NFT divisibility brings new value potential

The discussion on the value of crypto art NFT is getting more and more intense, and "scarcity" has become the central word in various discussions. If scarcity really determines the value of art, then breaking down its value may help us understand the source of NFT's value more easily.

This article conducts a structured analysis of the value of crypto artworks from the two aspects of value and rights, and explores the value mining potential brought about by the divisibility of NFTs.

The process of forming the value of artworks

When people talk about value, they often cannot do without "commodity", and this value is only in the economic sense. For artworks, their value needs to be considered from a philosophical perspective, including aesthetics, logic, ethics and even theological values, often starting from the author himself, exploring the relationship between man and society. The formation of value involves a process of construction and testing, and the two constantly give things new value as time goes by. The transaction of artworks has never been an equal exchange, but only a part of the process of testing value.

In this process, NFT only serves as a value storage medium, providing a safer and more transparent way for transactions. It records all information in the entire value formation process, including author information, creative background, transaction history, etc. In the real world, artists can only enjoy such treatment when their works are exhibited. Moreover, in many cases, even the exhibitors cannot guarantee that all the paintings on display are authentic.

Scarcity is not limited to the physical level, nor does it determine all value.

Whether it is physical art or crypto art, as a commodity itself, it is only a content carrier. The scarcity of physical works in the real world is defined by both the carrier and the content. The scarcity of the carrier is unique in space, while the scarcity of the content is unique in time and is determined by history. The scarcity in the virtual world only includes the latter, and the scarcity of the carrier is completely controlled by humans. Especially when discussing the scarcity of NFTs, it is meaningless to talk only about scarcity in quantity. When the authenticity of the work is guaranteed, the scarcity of the content is what we should focus on.

Of course, the scarcity of content cannot determine all value. It still needs to go through the testing process mentioned above to get the value precipitation. For some works, the ideas and viewpoints conveyed are not accepted by people in the current era. This process requires the test of time.

Take Van Gogh for example. His works belong to the Post-Impressionist school, but the mainstream painting school of his time was the academic school. Therefore, his art form was strongly opposed by the traditionalists. The stronger the voice, the more it will inspire young artists to think, so a group of Van Gogh's followers began to imitate his style. It can be said that Van Gogh's artistic ideas were ahead of their time by two eras, and the value of his works was constantly refreshed in this process.

Wheat Field by Van Gogh

NFT’s Scarcity Value Splitting

The proportion of the scarcity value of physical works in the overall value of the artwork is usually difficult to quantify. The emergence of NFT can just separate the scarcity value of the artwork, guide people to pay attention to the content and ideas of the artwork, and transfer the carrier of value to the content, rather than staying on the paint and canvas.

Division of rights at the legal level

The public has always had a deep misunderstanding about the way copyright is transferred, thinking that purchasing a physical work means obtaining the copyright of the content of the work. In fact, for artworks such as paintings, it is often a combination of property rights and intellectual property rights, and the transfer of property rights does not mean the transfer of intellectual property rights. Article 18 of my country's Copyright Law stipulates: "The transfer of ownership of original works of art and other works shall not be deemed as the transfer of the copyright of the work, but the exhibition right of the original work of art shall be enjoyed by the original owner."

For natural persons, the copyright protection period is the lifetime of the natural person and 50 years after his/her death. For works created by legal persons and other organizations, the protection period is 50 years from the date of publication, after which the work enters the public domain. The property right protection of copyright is limited in time. When the period expires, the work enters the public domain and is no longer protected by law. Anyone can use one or more property rights in the copyright of the work without permission and free of charge.

It can be seen that copyright and entities are not bound together. Whether in the real world or on the blockchain, creators do not need to worry about the copyright risks brought by selling their works. As a freely definable work carrier, NFT can limit the ownership of copyright by writing data on the chain. For example, the creator can authorize the owner of the NFT to use the content of the work to make peripheral products. However, in most cases, there is no essential difference between buying an NFT and buying a physical work, except for the content carrier.

Value mining after rights split

Splitting the power of artworks can often unearth more value. The more traditional way is to divide the sale of artworks into three aspects: the sale of physical originals, the sale of replicas, and the sale of derivatives. For a piece of artwork, its original may be worth a lot of money, but the market for replicas and derivatives can often create several times the value of the original. The gift shops of major museums around the world are the best example. Cultural and creative products have become the main source of income for world-class museums such as the British Museum and the Palace Museum.

British Museum Shop

NFT can achieve all three of the above aspects at the same time. It can sell originals, copies and derivatives through customized distribution methods, while enjoying the various premium capabilities brought by blockchain.

Copyright transfer of NFT

In a sense, NFT can indeed be considered as a digital copyright certificate, but it should be noted that it is only a "certificate" and does not represent the copyright itself. Purchasing NFT does not mean purchasing the copyright. At present, legal copyright transfer still needs to be achieved through power licensing or transfer contracts. In some countries, it is also necessary to register with the relevant intellectual property departments to counter bona fide third parties.

Although we can split the rights in NFTs, for example, licensing the owner of an NFT to have the commercial use rights of the NFT content, whether the transfer of rights in NFTs is legally effective remains to be discussed, which is also an inevitable topic on the road to compliance.

Copyright infringement issues have not yet been resolved

In addition, NFT still has no active defense mechanism for copyright infringement, especially for unknown artists. If their works are minted as NFTs and sold on the platform for profit without their knowledge, the infringer cannot passively stop the infringement until the artist himself discovers it.

Platform protection in terms of copyright issues

Both the Foundation and the Makersplace platform's restrictions on collectors' rights indicate that the sale of NFTs does not transfer the relevant intellectual property rights of the artwork.

Foundation Collector Terms

Makersplace Buyer Terms

But why are there price differences on different platforms? The main reason lies in the review standards and entry barriers for artists. For platforms such as Makersplace or Superrare, the works of artists that have passed the review can often be sold at higher prices than on other platforms. This is because the overall quality of the artworks sold on these platforms is higher, and the artists who have passed the review often have certain operational capabilities. The platform will certify the works provided by the artist as original works through various means, and the certification process also requires a certain cost.

In short, whether analyzed from the perspective of value or rights, NFT not only brings the potential for divisibility, but also does not change the traditional way of transferring copyrights of works. Like Van Gogh's works, NFT is also a product that transcends the times. History will also give an answer to the value of this technology itself.