The NFT market exploded, didn't it? Billions flowing, headlines screaming about overnight millionaires. But lurking behind the hype is a less glamorous but more insidious reality–who’s actually cashing in on your cloud-based fantasies. NFTs are often sold as the ultimate shlock to liberate creators. Instead, are they not just giving the rich a way to make even more money, leaving crumbs for artists?

Royalty Promises, Broken Dreams?

NFTs were going to revolutionize compensation for creators, especially when it came to royalties. Unlike the traditional art world where artists rarely see a dime from resales, NFTs, through smart contracts, theoretically guarantee a percentage of every subsequent transaction. Here is where the “unfair truth” begins to truly kick in. Creating smart contracts to enforce royalty payments. Yes, smart contracts can theoretically enforce royalties, but it’s not that simple.

Think about this: we celebrate NFTs for their decentralized nature, but decentralization means lack of enforcement. The crux of the matter Marketplaces can – and frequently do – decide to stop honoring creator royalties. Some creators even go so far as to preemptively court collectors by waiving royalties entirely. This shortsighted strategy encourages a race to the bottom, hurting those most intended to benefit by NFTs. It’s essentially a Wild West land grab, where the sheriffs are drunk in front of the saloon.

Remember the 2008 financial crisis? Still mysterious financial instruments, guaranteed wealth, and at last, a system that’s tilted toward the 1%? There are parallels here. NFTs, for all their complexities, can serve to disguise where the actual value is and who’s profiting. Instead, it delivers an undercurrent of anxiety and trepidation that the industry may still be barreling down the tracks toward another disaster.

Data Doesn't Lie, But It Can Sting

Now the NFT market peaked at almost $25 billion in 2021. That’s a huge amount of digital cash just hanging out. Is that money trickling down to the artists who drive this boom? Let's look at some uncomfortable data.

How many NFT projects truly result in meaningful, lasting revenue streams for their creators? How many of the primary sales or trading volume is dominated by the top 5% of collectors and whales. The answers, I suspect, would be outraging. We need more transparency. This is what we need to be looking for—where the money is flowing.

A South Asian artist mints an NFT, hoping to break into the global market. They wrestle with crippling gas costs and exorbitant platform fees. Even if their work does sell, they often only see a fraction of the resale price due to some marketplaces’ decision to stop offering royalties or similar mechanisms entirely. This is not empowerment; it's exploitation. And it’s yet another face of the injustice that stifles creation.

Copyright's Shadow, Legal Minefield

Just because you own an NFT doesn’t mean you have the copyright to the work it’s based on. This is an important distinction that is too frequently diluted in the NFT hysteria. The Miroslav Dimitrov v. Frank Ape LLC case is a cautionary tale. Having a right to the NFT doesn’t give you an automatic allowance to mint t-shirts adorned with the likeness.

This creates a legal minefield. Consider the scenario of purchasing an NFT, believing you have the right to exploit it commercially, and then receiving a copyright infringement lawsuit. The Hermès vs. Rothschild case underscores a particularly shocking clash. The “MetaBirkins” demonstrate how artistic expressions are increasingly colliding with the legal landscape of trademark law. Creating the right balance between artistic expression and corporate reputation, the line is often quite thin.

It's like the early days of the internet and music piracy. While Napster brought the promise of free music, it devastated the music industry and left artists out in the cold. NFTs, going forward without a clear legal framework, stand to make that history all too repeat itself. It's time to learn from the past. It is shock and awe at the fact that the industry is making those same mistakes all over again.

What Can You Do? Demand Better

So, what's the solution? Pretending that the NFT space is a total write-off would achieve nothing. We need to demand better. We, as collectors, artists, and enthusiasts have the power to create the ecosystem we want.

  • Support Platforms That Prioritize Royalties: Vote with your wallets. Choose marketplaces that enforce creator royalties and are transparent about their policies.
  • Educate Yourself and Others: Understand the legal nuances of NFT ownership and copyright. Share this knowledge with your fellow creators and collectors.
  • Demand Transparency: Call for greater transparency in royalty distributions and transaction fees. Hold platforms accountable.
  • Support Community-Governed Platforms: Explore decentralized platforms that give creators more control over their work and royalties.
  • Advocate for Clear Legal Frameworks: Push for clear and enforceable legal frameworks that protect both creators and collectors.

We believe NFTs can be used as a positive force – empowering artists, fostering creativity, and driving impact. Only if we acknowledge these ugly truths and fight for a better and more just system. Let's build a future where NFTs truly benefit the creators, not just the wealthy elite and the platforms profiting from their labor. It's time to make some noise. It's time to fight for what's right. There is no false dichotomy between social justice advocacy and technology in this new digital age.