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article imageOp-Ed: NFTs – Great idea, but risks, laws and sleaze factors emerging

By Paul Wallis     Mar 15, 2021 in Technology
Sydney - NFTs, “non-fungible tokens” are huge news. They’re making millions, unheard-of amounts of money, for artists. The problem is that big money can attract big trouble. …And NFTs are spreading, fast, to other areas.
If you read the torrent-level headlines on the subject of NFTs, you’ll see an emerging picture of hard sell, confusion, disputes, and some disturbing amounts of money changing hands in crypto form.
Let’s start with the basics:
1. Non-fungible means the item for sale is effectively a commodity. See TechRadar’s very useful, simple guide. This is actually a pretty realistic approach in all types of media, where works are copied. Prints are the commodity versions of paintings.
2. Your NFT is certified by the creator of the work for sale. There’s a strong element of intellectual property protection in the basic idea. That appeals to artists and creators, who are way too used to getting ripped off.
3. An NFT is a right to use the item purchased. It’s not ownership of the artwork, music, etc. and even Tweets.
4. NFTs may be short-circuited by unauthorized copies of the items being sold. This has led to a roar of protest online, and it’s a very tough issue. This is quite specifically also the exact opposite of the intention of NFTs. See leading NFT operator KnownOrigin’s Terms of Service for a very well-laid-out, absolutely clear description of who does what and who owns what. I’ve read a lot of TOS in my work as a B2B writer, and this one is a classic.
5. NFTs are unique. Each NFT is a discreet identity, a sort of accountant’s fantasy of propriety. …To a point. The propriety can be under strain when enough digits turn into dollars, and that’s what seems to be happening.
6. NFTs use blockchains and cryptocurrency, a bit of an edgy issue for some who know how volatile cryptos can be. Blockchain, however, also helps to establish the “forever” aspect of the transactions, instantly visible, and helping to authenticate NFTs.
7. Artists can negotiate splits of returns on their works to NFT platforms and other users. This is very complex, but it’s basically similar to royalties deals.
Do NFTs have the blessings of the art world? Ah…um…sorta…maybe…
I got lucky and found a very constructive, thoughtful critique of NFTs on artnet.com. The critique is pretty objective. What will NFTs do for art and artists? Artnet.com doesn’t seem too sold on the freedom and democratization of art rhetoric. Few artists would be. Ripping off creative work is rampant in the art and music sectors and sometimes fashion. “Idealism” isn’t a practical mindset for most creative people.
The expectation is of a bubble. The big money could just go elsewhere. NFTs are fashionable now; doesn’t mean that they will be a year from now. Big money is going in to NFTs, but it’s going in on the expectation of big money coming out. If that doesn’t happen, bye-bye NFTs, and probably fast.
This very understandable, and to some extent, obvious cynicism is missing a point or two, though:
1. NFTs provide access to unique media which is subject to IP laws. That means your adventurous production people can access top quality artworks not available elsewhere legally and with real returns to the certifying artist. That’s a hell of a lot better than the usual smash and grab you see in the music industry, for example, or the stuffy, suffocating high-end arts sector. As a legal transaction, NFTs are actually pretty good all round for this sort of content acquisition.
2. Distribution may be “cute”, in terms of who can access these media works, but it’s also very practical. This is mass marketing by other means in one sense, but it’s good practical digital distribution, too. Consider the rights issues when using anything at all you see online. NFTs are a workable solution to that very sore point with creators.
3. There’s room for expansion and refinement of NFTs. It would not be at all incomprehensible for “reseller” NFTs to do the delegated distribution, for example. You could have specialists working on movies, virtual reality components, etc. These would be experts, the sort of people who do the backroom work on most media productions. They need access to the things they work with, and NFTs can do that.
Sleaze? Could be, and it’s no use to anyone.
I really don’t want to throw a spanner, let alone any ugliness, into this generally highly productive idea. There are some underlying issues here, and it’s not the NFTs’ fault:
Big money means an instant sleaze factor component by definition. NFTs in the tens of millions of dollars could well mean big time money laundering. This environment has all the hallmarks of “add a few zeroes” – The money vanishes into an NFT. The NFT has intrinsic value, so the money launderer can also make money. Add crypto moves, and that original value could be easily manipulated.
Blockchain can do only so much. It can preserve transactions, but it can’t identify original sources of money. If some highly evasive money wanted to hide somewhere…?
This is just business, but the people who do that sort of business are well-known as not particularly idealistic. Very heavy hitters like to protect their interests. In the arts, where great works of art often show up in very strange places owned by chimps, NFTs could be joining the queue.
This is very tricky. Crime contaminates and corrupts everything it touches, including people. It adds a huge cost to everyone’s daily life. Ironically, with NFTs, the artists may be much better protected than the public, for a change. The trouble is that the criminals, as usual, get richer at everyone else’s expense.
There probably is a way around this. AI and integrated blockchains could make money laundering impossible, but that’s a while down the track. Banks can question any transaction. Regulators could set a few benchmarks for big money moves in NFTs as they do for money laundering. Smart tracking can break down money laundering into the original transactions, but that needs to be in place, not just theoretical.
I think NFTs will be a big, useful thing in the future, supporting artists not on the idealistic basis, but on a reliable practical business setup. That is extremely good news. Let’s not get too starry-eyed just yet, huh?
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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