NFTs were in the news in April. The Los Angeles Times had a front-page story. Several articles appeared in the Wall Street Journal. (links included in this post).
In this blog post, I’ll give excerpts from these sources to provide some basics on NFTs and these case studies. (UPDATE 5.10.21 added Case Study #7)
What are NFTs?
Let’s start with the basics..
This definition of NFTs is from a page on the Graphic Artists Guild (GAG) website: https://graphicartistsguild.org/non-fungible-what/?fbclid=
NFT: Non Fungible Token
“Non-fungible” means something unique which cannot be interchanged, and “token” means something which represents something else. As with the cryptocurrencies bitcoin and ether, NFTs reside in the blockchain. However, similar to real currencies (and unlike NFTs), cryptocurrencies are interchangeable in divisible units. NFTs exist as unique, whole tokens. While each NFT contains a non-transferable identity that can’t be altered, they are extensible – two NFTs can be combined to create a third unique NFT.
Since they are unique, NFTs can “tokenize” digital assets, like artwork, animations, music, digital real estate, and even the first-ever tweet. NFTs permit transactions that are simplified and efficient. Since the data about the NFT is permanently encoded within the blockchain, there is a lower risk of fraud in the NFT purchase transaction. For artists, NFTs permit transactions directly with art buyers, eliminating the middleman. The blockchain metadata fields for an NFT can contain information the artist may want to include, such as their signature, licensing terms, or copyright transfer. Many NFT marketplaces also permit artists to set a resale fee so that as their artwork is sold from buyer to buyer, they receive a passive income.
What is essential to understand about NFTs is that the digital artwork itself does not reside within the blockchain with the NFT. Instead, the NFT functions as a frame that points to an address for the artwork. Independent reporter Amy Castor writes on financial fraud and cryptocurrencies. As she puts it, “Really, an NFT is simply proof that an object exists.” Unless the artist has explicitly included usage rights or a transfer of copyright as part of the transaction, the NFT does not transfer any rights to the artwork. The buyer of an NFT can’t prevent other people from viewing the artwork, downloading it, or otherwise control that work outside whatever safeguards exist on the server on which the artwork resides.
So, what exactly is the buyer getting when they purchase an NFT? Essentially, the buyer purchases proof of ownership and authenticity – or “bragging rights” – to an original piece of digital artwork. The purchase includes whatever terms or information the artist decides to include within the blockchain data fields. Some artists include copyrights, licensing options, or even printed, signed copies of the artwork to sweeten the deal.”
The GAG website page on NFTs includes sections on “Buyer Beware,’ “Artist Be Aware,” and “To Tokenize or Not,” as well as a link for an NFT resource list.
Five Case Studies
Case Study #1
“Who Can Sell a Wonder Woman NFT?”
by Matt Pearce APRIL 14, 2021
Artist José Delbo worked for decades drawing superheroes for Marvel and DC. Now in his late 80s, he had been making money at conventions selling “fan art” of favorite characters. It’s not just for fun.. it’s often the retirement plan for indie artists in comics. Covid shutdown conventions and this income stream. Delbo’s grandson introduced him to NFTs. Here’s an excerpt from the article about what happened next…
“NFTs, or nonfungible tokens, are unique pieces of code that work like electronic certificates of authenticity. NFTs make it possible to buy and sell things like JPEGs of Major League Baseball cards, video clips of NBA highlights, virtual sneakers or even an NFT “flavor” of Pringles crisps using cryptocurrency. Think of it as an electronic deed for an electronic house.
Serious comics fans have spent hundreds or thousands of dollars for Delbo’s superheroes drawn on paper, so why not try the same thing online with NFTs?
The experiment paid off. This spring, as the rest of the world was scrambling to understand the NFT phenomenon, fans paid the equivalent of nearly $2 million for a set of NFTs by Delbo and the two-person artist team Hackatao featuring DC Comics character Wonder Woman.
“I have been able to take my art to a whole new place,” Delbo said on Twitter of his late-career pivot. Delbo’s latest drop, featuring a new, original hero, netted more than $1 million.
Comic artists dreaming of similar NFT paydays may not be so lucky. Especially if their images include highly profitable intellectual property controlled by DC Comics, Marvel or other studios. As the initial thrill of this spring’s NFT craze recedes, the new technology has started exposing age-old tensions between rank-and-file creatives and powerful entertainment corporations over who gets to prosper from a new market. In the comic book industry, that’s not been a fight that many artists win.
Shortly after Delbo’s sale, DC — which like Marvel long has allowed artists to sell original ink-and-paper drawings used in comic books — sent a notice to artists forbidding the minting of NFTs with DC characters.
“As DC examines the complexities of the NFT marketplace and we work on a reasonable and fair solution for all parties involved, including fans and collectors, please note that the offering for sale of any digital images featuring DC’s intellectual property with or without NFTs, whether rendered for DC’s publications or rendered outside the scope of one’s contractual engagement with DC, is not permitted,” said the letter from Jay Kogan, DC’s senior vice president for legal affairs.
Marvel sent a similar notice after artists auctioned NFTs of their original artwork of Marvel characters.
The warnings landed heavily in an industry where crossing Marvel or DC can hobble an artist’s ability to work on high-profile projects.
Popular comic artist Kode Abdo, known as BossLogic, canceled an NFT drop for art themed on the movie “Zack Snyder’s Justice League” after DC became concerned that “NFT projects have made substantial revenues without permission or consideration for studio IP,” he wrote on Instagram.
Jason Schachter, a comic art dealer whose NFT sales of current Marvel artists’ NFT art is thought to have prompted the company’s crackdown, said both Marvel and DC had written letters “asking us to put a pause on selling any NFTs with their licensed properties.”
“It’s not in our best interests to bite the hand that feeds us,” said Schachter, who halted NFT sales to maintain what he says have been good relationships with Marvel and DC. Marvel and DC declined to comment for this story.”…..
…This article also goes into some of the history of IP and comics…
“DC and Marvel have made billions and dominated the comics world by protecting their rights to characters like Batman and Wolverine, marketing the images to millions of fans through comics and movies as well as toys, T-shirts and video games. Those projects, however, are made possible by an army of artists — many of them contractors who don’t receive health benefits and have struggled for decades for greater recognition and creative rights.
“It’s tough to make a living doing comic book art,” said Jimmy Palmiotti, a comic publisher, writer and artist who has worked for Marvel and DC Comics. “There’s no union. There’s no retirement. There’s no parachute. You have to constantly hustle. The companies know there’s a ton of talent all over the world willing to draw comics for next to nothing, and they’re willing to take advantage of it.”
As the first Superman movie began development in the 1970s, it was revealed that the Man of Steel’s creators from the 1930s, Jerry Siegel and Joe Shuster, did not initially stand to cash in from the comic industry’s expansion into a lucrative new market. Industry activism in that era resulted in artists winning the ability to sell their finished pages to fans as collectibles after the publishers put out the comic book.
Some Marvel and DC artist contracts appear to strictly limit even those rights, according to recent agreements reviewed by The Times. One contract said the original “physical” (not digital) art remained the property of Marvel, “but shall be returned to Talent as a courtesy” and allowed to be sold according to Marvel’s art-return policy, “as determined from time to time by Marvel.” Translation: Marvel makes the rules.
DC’s legal rights, asserted in one artist’s contract, appeared to be even more sweeping. While paper original sales are allowed, the artist otherwise assigns ownership of the comic art to DC “and all other rights to exploit the Work in all media now known or hereafter devised, throughout the universe, in perpetuity.”
Many fans may not realize that these labor arrangements are why some comic book artists illustrate covers and major inside “splash” pages on paper, while producing less-important pages digitally. Digital art often can be easier to produce, but paper pages can be sold to collectors once the publishers are done with them. That’s why Batman might get drawn on paper while his butler, Alfred, might get drawn on a screen.
But as more comic artists’ work migrates onto the digital space, some worry this creative right from the print era might disappear.”
Case Study #2
WALL STREET JOURNAL
“NFTs the Method to the Madness”
By Jason Zweig March 19, 2021
This article gives basics on NFTs including the sale of an NFT of this popular image:
“You’ve heard of nonfungible tokens even if you don’t yet know what they are—because the people buying them sound so crazy. In February, an NFT representing the Nyan Cat video meme, which looks like a feline Pop-Tart dragging a rainbow through outer space, sold for more than $500,000. A video NFT of LeBron James dunking a basketball sold for $208,000. On March 11, an NFT attached to a digital collage by the artist known as Beeple sold at Christie’s for $69 million.
Although such prices are baffling—and may, in fact, be crazy—NFTs could solve problems that have dogged the art world and other markets for centuries. Think of a nonfungible token as a unique digital serial number that certifies the authenticity and ownership history of an associated object.
That information, along with other data, is recorded on a blockchain. This is a ledger, or immutable record, that resides on a decentralized network of computers world-wide. The blockchain technology underpins bitcoin and ethereum, the leading cryptocurrencies. Any of the ledger’s millions of users can instantly verify that the information is accurate and complete.
By connecting the blockchain to art and other creative work, NFTs bring the objectivity of computer code to fields that are notorious for subjectivity. Artists, writers and musicians struggle to find audiences and make a living. Curators, dealers, collectors and art historians bicker nonstop about the quality and value—and the authenticity—of major works.
Consider the French artist Jean-Baptiste-Camille Corot, who was jokingly said to have painted 3,000 canvases, 10,000 of which were bought in the U.S. Is a particular Corot genuine or a forgery? Who were its previous owners? Has it ever been exhibited at a museum or previously sold at auction? Was it ever seriously damaged and extensively restored?
Until now, buyers often had to take the answers to such questions on faith. An NFT, however, can integrate reams of information about an artwork into an authoritative, permanent digital record.
Case Study #3
WALL STREET JOURNAL
“Artists Jump into NFTs”
By Kelly Crow April 5, 2021
“An NFT frenzy is raging and artists want in. From museum darlings to digital upstarts, artists across the marketplace say nonfungible tokens could be a game-changer, roiling gallery loyalties and reshaping what creators can demand financially and how they work.
NFTs are tokens that amount to digital certificates of authenticity and allow images that exist only on screens to be traded and tracked.
Top-tier artists like Damien Hirst and John Gerrard already are converting some of their works into NFTs. Now, Urs Fischer is diving in. The 47-year-old Swiss-born artist will offer his first NFT, “Chaos #1 Human,” on Fair Warning, an auction app, on April 11. The animated work depicts a 3D scan of a brown egg and a cigarette lighter slowly colliding and moving through each other. It is part of a new series exploring cultural artifacts through hundreds of NFT pairings of everyday objects that will be capped with one amalgamation of all 1,000 images.
The rest of the art world is still catching up to what NFTs do and how they might transform transactions. Museum trustees said they are adding cryptocurrency to their portfolios—while dealers and art advisers are trying to pinpoint which NFT artists are trendy. Auction houses, early out of the gate, are tacking on classes to teach collectors the ropes. On April 26, Christie’s education arm will hold a three-day online course titled the “Comprehensive Guide to NFTs.”
Case Study #4
WALL STREET JOURNAL
“Digital Artist Pak Sells NFT Works for 17 Million”
By Kelly Crow April 14, 2021
“(Artist) Pak maintains a cryptic persona and has declined through a Sotheby’s spokesman to confirm any biographical details, other than to prefer the pronouns “they/them.” It also remains unclear if Pak represents an individual or a group of designers.
Pak’s auction will likely elevate the artist’s profile in traditional art circles. Until now, the artist was best known for The Archillect, a social-media feed Pak designed to be run and curated by an algorithm of artificial intelligence. Even so, Pak is widely known in digital design circles for creating sleek, wryly conceptual artworks that explore ideas about value and ownership, and this latest series, “The Fungible Collection,” explores the NFT world’s market aspects in fresh way
Max Moore, the Sotheby’s specialist overseeing the sale, said, “Some people think there’s a stigma to buying a JPEG, but once you dive into the technology, there is a conceptual sophistication that’s not possible anywhere else in art,” adding, “With Pak, we’re just scratching the surface.”
Mr. Moore said the house broke with auction convention by allowing the artist to sell an open edition—or a conceivably endless supply—of “Cubes,” and nearly 20,000 cubes sold for $500 apiece during a 15-minute time slot on the sale’s first day. That amounted to nearly $10 million on Monday alone. Similar time slots were opened on Tuesday and Wednesday—attracting so much traffic on Tuesday that Nifty Gateway’s site temporarily bogged until the glut of credit-card transactions could get processed. All in, the artist sold 23,598 cubes to 3,080 people for a combined $14 million.
After the cube sale opened, Pak added another twist by saying these NFTs could be “burned," or destroyed and thereby converted from unique art tokens back into the artist’s newly created cryptocurrency dubbed ASH—a crazy-eight value loop that could befuddle traditional collectors but appeal to cryptocurrency veterans accustomed to plying their fortunes into tradable digital coins.
Colin Goltra, a Manila-based executive at a cryptocurrency exchange said he bought cubes and followed the sale, and the artist, closely. He says, “Pak is our Picasso.”
Case Study #5
“What’s an NFT?”
by Nadja Sayej March 17,2021
“Christie’s auction house made headlines last week with a groundbreaking digital art sale—the first purely digital artwork has sold for $69 million. This is the latest craze in the art world, as NFTs, or “non-fungible tokens,” are seeing a gold rush in the art market.
An NFT is a special type of cryptographic token that acts as a digital stamp of authenticity. This digital artwork, called Beeple’s Opus, is created by Beeple (the art moniker of South Carolina artist Mike Winkelmann). It is a collection of 5,000 images, including photographs, illustrations, digital sketches, and abstract 3-D renderings that traces the evolution of the artist over the past 13 and a half years. Noah Davis, a contemporary art specialist at Christie’s New York, calls this artwork as “a kind of Duchampian readymade.”
Now, Beeple is the third-most-valued artist, in terms of auction prices, after David Hockney and Jeff Koons. The artist shared his own disbelief on Twitter. This one NFT sale signals a shift in the art world. “Digital art is a long established medium; however, it wasn’t until the introduction of NFTs and blockchain technology that these artists were able to stake their claim in the art market,” says Davis. “It was a vote of confidence in the artistic community, from both the crypto-art market and the traditional art world.”….
…..One can only buy a NFT, as a “purely digital” artwork, with cryptocurrency. This one is collected through Ether, and its proof of ownership is recorded on the Ethereum blockchain. This completely original digital signature has information recorded and encrypted through its blockchain ledger with numbers and letters and can’t be copied.”
Case Study #6
"The World Knows Her as ‘Disaster Girl.’ She Just Made $500,000 Off the Meme"
By Marie FazioApril 29, 2021
Excerpt: "The name Zoë Roth might not ring any bells. But chances are you’ve seen her photo.
One Saturday morning in 2005, when Ms. Roth was 4 years old, her family went to look at a house on fire in their neighborhood in Mebane, N.C. Firefighters had intentionally set the blaze as a controlled fire, so it was a relaxed affair: Neighbors gathered and firefighters allowed children to take turns holding the hose.
Ms. Roth remembers watching the flames engulf the house when her father, an amateur photographer, asked her to smile. With her hair askew and a knowing look in her eyes, Ms. Roth flashed a devilish smirk as the fire roared behind her. “Disaster Girl” was born.
In the years since Dave Roth, Zoë’s father, entered it in a photo contest in 2007 and won, the image has been edited into various disasters from history, with Ms. Roth grinning impishly as a meteor wipes out the dinosaurs or the Titanic sinks in the distance. Now, after more than a decade of having her image endlessly repurposed as a vital part of meme canon, Ms. Roth has sold the original copy of her meme as a nonfungible token, or NFT, for nearly half a million dollars.
The meme sold for 180 Ether, a form of cryptocurrency, at an auction on April 17 to a user identified as @3FMusic. As with any currency, the value of Ether fluctuates, but as of Thursday, 180 Ether was valued at more than $495,000. The Roths retained the copyright and will receive 10 percent of future sales.
The market for ownership rights to digital art, ephemera and media known as NFTs, is exploding. All NFTs, including the “Disaster Girl” meme Ms. Roth just sold, are stamped with a unique bit of digital code that marks their authenticity, and stored on the blockchain, a distributed ledger system that underlies Bitcoin and other cryptocurrencies.
In the meme hall of fame, “Disaster Girl” ranks alongside “Ermahgerd,” a pigtailed teenage girl posing with “Goosebumps” books; “Bad Luck Brian,” immortalized in a grimacing yearbook photo with braces; and “Success Kid,” a toddler on a beach with a clenched fist and an expression of intense determination.
In an interview, Ms. Roth said selling the meme was a way for her to take control over a situation that she has felt powerless over since she was in elementary school.
Before making the decision to sell, Ms. Roth consulted “Bad Luck Brian” himself — his real name is Kyle Craven — and Laney Griner, the mother of “Success Kid.”
“It’s the only thing that memes can do to take control,” Ms. Roth recalled Mr. Craven telling her.
“Disaster Girl” memes have spread far and wide. Once, a group from Poland asked permission to use the meme for educational material about a dying Indigenous language. Someone in Portugal sent Ms. Roth pictures of a mural with the meme…..
…..(Now a university senior)…After graduation, Ms. Roth plans to take a gap year before pursuing a graduate degree in international relations. She said she would donate the fortune she has made from her likeness — which is still in cryptocurrency form — to charities and to pay off her student loans, among other things.
When she’s home, she often walks past the lot where it all started and wonders if locals know that it’s a “meme place,” she said.
“People who are in memes didn’t really have a choice in it,” she said. “The internet is big. Whether you’re having a good experience or a bad experience, you kind of just have to make the most of it.”
Ben Lashes, who manages the Roths and stars of other memes including “Nyan Cat,” “Grumpy Cat,” “Keyboard Cat,” “Doge,” “Success Kid,” “David After Dentist” and the “Ridiculously Photogenic Guy,” said his clients had cumulatively made over $2 million in NFT sales."
He said that NFT sales had helped establish memes as a sophisticated art form and “serious pieces of culture.”
Case Study #7
LA TIMES Op-Ed
"What do you acquire when you buy an NFT?"
by Margaret Wertheim 5.9.21
Excerpt: "....What is this beautiful, special thing you acquire when you buy an NFT? It is not generally the artwork. Rather, what one is buying is a digital “token” that, strictly speaking, refers to a transaction.
Digging into Foundation’s website, the limitations of NFTs become clear. The site’s “Community Guidelines” state that a collector of an NFT “can’t claim legal ownership, copyrights, trademarks, or other intellectual property rights” to a work. What the buyer acquires is an “NFT that represents the artwork on the blockchain.”
This crypto-jargon is rarely unpacked. In layman’s terms it means that when you purchase an NFT you are literally buying an entry in an online ledger — which is to say data on a “blockchain.” Most often an NFT-affiliated artwork will be a digital file of an image, a video or an animation. The blockchain doesn’t contain this file, or only very rarely. Rather, it contains a link to a database where a copy of the file is stored.
While crypto-art enthusiasts make much of the uniqueness of NFTs, they are unique in the way a bar code is. A bar code is a distinct identifier associated with an object, say a pair of sneakers or a can of sardines. Bar codes enable stores to keep track of inventory; NFTs allow keepers of a blockchain to keep track of transactions about a file.
As to what’s in this file: It may be best thought of as a representation of an artwork. There may well be more than one such representation (just as there are multiple cans of sardines), each with its own blockchain entry and its own NFT. Canadian musician Grimes made several million dollars selling hundreds of NFTs for copies of two short videos with cherub images.
In a sense this is the digital equivalent of a photograph or print that’s part of a numbered edition. One difference with an NFT is that the exact image it links to is probably available online for anyone to enjoy as much as the collector who’s paid thousands of dollars for a token.
Sometimes, NFTs are connected to physical things, as was the case with the disappearing Basquiat. High-end sneakers, expensive streetwear and baseball cards are some of the items now on offer via NFTs, which act here as a kind of ownership certificate. In the spirit of Andy Warhol, I’d like to mint an NFT for a can of Campbell’s soup.
It’s possible the creator of an NFT-affiliated work may also sell its copyright as part of the deal. The Basquiat sellers claimed to be offering “all related IP and copyright in perpetuity.” (IP being “intellectual property.”) Yet this is the exception. Most “minters” of NFTs retain subsidiary rights.
Perhaps the rights NFT collectors most highly value are bragging rights: They can say they “own” a work. Yet their copy has no special qualities aside from its NFT, so under the hood of the hype, the frenzy is about the token, in which there is now a booming secondary market.
It’s hard not to see this as a case of digital tulip fever. Can you imagine paying millions of dollars for a bar code? Then again, perhaps this is the apotheosis of Warhol’s soup can strategies — attributing value to that which seems the most banal.
Art NFTs put me in mind of film auteur Werner Herzog’s distinction between the “truth of accountants” and “ecstatic truth.” NFT mavens wax lyrical about the “authenticity” of these tokens as if they are trading a semi-divine quality, yet the authenticity encoded by an NFT is the same kind encoded by a transaction number on a credit card statement. They are a dressed-up species of bookkeeping. What art needs is less auditing and more ecstasy.
Moreover, there are serious legal issues. Will databases containing NFT-linked files disappear, as Myspace did? Already, defunct links have caused collectors to lose access to files. If an artist or minter forgets the “seed phrase” (a passcode) to their “digital wallet,” they lose access to the proceeds of sales with no recovery path.
And does the minter really own the underlying work, or its rights? Fraud is rife. Scams abound. Misunderstandings, shall we say. The Basquiat sellers seem to have misunderstood basic copyright law.
On April 28, the artist’s estate intervened in the Basquiat offer. “No license or rights were conveyed to the seller,” we learned. The drawing’s owner could not legally reproduce it or reuse it in any way. It all went pfft — there was no legitimate NFT.
So, buyer, beware. The real value in NFTs may well be this: a bonanza for copyright lawyers."