry (...) without restricting the growth of this new market".
Auction platforms for NFT sales may face regulatory pressure to comply with anti-money laundering legislation. Gou Wenjun, the director of the Anti-Money Laundering Monitoring and Analysis Centre for the
People's Bank of China
The People's Bank of China (officially PBC or informally PBOC; ) is the central bank of the People's Republic of China, responsible for carrying out monetary policy and regulation of financial institutions in mainland China, as determined by ...
, expressed that NFTs could "easily become money-laundering tools." Gou elaborated that there is increasing unlawful exploitation of various new cryptographic technologies and that illicit actors often self-identify as innovators of the financial technology sector.
A February 2022 study from the
United States Treasury
The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and t ...
assessed that there was "some evidence of money laundering risk in the high-value art market," including through "the emerging digital art market, such as the use of non-fungible tokens (NFTs)." The study considered how NFT transactions may be a simpler option for laundering money through art by avoiding the transportation or insurance complications in trading physical art. Several NFT exchanges were labeled as virtual asset service providers that may be subject to
Financial Crimes Enforcement Network
The Financial Crimes Enforcement Network (FinCEN) is a bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terr ...
regulations. In March 2022, two people were charged for the execution of a $1,000,000 NFT scheme through
wire fraud
Mail fraud and wire fraud are terms used in the United States to describe the use of a physical or electronic mail system to fraud, defraud another, and are Federal crime in the United States, federal crimes there. Jurisdiction is claimed by the ...
.
The
European Union
The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been des ...
has yet to establish specific regulations to combat money laundering through NFTs. The
European Commission
The European Commission (EC) is the executive of the European Union (EU). It operates as a cabinet government, with 27 members of the Commission (informally known as "Commissioners") headed by a President. It includes an administrative body o ...
announced in July 2022 that it is planning to draw regulations regarding that issue by 2024.
Other uses
* Event tickets have been suggested for sale as NFTs. This would enable event organizers or performers to garner royalties on resales.
* In 2019,
Nike
Nike often refers to:
* Nike (mythology), a Greek goddess who personifies victory
* Nike, Inc., a major American producer of athletic shoes, apparel, and sports equipment
Nike may also refer to:
People
* Nike (name), a surname and feminine give ...
patented a system called CryptoKicks that would use NFTs to verify the authenticity of physical sneakers and would give a virtual version of the shoe to the customer.
* Some private online communities of certain NFT releases.
Standards in blockchains
Specific token standards support various blockchain use cases. Ethereum was the first blockchain to support NFTs with its ERC-721 standard
and this is currently the most widely used. Many other blockchains have added or plan to add support for NFTs.
ERC-721 was the first standard for representing non-fungible digital assets on the Ethereum blockchain. ERC-721 is an inheritable
Solidity
Solidity is an object-oriented programming language for implementing smart contracts on various blockchain platforms, most notably, Ethereum. It was developed by Christian Reitwiessner, Alex Beregszaszi, and several former Ethereum core contri ...
smart contract
A smart contract is a computer program or a transaction protocol that is intended to automatically execute, control or document events and actions according to the terms of a contract or an agreement. The objectives of smart contracts are the re ...
standard; "inheritable" means that developers can create new ERC-721-compliant contracts by copying from a reference implementation. ERC-721 provides core methods that allow tracking the owner of a unique identifier, as well as for the owner to transfer the asset to others.
The ERC-1155 standard offers "semi-fungibility", as well as providing an analogue to ERC-721 functionality (meaning that an ERC-721 asset can be built using ERC-1155). Unlike ERC-721 where a unique ID represents a single asset, the unique ID of an ERC-1155 token represents a class of assets, and there is an additional quantity field to represent the amount of the class that a particular wallet has.
Assets of the same class are interchangeable, and a user can transfer any amount of assets to others.
Issues and criticisms
Unenforceability of copyright
![Right-clicked NFT](https://upload.wikimedia.org/wikipedia/commons/8/8f/Right-clicked_NFT.png)
Because the contents of NFTs are publicly accessible, anybody can easily copy a file referenced by an NFT. Furthermore, the ownership of an NFT on the blockchain does not inherently convey legally enforceable
intellectual property
Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. There are many types of intellectual property, and some countries recognize more than others. The best-known types are patents, cop ...
rights to the file.
It has become well known that an NFT image can be copied or saved from a web browser by using a
right click menu to download the referenced image. NFT supporters disparage this duplication of NFT artwork as a "right-clicker mentality". One collector quoted by ''
Vice
A vice is a practice, behaviour, or habit generally considered immoral, sinful, criminal, rude, taboo, depraved, degrading, deviant or perverted in the associated society. In more minor usage, vice can refer to a fault, a negative character tra ...
'' compared the value of a purchased NFT (in contrast to an unpurchased copy of the underlying asset) to that of a
status symbol
A status symbol is a visible, external symbol of one's social position, an indicator of economic or social status. Many luxury goods are often considered status symbols. ''Status symbol'' is also a sociological term – as part of social and soci ...
"to show off that they can afford to pay that much".
The "right-clicker mentality" phrase spread virally after its introduction, particularly among those who were critical of the NFT marketplace and who appropriated the term to flaunt their ability to capture digital art backed by NFT with ease.
This criticism was promoted by Australian programmer Geoffrey Huntley who created "The NFT Bay", modeled after
The Pirate Bay
The Pirate Bay (sometimes abbreviated as TPB) is an online index of digital content of entertainment media and software. Founded in 2003 by Swedish think tank Piratbyrån, The Pirate Bay allows visitors to search, download, and contribute mag ...
. The NFT Bay advertised a
torrent file
In the BitTorrent file distribution system, a torrent file or meta-info file is a computer file that contains metadata about files and folders to be distributed, and usually also a list of the network locations of trackers, which are compute ...
purported to contain 19
terabyte
The byte is a units of information, unit of digital information that most commonly consists of eight bits. Historically, the byte was the number of bits used to encode a single character (computing), character of text in a computer and for this ...
s of digital art NFT images. Huntley compared his work to an art project from
Pauline Pantsdown
Simon Hunt, sometimes known as Pauline Pantsdown (born c. 1962), is an Australian satirist and Australian Senate candidate who parodied Pauline Hanson, a controversial member of federal parliament, in 1997 and 2016.
His birth name was Simon Hunt, ...
and hoped the site would help educate users on what NFTs are and are not.
Storage off-chain
NFTs that represent digital art generally do not store the associated artwork file on the blockchain due to the large size of such a file, and the limited processing speed of blockchains. Such a token functions like a certificate of ownership, with a
web address
A Uniform Resource Locator (URL), colloquially termed as a web address, is a reference to a web resource that specifies its location on a computer network and a mechanism for retrieving it. A URL is a specific type of Uniform Resource Identifie ...
that points to the piece of art in question; this however makes the art itself vulnerable to
link rot
Link rot (also called link death, link breaking, or reference rot) is the phenomenon of hyperlinks tending over time to cease to point to their originally targeted file, web page, or server due to that resource being relocated to a new address ...
.
Environmental concerns
NFT purchases and sales are enabled by the high energy usage, and consequent
greenhouse gas emissions
Greenhouse gas emissions from human activities strengthen the greenhouse effect, contributing to climate change. Most is carbon dioxide from burning fossil fuels: coal, oil, and natural gas. The largest emitters include coal in China and lar ...
, associated with blockchain transactions.
Though all forms of Ethereum transactions have an impact on the environment, the direct impact of the transaction is also dependent upon the size of the Ethereum transaction. The
proof-of-work
Proof of work (PoW) is a form of cryptographic proof in which one party (the ''prover'') proves to others (the ''verifiers'') that a certain amount of a specific computational effort has been expended. Verifiers can subsequently confirm this exp ...
protocol required to regulate and verify blockchain transactions on networks such as
Ethereum
Ethereum is a decentralized, open-source blockchain with smart contract functionality. Ether (Abbreviation: ETH; sign: Ξ) is the native cryptocurrency of the platform. Among cryptocurrencies, ether is second only to bitcoin in market capita ...
consumes a large amount of electricity. To estimate the
carbon footprint
A carbon footprint is the total greenhouse gas (GHG) emissions caused by an individual, event, organization, service, place or product, expressed as carbon dioxide equivalent (CO2e). Greenhouse gases, including the carbon-containing gases carbo ...
of a given NFT transaction requires a variety of assumptions or estimations about the manner in which that transaction is set up on the blockchain, the economic behavior of blockchain miners (and the energy demands of their mining equipment), and the amount of renewable energy being used on these networks. There are also conceptual questions, such as whether the carbon footprint estimate for an NFT purchase should incorporate some portion of the ongoing energy demand of the underlying network, or just the marginal impact of that particular purchase.
An analogy might be the carbon footprint associated with an additional passenger on a given airline flight.
Some NFT technologies use validation protocols, such as
proof of stake
Proof-of-stake (PoS) protocols are a class of consensus mechanisms for blockchains that work by selecting validators in proportion to their quantity of holdings in the associated cryptocurrency. This is done to avoid the computational cost of ...
, that use much less energy per validation cycle. Other approaches to reducing electricity include the use of off-chain transactions as part of minting an NFT.
A number of NFT art sites hope to address these concerns, and some are moving to technologies and protocols with lower associated footprints. Others now allow the option of buying carbon offsets when making NFT purchases, although the environmental benefits of this have been questioned. In some instances, NFT artists have decided against selling some of their own work to limit carbon emission contributions.
Artist and buyer fees
Sales platforms charge artists and buyers fees for minting, listing, claiming, and secondary sales. Analysis of NFT markets in March 2021, in the immediate aftermath of Beeple's "Everydays: the First 5000 Days" selling for million, found that most NFT artworks were selling for less than , with a third selling for less than .
Those selling NFTs below $100 were paying platform fees between 72.5% and 157.5% of that amount. On average the fees make up 100.5% of the price, meaning that such artists were on average paying more money in fees than they were making in sales.
Plagiarism and fraud
There have been cases of artists and creators having their work sold by others as an NFT without permission.
After the artist Qing Han died in 2020, her identity was assumed by a fraudster and a number of her works became available for purchase as NFTs. Similarly, a seller posing as
Banksy
Banksy is a pseudonymous England-based street artist, political activist and film director whose real name and identity remain unconfirmed and the subject of speculation. Active since the 1990s, his satirical street art and subversive epigrams ...
succeeded in selling an NFT supposedly made by the artist for $336,000 in 2021; the seller refunded the money after the case drew media attention. In 2022, it was discovered that as part of their NFT marketing campaign, an NFT company that voice actor
Troy Baker
Troy Baker (born April 1, 1976) is an American voice actor and musician. Baker is known for his video game roles, including Joel Miller in ''The Last of Us'' (2013) and its sequel (2020), Booker DeWitt in ''BioShock Infinite'' (2013), Samuel ...
announced his partnership with had plagiarized voice lines generated from
15.ai, a free
AI text-to-speech
Speech synthesis is the artificial production of human speech. A computer system used for this purpose is called a speech synthesizer, and can be implemented in software or hardware products. A text-to-speech (TTS) system converts normal languag ...
project.
The anonymity associated with NFTs and the ease with which they can be forged make it difficult to pursue legal action against NFT plagiarists.
Some NFT marketplaces responded to cases of plagiarism by creating "takedown teams" to respond to artist complaints. The NFT marketplace
OpenSea
OpenSea is an American online non-fungible token (NFT) marketplace headquartered in New York City. The company was founded by Devin Finzer and Alex Atallah in 2017.
OpenSea offers a marketplace allowing for non-fungible tokens to be sold directly ...
has rules against plagiarism and
deepfake
Deepfakes (a portmanteau of "deep learning" and "fake") are synthetic media in which a person in an existing image or video is replaced with someone else's likeness. While the act of creating fake content is not new, deepfakes leverage powerful ...
s (non-consensual intimate imagery). Some artists criticized OpenSea's efforts, saying they are slow to respond to takedown requests and that artists are subject to support scams from users who claim to be representatives of the platform.
Others argue that there is no market incentive for NFT marketplaces to crack down on plagiarism.
* A process known as "sleepminting" allows a fraudster to mint an NFT in an artist's wallet and transfer it back to their own account without the artist becoming aware.
This allowed a
white hat
White hat, white hats, or white-hat may refer to:
Art, entertainment, and media
* White hat, a way of thinking in Edward de Bono's book ''Six Thinking Hats''
* White hat, part of black and white hat symbolism in film
Other uses
* White hat (compu ...
hacker to mint a fraudulent NFT that had seemingly originated from the wallet of the artist
Beeple
Michael Joseph Winkelmann (born 20 June 1981), known professionally as Beeple, is an American digital artist, graphic designer, and animator known for selling NFTs. In his art, he uses various mediums to create comical, phantasmagoric works that ...
.
* Plagiarism concerns led the art website
DeviantArt
DeviantArt (historically stylized as deviantART) is an American online art community that features artwork, videography and photography, launched on August 7, 2000 by Angelo Sotira, Scott Jarkoff, and Matthew Stephens among others.
DeviantArt, ...
to create an algorithm that compares user art posted on the DeviantArt website against art on popular NFT marketplaces. If the algorithm identifies art that is similar, it notifies and instructs the author how they can contact NFT marketplaces to request that they take down their plagiarized work.
* The BBC reported a case of insider trading when an employee of the NFT marketplace
OpenSea
OpenSea is an American online non-fungible token (NFT) marketplace headquartered in New York City. The company was founded by Devin Finzer and Alex Atallah in 2017.
OpenSea offers a marketplace allowing for non-fungible tokens to be sold directly ...
bought specific NFTs before they were launched, with prior knowledge those NFTs would be promoted on the company's home page. NFT trading is an unregulated market in which there is no legal recourse for such abuses.
* The price paid for specific NFTs and the sales volume of a particular NFT author may be artificially inflated by
wash trading, which is prevalent due to a lack of government regulation on NFTs.
* When
Adobe
Adobe ( ; ) is a building material made from earth and organic materials. is Spanish for ''mudbrick''. In some English-speaking regions of Spanish heritage, such as the Southwestern United States, the term is used to refer to any kind of e ...
announced they were adding NFT support to their graphics editor
Photoshop
Adobe Photoshop is a raster graphics editor developed and published by Adobe Inc. for Windows and macOS. It was originally created in 1988 by Thomas and John Knoll. Since then, the software has become the industry standard not only in raster ...
, the company proposed creating an
InterPlanetary File System
The InterPlanetary File System (IPFS) is a protocol, hypermedia and file sharing peer-to-peer network for storing and sharing data in a distributed file system. IPFS uses content-addressing to uniquely identify each file in a global namespace ...
database as an alternative means of establishing authenticity for digital works.
Security
In January 2022, it was reported that some NFTs were being exploited by sellers to unknowingly gather users’
IP address
An Internet Protocol address (IP address) is a numerical label such as that is connected to a computer network that uses the Internet Protocol for communication.. Updated by . An IP address serves two main functions: network interface ident ...
es. The "exploit" works via the off-chain nature of NFT, as the user's computer automatically follows a web address in the NFT to display the content. The server at the address can then log the IP address and, in some cases, dynamically alter the returned content to show the result. OpenSea has a particular vulnerability to this loophole because it allows HTML files to be linked.
Pyramid/Ponzi scheme claims
Critics compare the structure of the NFT market to a
pyramid
A pyramid (from el, πυραμίς ') is a structure whose outer surfaces are triangular and converge to a single step at the top, making the shape roughly a pyramid in the geometric sense. The base of a pyramid can be trilateral, quadrilat ...
or
Ponzi scheme
A Ponzi scheme (, ) is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. Named after Italian businessman Charles Ponzi, the scheme leads victims to believe that profits are comin ...
, in which early adopters profit at the expense of those buying in later. In June 2022,
Bill Gates
William Henry Gates III (born October 28, 1955) is an American business magnate and philanthropist. He is a co-founder of Microsoft, along with his late childhood friend Paul Allen. During his career at Microsoft, Gates held the positions ...
stated his belief that NFTs are "100% based on
greater fool theory
In finance, the greater fool theory suggests that one can sometimes make money through the purchase of overvalued items with a purchase price drastically exceeding the intrinsic valueif those assets can later be resold at an even higher price.
I ...
".
"Rug pull" exit scams
A "rug pull" is a scam, similar to an
exit scam
An exit scam is a confidence trick where an established business stops shipping orders while receiving payment for new orders. If the entity had a good reputation, it could take some time before it is widely recognized that orders are not shipping ...
or a
pump and dump
Pump and dump (P&D) is a form of securities fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price. Once the operat ...
scheme, in which the developers of an NFT or other blockchain project hype the value of a project to pump up the price and then suddenly sell all their tokens to lock in massive profits or otherwise abandon the project while removing liquidity, permanently destroying the value of the project.
Rug pulls have become an increasingly common hazard when buying NFTs, with the proceeds of some rug pulls being valued at hundreds of thousands or even millions of dollars. Rug pulls accounted for 37 percent of all crypto-related scam revenue in 2021, according to one analysis.
In popular culture
A comedy sketch on the March 27, 2021, episode of ''
Saturday Night Live
''Saturday Night Live'' (often abbreviated to ''SNL'') is an American late-night live television sketch comedy and variety show created by Lorne Michaels and developed by Dick Ebersol that airs on NBC and Peacock. Michaels currently serves a ...
'' featured characters explaining NFTs through rap to US Treasury Secretary
Janet Yellen
Janet Louise Yellen (born August 13, 1946) is an American economist serving as the 78th United States secretary of the treasury since January 26, 2021. She previously served as the 15th chair of the Federal Reserve from 2014 to 2018. Yellen is t ...
, as played by
Kate McKinnon
Kate McKinnon Berthold (born January 6, 1984) is an American actress, comedian, and writer. She is known for her character work and celebrity impressions on the sketch comedy series ''Saturday Night Live'' (2012–2022), of which she was a cas ...
.
The 2021
Paramount+
Paramount (from the word ''paramount'' meaning "above all others") may refer to:
Entertainment and music companies
* Paramount Global, also known simply as Paramount, an American mass media company formerly known as ViacomCBS. The following busin ...
television film ''
South Park: Post Covid: The Return of Covid'' featured an adult version of
Butters Stotch
Leopold "Butters" Stotch is a fictional character in the adult animated television series ''South Park''. He is voiced by series co-creator Matt Stone and loosely based on co-producer Eric Stough. He is a student at South Park Elementary School. ...
in his Professor Chaos persona tricking people into purchasing NFTs in 2061. The film portrays them as a poor investment, and Chaos has grown so adept at selling them that he is locked in a mental institution.
See also
*
Decentralized autonomous organization
*
Web3
Web3 (also known as Web 3.0) is an idea for a new iteration of the World Wide Web which incorporates concepts such as decentralization, blockchain technologies, and token-based economics. Some technologists and journalists have contrasted it w ...
Notes
References
External links
*
{{Cryptocurrencies, state=expanded
Blockchain and auctions
Digital art
Blockchain art