Bracing Scarcity: Can NFTs Save Digital Art?

Abstract

Rebecca creates an artwork. David mints an NFT that links to Rebecca’s work. Is David making a copyright infringement? This question — probably the most fundamental one at the intersection between copyright and the technology of non-fungible tokens (NFT) — is the focus of this Article. As surprising as this may sound, the answer is not at all obvious under the extant copyright law. This Article argues that from a policy standpoint, the answer must be positive. Expounding this issue is imperative in order for the NFT technology to fulfill its potential for creative works markets.

In this Article, we analyze the markets for digital artworks and show that NFTs could potentially address the most pressing and long-lasting dilemma of art and the digital world: how to maintain the incentive to create digital art without overshadowing the big promise of the internet — to maximize access to content. This incentive-access friction was so far perceived as a necessary trade-off in copyright theory, and the internet presented a powerful manifestation of it. It has become a truism: the more enhanced the access to works has become online, the less likely artists were to benefit from their works. Everyone had to pick a side or draw the line somewhere on this incentive-access continuum.

NFTs may open a way to move past the incentive-access paradigm. NFT transactions occur on the blockchain — a separate, parallel platform — and they do not affect the availability of the work outside of the platform. Thus, NFTs can revive scarcity and authenticity in the digital sphere, while at the same time not harming a bit the access to the works. While this could feature a dramatic improvement, this potential can only be realized if copyright law awards exclusive rights over minting to rightsholders. If all can mint NFTs, scarcity is lost again, and artists cannot benefit from art sales.

This Article offers at least three novel contributions to the literature. First, it establishes the case for exclusive minting-rights to authors based on an analysis of art markets and the attributes of the NFT technology. It also shows that exclusive minting-rights to authors can promote other crucial objectives such as distributive justice and cultural diversity in art markets. Second, it analyzes the legal mechanisms that can effectuate the desired result of exclusive minting rights. Third, this Article’s analysis of NFTs illustrates more generally different approaches to the design of copyright law amid emerging technologies, which is a contentious and hotly debated issue.

Keywords: Copyright, Intellectual Property, NFT, Blockchain, Moral Rights, Cultural Diversity, Misappropriation, Incentive-Access Paradigm