Top NFT-Based Trading Card Games (TCGs)

NFT-based games integrate traditional gaming concepts with blockchain technology, non-fungible tokens (NFTs), and other decentralized financial elements. 

Gamers are loving GameFi (the intersection of gaming and NFTs, and even DeFi) for three main reasons: 

  1. True ownership: While in conventional digital games, players can buy in-game assets, those assets don’t actually belong to them. On the other hand, NFT-based games give players complete control over their assets– in-game assets like cards, lands, avatars, or swords are NFTs.
  2. Verifiable rarity and uniqueness: Non-fungibility makes it possible for creators to make 100% unique tokens, as well as programming different rarity levels for the assets. Naturally, some items in games will be scarcer or more useful than others, and their value should reflect that. Since everything happens on the blockchain, it’s easy to verify the scarcity, uniqueness, and authenticity of each asset.
  • Opportunity to earn income while playing: These games implement play-to-earn mechanisms. By participating in games, players can earn cryptocurrencies and in-game items that have real-world value. Many games have their own secondary markets for trading.

NFT-Based trading card games are getting so much attention because they’re a perfect mesh for most any game genre, from role-playing games to fighting games. One of the most popular gaming categories is card trading. 

For many people, training card games, or TCGs, revive childhood memories of collectible card games while at the same time offering a new way of generating revenue.

In play-to-earn NFT-based card trading games, each card is a non-fungible token (NFT), usually in ERC-721 standards. They enable the play-to-earn mechanism using common elements found in GameFi, such as an in-game currency and a marketplace. 

Here are the top NFT-based trading card games. 

Gods Unchained

Gods Unchained is the most popular trading card game in the blockchain universe. It runs on Ethereum and Immutable X. 

Gods Unchained is a free-to-play fantasy-themed turn-based, tactical card game; players must build their decks based on a strategy. 

By playing the game, you can earn common core cards. Those cards can’t be traded on the marketplace; at this point, they are not minted on the blockchain. It’s possible to increase the value of these common cards, by earning “flux”, a resource gained by winning the ranked games.

Gods Unchained has a process called The Forge, in which players who have earned enough flux can merge two identical core cards into one by spending flux. This process creates higher-quality cards, and since the forged cards are minted on the blockchain, they can be sold on the blockchain, sometimes for a hefty profit. 

Splinterlands

Splinterlands game runs on the Hive blockchain. 

You can test the game for free, but to start playing, you need to buy a starter set for $10.You can get new cards by buying packs from the shop or individual items from other players in the marketplace. You can also sell your assets on this marketplace. 

One of the highlights of Splinterlands is its cross-compatibility with multiple blockchains, enabling users to trade their cards on several marketplaces. 

In addition to selling your cards, you can earn in Splinterlands by getting its in-game currency DEC (Dark Energy Crystals). There are a couple of ways to acquire DEC in the game. First, by winning ranked battles, and second by destroying the cards you don’t use anymore. You can use DEC to buy assets from the game’s shop.

Another way to earn on Splinterlands is renting your cards via peakmonsters.

Sorare

Sorare is a fantasy football game built on the Ethereum blockchain. 

You can collect player cards and build teams, and as with real-world trading card games, the real value comes from the most valuable player cards. Depending on the rarity of the card, it can get quite expensive.

The Sorare play-to-earn mechanism enables users to participate in tournaments, where users can earn points and rewards based on their team’s performance.

Dark Country Game

Dark Country is a trading card game on the WAX blockchain with gothic-themed characters like zombies, ghosts, and haunted Indians.

In addition to cards, players can own heroes, items, and lands as NFT assets. Players can stake Dark Country assets on rplanet.io and collect cards on collect.social to gain the platform’s Racoon tokens. 

Dark Country has a weekly forging activity similar to Gods Unchained’s The Forge called Heroes Reforge and Staking. Players need to burn four heroes of the same type in order to receive a new hero with better quality. They can then stake this improved asset to earn rewards.

Dark Country has recently introduced land assets compatible with WAX and Flow blockchains. 

With lands, several new revenue generation options will be possible soon, such as land leasing and staking the platform’s in-game currency Shadow Dime (SDM) on lands.

Final Thoughts: Emerging Exciting New TCG Projects

While some may argue that the game mechanics of most NFT-based games are primitive and “not quite there yet,” TCGs marry the simplicity of a trading card game with the blockchain very well. 

A few more exciting TCG projects to keep an eye on include:

  1. Skyweaver, a free-to-play Ethereum-based game in beta mode. Players have three grades of cards: base, silver, and gold. Base cards can’t be traded, but silver and gold cards can be. You earn silver cards via ranked rewards and conquest, and gold cards via conquest.
  2. Parallel,  a science-fiction-themed card game also based on the Ethereum blockchain. The team built its own NFT drop system. The project is currently raising funds by selling drops, which contain cards. These cards will have utilities once the game development is complete.
  3. Metropolis Origins, is a cyberpunk-themed card game by QXR Studios running on the WAX blockchain. It’s a sequel to game designer Graeme Devine’s adventure game Metropolis. The game released a founder NFT pack that enables owners to play the game in beta mode. 

The evolution of blockchain card games will be one to watch, as more implementations of conventional card games on the blockchain continue to emerge.  With NFTs’ programmable nature, we can expect to see the evolution of more dynamic, and potentially lucrative and competitive, playing card games in the near future. 

What is a Rug Pull in Cryptocurrency?

A rug pull is a type of scam where the team of a cryptocurrency project suddenly exits the project, running away with investors’ funds.

Rug pulls occur particularly often on decentralized exchanges (DEX) and in the NFT world.  

DEXs allow users to trade cryptocurrencies without intermediaries; well-known examples include Uniswap, Balancer, and PancakeSwap. There is no central authority on these decentralized exchanges and users can trade anonymously. They’re primarily used to swap one cryptocurrency for another.

A typical rug pull scenario unfolds as follows. Malicious developers launch a new token and list it on a DEX. Investors can easily exchange more established tokens like ETH for this new token. Once enough investors’ funds accumulate in the liquidity pool (LP) for this seemingly legitimate token offering a high APY, developers quickly dump their holdings and drain their funds, and the new token’s value plummets to zero.

The year 2021 didn’t fall short of such scams. According to a report by Chainanalysis, this type of maneuver was the most popular one among the whole crypto fraud varieties in 2021, accounting for 37% of all scam revenue.

Rug Pull Example #1: Fake Project Forks on OlympusDao

Imposters exploited the popularity of meme coins among crypto traders by using a dog-themed logo inspired by the Greek god of Anubis depicted with a dog’s head. Developers presented the fake project AnubisDAO as a fork of the decentralized reserve currency OlympusDAO and launched the project’s ANKH token on the Copper platform. 

The developers used pseudonyms, and the project had neither a website nor a whitepaper. Nevertheless, $60M was raised in WETH, which disappeared from the project’s liquidity pools just twenty hours after the launch.

Rug Pull Example #2: Binance Smart Chain Forks

The Binance Smart Chain (BSC) saw multiple headline-worthy rug pulls. Meerkat Finance, a fork of the Yearn Finance protocol, was supposed to be a yield farming pool. After the launch, $31M in Binance token, BNB, disappeared from the project’s LP. It’s still not clear if this was a real rug pull case. However, the projects’ Twitter accounts disappeared along with the investors’ money which is a strong indicator that the project team was involved with the scam.  

Another BSC rug pull case is the TurtleDex project, whose developers ran away with $2.5 million that had been raised as 9,000 BNB. The team drained the funds from the Binance native DEXs Pancake Swap and ApeSwap and sent them to multiple wallets to sell on the Binance Exchange.

Other projects rug pulled on the BSC DEXs are Defi100, Uranium Finance, and Stablemagnet. Defi100 marketed itself as a synthetic index token based on the total market cap of the DeFi sector. 

Rug Pull Example #3: Squid Game

When the Netflix series Squid Game soared in popularity, imposters came up with a Squid coin idea. It was supposedly a play-to-earn cryptocurrency project that promised investors to participate in online games inspired by the hit series. It was launched on Pancake Swap. 

There were many warning signs for the potential investors, like an unprofessionally written whitepaper and a recently registered website. Nevertheless, the team exit scammed with over $3M investors’ funds after the Squid currency peaked at $2,861.

Rug Pull Example #4: Fake Uniswap V2 Fork

Uranium Finance claimed to be an automated market maker (AMM) protocol forked from Uniswap V2. Stablemagnet billed itself also as an AMM. They cost the investors $32M, $50M, and $27M, respectively.

Rug Pull Example #5: Avalanche Meme Coin Goes Bust

In November 2021, it was Avalanche’s turn to experience its largest rug pull. 

SDOG coin, issued by SnowdogDAO, was supposed to be the first-ever meme coin on Avalanche, and it was launched on the native DEX Trader Joe. Eight days after the initialization, SDOG’s value plunged to $1,500 after skyrocketing to $6,000. 

The SDOG case was a bit different than a typical rug pull; the developers promised the community a buyback of the coins, meaning the company would repurchase its own coins. 

This tactic reduces the number of tokens in circulation, and in theory, supports a deflationary token environment. The actual rug pull occurred while $40M worth of SDOG coins was transferred from Trader Joe to the project’s own AMM. 

The buyback failed because an account swapped $10M worth of SDOG for other cryptocurrencies in the meantime. This was only possible if the account had the “challenge keys” required by the project’s smart contract, hinting that the rug pull was an inside job. 

Rug Pull Example #6: NFT Rug Pulls

Rug pulls can happen on centralized exchanges as well, as evidenced multiple times by NFT rug pulls. 

One of 2021’s most notorious scams was an NFT project called Evolved Apes. Thousands of investors piled their money into Evolved Apes, whose developer ran away with $2.7 million.

Another NFT rug pull incident was Baller Ape Club, a collection of 5,000 NFTs supposedly inspired by the famous Bored Ape Yacht Club collection. On the drop day, developers directed the potential investors to a fake link that repeatedly showed a warning pop-up with a transaction failed message, although the transactions were successful. In the end, $2M worth of SOL was stolen from the investors.

Iconics, an NFT project also launched on the Solana blockchain, had promised its investors to deliver 8,000 unique NFT artworks. Instead, collectors received a random collection of emojis. Developers ran away with $140K.

How to Avoid Rug Pulls

If you don’t want to fall victim to a rug pull event, take notice of these red flags before investing in the brand new red-hot project.

  • A DEX loophole is that audits are not obligatory for token listings. Nevertheless, legitimate projects undergo audits to convince their investors. Be wary of projects that avoid this process.
  • Can you research the individual members of the development team? Are they all anonymous or pseudonymous? Do your due diligence, and note that fake faces and fake names are common on team bios. 
  • Add skepticism if a price soars in value exceptionally fast without a fundamental cause.
  • Excessive promotion can be another warning sign.
  • Does the project have an official website, social channels, and whitepaper? If so, can you spot amateurishness in the presentation, such as rushed whitepaper typos?
  • Does the project have an active Discord or Telegram? How is its community?

Legitimate projects tend to have tens of millions of dollars in total liquidity, as well as some longevity that supports the project’s community. Look for the common elements in the cryptocurrency industry’s established projects, and try to find the same signs in upcoming projects.

Final Thoughts: Rug Pull Safety

Cryptocurrency rug pulls can trap both novice and experienced investors. Newbies are unaware of the risks behind the decentralized projects, and veterans fall prey to FOMO while seeking high-upside and hyped opportunities. 

It’s essential to know about different tools scammers use to exploit the cryptocurrency system and spot the projects built on a lie.  

lt Although blockchain is a secure, reliable, and stable technology by itself, don’t give the same sort of credibility you would to a project like Bitcoin or Ethereum to any new upstart just because it’s using the blockchain. 

What are Blockchain Protocols & How Do They Work?

Blockchain protocols allow for the recording of transactions in a trustless, distributed, peer-to-peer manner using a public ledger without the need for any central authorities. 

Blockchains have changed how the world organizes capital, data, and assets and will continue to have implications across several industries, including financial services, real estate, supply chains, etc. 

The blockchain concept had existed before Bitcoin came to public light in 2008, but Bitcoin is the first significant example of a blockchain that everyone now knows. 

Bitcoin arose to solve the fundamental problem of lack of trust in value transfer methods and peer-to-peer payments over the Internet without double-spending, meaning without spending the same set of values twice, since digital information can typically be copied. 

The public ledger that is blockchain maintains a continuously growing list of transactions and data chained and stored within blocks that are cryptographically secured from tampering or change by any parties using the network, making it immutable. 

Additionally, because it is a distributed, public ledger, all parties using the network can see the past history of transactions, and the transactions can never be removed. The ledger becomes a shared and synchronized database across all parties, allowing all transactions to be publicly witnessed and transparent via a block explorer

How Do Blockchain Protocols Work?

The blockchain is run by a network of nodes, or distributed networks of computers. These independent nodes verify the accuracy of transactions, maintain updated versions of the ledger, and record new transaction data on the public ledger. 

The ledger is built as a linked chain of blocks. Each block contains a number of transactions validated as legitimate by the network during a specific time span and then recorded in the ledger. 

Each block also includes the cryptographic hash of the prior block in the blockchain linking one block into a chain of blocks, which provides integrity of the previous block all the way back to the genesis block of the blockchain. 

The benefit of blockchain is that it allows for distributed control instead of only functioning as a distributed database where data is still controlled by one entity. This allows different parties, people, and institutions that may not necessarily trust what the other is saying is legitimate to share information without requiring a central administrator (like a governing body or central bank) to verify the information alone. 

Instead, the blockchain depends on its unique consensus mechanism, whereby nodes validate and record transaction data to reach a consensus that determines the final output of data into the ledger. 

This prevents a single, non-trustworthy player or small majority from maliciously deciding to change the record of the ledger. For Bitcoin, this would require a majority to obtain 51% control of the hash rate for the Bitcoin network, which is almost impossible to do.

As new transactions are added to the blockchain, the prior transactions become more difficult to manipulate. With 13,000+ live Bitcoin nodes today on the network, it becomes almost impossible for a bad actor or hacker to remove past blocks from the chain or publish fraudulent data to the ledger. 

Different Types of Blockchains

While the above details the Bitcoin blockchain, there are several types of blockchains with their own style of reaching consensus, governance, and other factors. 

Ethereum is a platform for decentralized blockchain projects such as dApps, decentralized Finance (DeFi), Non-Fungible Tokens (NFTs), and smart contracts. 

NFTs are blockchain-based tokens that each represent a unique asset such as a piece of digital content, media, art, or other tokenized asset and verify its ownership and authenticity. NFTs are designed to be cryptographically verifiable, unique or scarce, and easily transferable.  

Any developer and project in the world can use the Ethereum public blockchain in a permissionless manner to launch their own tokens, including NFTs, as long as it adheres to the specifications of the Ethereum network. 

Today, the Ethereum network regularly facilitates the flow of tens of billions of dollars of value, with over $150B USD of value currently locked in smart contracts on its network as of Q4 2021 to facilitate decentralized asset exchange such as involving lending, insurance, and payments. 

Ethereum network Total Value Locked in DeFi, Source: https://defillama.com/chain/Ethereum 

Due to the adoption of DeFi and NFTs, Ethereum has recently become so widely used that using the Ethereum network has become cost-prohibitive for many users today due to high transaction fees and congestion on the network. 

NFT Trade Volume 2021, Source: The Block

Thus, many participants have explored other Layer-1 blockchain platforms that offer similar decentralized applications like Ethereum, with lower transaction fees and varying decentralization and security profiles.

Other Layer-1 blockchain protocols involve blockchains with varying performance and utility to target niche or enterprise sectors, such as Avalanche, Flow, Solana, and Terra, and have also innovated with new consensus algorithms, blockchain architectures, and execution environments. 

As alternatives for specialized tasks, certain purpose-built niche blockchains have arisen, such as high-performance blockchains for creating NFTs such as Flow, blockchains for making supply chains more efficient, or others to help move and store different types of information at a higher throughput than on major public blockchains such as Bitcoin.

Unlike the general-purpose blockchain of Ethereum, Flow is built to efficiently scale for billions of people interacting with NFTs such as in-game items. Flow was created by Dapper Labs, the team behind NBA Top Shots and CryptoKitties. 

Flow improves upon Ethereum specifically for the use case of NFTs to create fast, proof of stake-powered consensus without the sharding in ETH 2.0, near instant finality without reducing decentralization, in contrast to Ethereum’s 12-60 second time-to-finality, and is scalable for the large demands of a growing blockchain gaming industry while being inexpensive to use. 

Solana is another high-performance public blockchain created to track transactions in a specific sequence, optimizing scalability over decentralization, and enabling scalable apps and NFTs for developers and users, with extremely low transaction fees and high throughput.

Final Thoughts: Blockchain Use Cases

Blockchain as a technology can be used for any use case, enterprise or otherwise, that deals with the transfer of data or value in some form. 

It has the potential to revolutionize the financial services industry due to removing the need for intermediaries such as payment processors. Any industry that involves agreements, which is almost every business in the modern economy, can benefit from the use case of smart contracts, which are agreements denoted in code. 

Elections, voting, and governance, in general, are another use case of blockchain that can become more transparent and easier to participate in for all parties. 

Rights to intellectual, physical, or creative digital property is another use case that blockchain makes easy to authenticate and transfer as tokenized assets, in the example of NFTs. 

Due to the decentralized, trustless, and immutable nature of blockchain technology can create several innovations and impact many industries that will continue to change the organization and transfer of data and assets.  

While Bitcoin was the original blockchain that came to public light, Ethereum and other more niche and specific blockchains are where the majority of modern-day development is happening. 

How Are NFTs Authenticated?

The NFT concept is new to most; the term “non-fungible token” skyrocketed into the mainstream from relative obscurity within an esoteric group of cryptocurrency aficionados. 

The script changed in early 2021: NFT collectors suddenly started spending thousands to sometimes millions of dollars to buy various JPEGs and GIFs on the Internet. 

With so much money flowing into the evolving NFT marketplace, there is a dire need for NFT verification services. 

How do I know that the NFT I’m buying is legit, instead of some shoddy reproduction created by some scammer? 

The following guide explores how NFTs are authenticated.  We’ll talk about a handful of mechanisms being implemented to protect NFT collectors. We’ll debate the question of which of these schemes will see mass adoption as the NFT market matures.

The NFT space is still in its infancy and a variety of NFT authentication methods are being used, each of which offers specific advantages to the end-user. 

What Aspects of an NFT Need to be Authenticated?

The first question we need to ask is what exactly is it that we need to authenticate about an NFT

There are basically two factors to consider:

  1. Authenticity — Who created the NFT and who currently owns it?
  2. Originality/rarity — Is the work the first of its kind and unique or are there similar/derivative works?

First, and most importantly, collectors need to verify the source of the NFT and its rightful owner. 

Next, because the value of an NFT is partially based on rarity, we need to verify that the artwork being minted is not a copy or derivative of previously existing work. If the artist is minting several copies or slightly revised versions of a work, then its value is questionable. 

Moreover, since anyone can copy an image file and mint it as an NFT, one must be able to prove the creation is tied to a particular creator, or the most valuable component of NFTs, the provable scarcity and provenance, goes out the window.

In the case of physical art, there is a master and there are often prints (or copies) of the original work. 

The master holds the most value. 

Next, artist-signed prints have value to some collectors. 

However, unsigned prints have very little value. They can easily be copied so they have no inherent rarity.

The same might be true for digital art. The master NFT holds the most value. Limited edition copies minted by the artist might also have value to some collectors. Copies not minted by the artist floating around the internet are essentially valueless since they can be replicated an infinite number of times.

How is the Authenticity of an NFT Verified?

In the case of verifying that an NFT was minted by the original artist and not a scammer, we rely on the public record. Records of NFTs minted on decentralized blockchains are immutable, which means the record can’t be changed by anyone– at least not without a prohibitively expensive effort, but that’s a rabbit hole we’ll jump into another time. 

Thus we need only look at the record for a particular NFT to determine when it was minted as well as its ownership history. 

This is easier said than done, however; many art collectors will outsource this step to a trusted third party. 

For example, an artist by the pseudonym “Beeple” sold a work of art called “Everydays – The First 5000 Days,” for $69 million. The NFT was offered by Christie’s auction house. Collectors can rest assured that high-end auctioneers such as Christie’s have done their due diligence to be sure that the NFT being auctioned is authentic– a sort of authentication by proxy.

Most NFTs, however, are sold on centralized NFT marketplaces such as OpenSea, Rarible, Mintable, and others. 

Each NFT marketplace handles NFT authentication differently.

NFT Marketplaces and NFT Authentication 

Many NFT marketplaces offer some level of NFT authentication service, but not all of them. 

Marketplaces that do offer this service approach NFT authentication from a variety of angles: 

  • OpenSea, the largest NFT marketplace, offers no assurances that an NFT is original. The buyer must do their own research. 
  • Mintable, SuperRare, and Foundation only sell work by hand-curated artists. 
  • Nifty Gateway offers both hand-curated and post-verified NFTs. 
  • Rarible vets artists and performs what is known as a “reverse image search” to identify copies and near copies of the work. 

This list represents a small handful of NFT marketplaces and their NFT verification protocol; new NFT marketplaces are popping up daily and each has its own system for verifying (or not) the NFTs being sold or auctioned on their sites.

How is the Rarity of an NFT Authenticated?

Verifying the uniqueness of an image is far more difficult than identifying the authenticity and owner of an NFT. 

A human being should be able to easily identify a copy or modified version of an image merely by looking at it. When comparing a handful of images, it would be tricky to fool a diligent human. However, it would be impossible for a human to search for every copy or near copy of an image manually. 

Computer algorithms can help us with due diligence. 

Rarible, for example, performs a reverse search on images to identify copies and similar works. 

What is a Reverse Search?

With a traditional image search, the user searches for images labeled or tagged with a particular keyword or phrase. Google Images is the most commonly used example of this. 

However, Google also lets users do a reverse search to find images that are similar to the NFT in question. Search results also include information such as the date each image was posted online. Stock image sites such as Adobe Stock also use this reverse search method to identify similar images.

So how does a reverse image search for NFTs work? 

Perceptual Hashing for NFT authentication

In identifying similar images via computer, a technique known as perceptual hashing is employed. 

Humans perceive colors and shapes, not pixels. We can compare images instantaneously. However, computers can’t determine that two images are similar just by comparing the pixel data. An image can be slightly modified — resized, cropped, or adjusted in other ways — and we end up with a completely different list of pixels.

We can solve this problem with the process of perceptual hashing. 

Perceptual hashing 101

Hashing is the act of reducing a data set to a much smaller set of data that can more easily be compared. Perceptual hashing breaks an image down into perceivable traits such as shapes and colors. 

The hash file can then be compared with other hashed files to find similar patterns. 

A computer algorithm can identify similar images using perceptual hashing. However, the computer isn’t able to make the final call on originality. It can only bring similarities to the attention of a human. The human can then make the final call. 

It’s not a perfect process, but it does streamline the authentication process for the end decision maker greatly.

Pastel is pioneering a near-duplicate NFT detection strategy using a mix of deep learning models using Tensorflow with Keras Applications, which transform each NFT into a fixed list of over 10,000 numbers (the ‘NFT fingerprint vector’). Then, it assesses the correlation between an NFT fingerprint vector and all other existing fingerprints on Pastel and marketplaces like OpenSea, and open databases like Google. Finally, it churns out a relative rareness score between 0% (the NFT is identical to another) or 100% (it’s completely unique.)  

Final Thoughts On How NFTs are authenticated

As you might imagine, NFT verification services are invaluable to serious collectors. Presently, a variety of NFT verification schemes are being used by NFT marketplaces and art auction houses. 

The NFT authentication process may involve humans and computers.  

While humans are great at vetting artists, they’re not so great at manually searching for images that might be similar. And computer algorithms alone can’t make a final determination on an image’s rarity. 

The rarity of an NFT is relatively simple to verify by using a combination of perceptual hashing and human verification. 

However, for the casual collector of NFTs, simply going by a blue checkmark and the proper link on a popular marketplace like OpenSea might be enough– but as you can imagine, this exposes one to a great deal of risk. 

When it comes to peer-to-peer NFT trades, the ecosystem still has a long way to go to ensure a trustless, fair, and fool-proof system.

NFT Copyright: What Artists and Collectors Should Know

NFT art is soaring in popularity due to the blockchain’s ability to offer a multitude of features that appeal to both creators and collectors. 

Artists continue earning royalties for the same artwork from the sales in the secondary market, which isn’t possible in the traditional art scene. 

Collectors enjoy advantages that weren’t possible before blockchain technology, such as an undisputable artwork’s transaction history and provenance, scarcity, and liquidity. 

However, the NFT ownership concept is more complicated than meets the eye, and it often trips up many.

But what do I actually own? 

What if someone just screenshots your art? 

Can I sue someone if they print my NFT on a shirt?

The answer to all of these questions is a nebulous “it depends.”

When someone buys an art NFT, they don’t purchase the artwork itself but the token that represents it. 

Owning the token isn’t necessarily the same thing as owning the copyrights of the underlying asset, unless it was specified in the underlying contract. 

The following guide explores what NFT copyright is, and what both creators and collectors should know about their NFTs. 

Copyrights and intellectual property rights

Copyright is a bundle of rights that specify what’s ok and what isn’t, regarding things like reproducing and distributing copies of the work, preparing derivatives based on the original work, displaying the work in public, and performing the work publicly, as regulated by 17 U.S. Code § 106.

Purchasing an NFT doesn’t transfer these rights to the buyer automatically. Unless an external agreement (17 U.S. Code § 204) is made between the artist and the purchaser,  the artist who created the original artwork remains the copyright holder.

The artist can transfer the copyright, grant a license for specific purposes, or limit the NFT’s use in some way. Agreements used for transferring rights must be coded in the smart contracts or expressed in written terms elsewhere.

Intellectual property (IP) is a broader concept that can refer to any product of the human intellect that the law protects from unauthorized use by others. Patents, copyrights, trademarks, and trade secrets all fall into the realm of IP.

Again, the only way an NFT buyer can retain IP rights is through an explicit agreement signed by the creator of the original artwork.

Standard license agreements for NFT ownership confer the rights to use, copy, display, resale, and gift NFTs. Granting a license of copyright and IP to the buyer through smart contracts or external agreements is also common. Some NFT projects permit commercial use, like CryptoKitties. 

CryptoKitty owners can use them to commercialize their own merchandise, given that they don’t earn more than $100K per year. Another well-known NFT project, Bored Ape Yacht Club, has generous IP terms similar to CryptoKitties. For example, owners are allowed to create characters around their apes or print them on their personal belongings.

Copyright Terms of NFT Marketplaces 

Although there’ll always be exceptions, we can say that in open marketplaces like Opensea and Rarible, artists license the NFTs to the buyer and not to the marketplace.

In marketplaces where only exclusive NFT collections are sold, the marketplace usually owns the NFTs and the related IP rights, like in the case of NBA Top Shot.

Curated marketplaces like Superrare, MakersPlace, and Nifty Gateway, artists are expected to grant licenses for display, distribution, and derivative rights, for promotional activities. Some marketplaces require artists not to mint multiple NFTs for the same artwork.

On Rarible and MakersPlace, artists can apply a custom license to their NFTs, in addition to platforms’ own standard agreements.

When an NFT is resold, the general practice is that any resale activity terminates the former owner’s rights and the current owner of that NFT becomes the new license holder.

NFT Copyright: What You Should Know as a Collector 

As a rule of thumb, NFT owners generally only have the copyrights to resale and gift their NFTs. Please don’t assume you can create derivatives of the underlying artworks and sell them for commercial purposes by default. 

Some projects may be cool with it, others may not. 

Some projects may give holders every possible right under the sun with their NFT, whereas others insist on keeping the project’s branding, and every NFT, held close. 

Always research the related platform’s license terms and conditions yourself if your intentions are beyond reselling the artwork in the secondary market. Otherwise, copyright infringement issues may arise.

It would help if you also bought only on platforms you trust. Always double-check if the artist verifies the related artwork as theirs. In May 2021, artist Xcopy, a famous figure in the crypto art community, tweeted about a fraud regarding his art on a new platform called Hen. 

This isn’t a rare event in the NFT world; always check if you’re buying an original work of art.

NFT Copyright: What you Should Know as an Artist

Artists should only mint their own creations. If the work is done in collaboration with others, their authorization is necessary.

It seems obvious, but in the Wild West vibe of early NFT marketplaces, it seems that you can get away with minting shoddy reproductions of other works. 

Remember how the blockchain tracks every transaction ever? While NFT copyright law is in its wobbly baby deer leg phases now, it’s not difficult to algorithmically track financial and copyright crimes. 

In the NFT world, many frauds take place. If you happen to discover your art is being sold as an NFT by someone else without your consent, you can claim copyright infringement against the sellers.

As stated above, unless you transfer the copyrights to buyers with an external agreement, you hold the copyrights of your work. However, if you did the NFT artwork initially under an employment contract, it might be regarded as work for hire, according to 17 U.S. Code § 101. In this case, the employer might hold the copyrights.

As a precaution against people with bad intentions, you can release your artwork as an NFT before sharing it with someone else.

Finally, like collectors, artists should also be wary of the platform they sell their art and terms and conditions regarding copyrights.  

Final Thoughts: Expect NFT Copyright Law to Evolve

Both collectors and artists should be aware that NFT technology is very new and many issues regarding IP rights are not completely clear. 

Understanding the underlying technology is necessary for both parties, along with the legal aspects. In case of conflicts, consulting lawyers for legal advice is inevitable.