Guide to CryptoPunks: Are They “Digital Antiques”

CryptoPunks are collectible ERC-721 tokens hosted on the Ethereum Blockchain and stimulated the “profile picture” NFT movement. CryptoPunks was among the first NFT collections from Larva Labs and laid the groundwork for upcoming NFT projects.

What is a CryptoPunk?

A CryptoPunk is a 24*24 pixel, 8-bit, punky-looking NFT art image. CryptoPunks are algorithmically generated and are unique, unalterable, and have no chance of complete similarity to one another.

The project was officially introduced in June 2017; 10,000 CryptoPunks were created by Larva Labs, and 9,000 CryptoPunks were offered free to claim by early cryptocurrency users.

The remaining 1,000 CryptoPunks, termed DevPunks, are numbered between 1 and 1000. These are rare punks tend to be priced higher than the others. Most CryptoPunks sell between $350,000 and $500,000 while there are some that are being sold for millions.

CryptoPunks are available to be bought and sold on third-party marketplaces such as OpenSea, Rarible, etc. Some punks are also auctioned at these marketplaces. 

Why Buy CryptoPunks

The price of the CryptoPunk collection rose exponentially around Aug 2021. With a floor price starting around under $100 and skyrocketing to millions in April 2022. Many view CryptoPunks as “digital antiques” of sorts, the “storage of value” of which is currently being determined by markets throughout the course of history.

How to Recognize a Punk

Punks are divided into five general categories: 6039 male punks, 3840 female punks, 88 Zombie punks, 24 Apes, and 9 Aliens. The rare avatars are naturally more costly.

Further, these punks can have a combination of 87 attributes. You could buy a Beanie, Choker, Pilot Helmet, Tiara, Buck Teeth, Welding Goggles, Pig Tails, Rosy Cheeks, Cowboy hat punk, etc., depending on the type of hat, glasses, hair, race, or the skin color it has.

There are 4501 punks with any of the three attributes mentioned above, 3560 with two attributes, 1420 with four of these attributes, 333 with just one attribute, 166 with five attributes, 11 with six attributes, and eight punks with no attributes at all.

Does the Punk Background Mean Anything?

Yes, it does!

The punks on the blue background have no bids and are not for sale. Punks with a red background are available for purchase, while punks with purple background are auctionable and have an active bid on them. Punks in the green background are wrapped punks sold on different NFT marketplaces.

You can join the Discord chat for live announcements related to the sale and purchase of CryptoPunks, which also has a bot announcing all sales, offers, and bids in real-time.

Learn a Bit About the Statistics

The total lifetime sales volume for Cryptopunks as of March 2022 is $2 Billion, whereas $75.24 million were spent in February 2022. The lowest price of an available punk as of April 2022 is 68 ETH, or approximately US $236,636.60. The highest sale of CryptoPunk in Feb 2022 was that of an alien punk with a blue hat costing $23.7 million.

A person can buy more than one punk, too; the maximum number of punks owned by a single owner as of date is around 400.

How to Buy a Punk

You can check the profile page of each punk on the Larva Labs website to see details on their attributes. You can check the current market status of the punk to see who owns it, if it is on sale, and the owner’s expected price. If current bids are going on the punk, you can check it from the profile page.

The complete transaction history of the punk can be viewed on this page.

Once you decide on which punk to buy, you can follow the following steps to buy a punk:

  • Download a Web-3 wallet such as Metamask
  • Buy Ether from exchanges such as Coinbase
  • Install the wallet plugin on the Metamask website, and you will find options to bid, sell, and buy punks.

Remember, you should have wrapped versions to sell them on third-party marketplaces. For details on how to wrap your CryptoPunks, you can visit here. There are no fees charged on CryptoPunk transactions except for the gas fees charged on every transaction on the Ethereum Blockchain.

Do You Wish to Create your Own CryptoPunk?

The original collection of CryptoPunks is fixed and cannot be minted. 

However, some take to creating “clone” CryptoPunks through any marketplaces that allow creating your own NFTs. All you need is to have the required amount of Ethereum tokens in your wallet.

However, these “clone” punks are essentially worthless, and provably so since the ownership of the authentic punks can be verified on the blockchain.

About the Team

The project is the brainchild of John Watkinson and Matt Hall, co-founders of a creative technology company called Larva Labs. Larva Labs is also behind other popular Blockchain projects: Meebits, an NFT collection of 3D characters, and Autoglyphs, a generative art form.

Besides these, they are also involved in Web and Mobile technology. The only web project from Larva Labs was done with Google and was called Github Data Visualization using Flutter Web. Flutter is a development framework aimed to change the app development process. 

The mobile projects from the team include:

  • Road Trip, an endless driving game
  • Boo, an android app for face detection and animation
  • AppChat, a chatroom for the Android apps
  • FlowHome, an Android launcher that organizes social network notifications and system notifications creatively on the phone
  • BreathPacer, a breathing trainer app for iPhone with sound and animations
  • Androidify, personalizing the Android logo into self or friends’ avatars, etc. 

Final Thoughts: What’s the Latest on CryptoPunks?

US-based Yuga Labs acquired the intellectual property rights of CryptoPunks and Meebits in March 2022. They plan to give commercial rights to both communities. Until now, punk owners could only reproduce, transmit, distribute, and display their punk images. Now, they might be able to modify and sell third-party products with them.  

Yuga Labs is the creator of another popular NFT collection called Bored Apes Yacht Club (BAYC) and the associated collection Mutant Apes Yacht Club (MAYC), launched in 2021. These collections are unique in that they gave full IP rights to the owners. 

Yuga Labs immediately granted all CryptoPunks holders full commercial rights to their Punks.

Layer-1 vs. Layer-2 Blockchains: What You Must Know

Bitcoin did the heavy lifting of creating a peer-to-peer decentralized and tokenized financial network. One person can send another person halfway around the world $1,000,000 in BTC for a paltry $20, sometimes even as low as a dollar and change. 

The problem is that microtransactions, such as sending a friend $4 for a cup of coffee, cost the same. 

Similarly, Ethereum created an entire galaxy of possibilities for DeFi, NFTs, and other decentralized applications. However, the breadth of its value has also been one of its detractions– as network gas fees skyrocket in times of extremely high traffic, making using the network ludicrously expensive for users and developers alike. 

CryptoKitties, an early sensational NFT game, nearly ground Ethereum’s network activity to a halt in 2018 due to the throng of transactions. Even today, gas fees can be hundreds or thousands of dollars to mint a new Ethereum-based NFT. 

However, problems are usually followed by problem solvers. Hundreds of developers have dedicated their professional lives of late to either building decentralized apps to help scale projects like Bitcoin or Ethereum or creating more scalable networks from the ground up. 

Layer-1: The underlying blockchain architecture. For example, Bitcoin and Ethereum.

Layer-2: A network that sits on top of Layer-1, which facilities network activity. For example, the Lightning Network and Raiden Network.

The following Layer-1 vs. Layer-2 blockchain guide explores both approaches and how they contrast. 

Layer-1 vs. Layer-2 Blockchains: The Basics

Layer-1 updates usually involve consensus protocol changes or sharding

As you may know, Bitcoin and Ethereum use a gawky but effective consensus protocol called Proof-of-Work (PoW). It’s good at what it does because it works. However, as network activity grows, its limitations become unbearable for many. 

PoW requires miners to solve cryptographically-difficult equations via computational power– hence Bitcoin mining facilities that are just warehouses with specifically designed computers running 24/7/365

At times, transactions can take way too long for convenience’s sake and become very expensive. Bitcoin can manage about seven transactions per second, whereas Ethereum can do 15-20. 

Proof-of-Stake (PoS) is a relatively newer protocol; rather than computation power, it relies on people (validators) staking a certain quantity of holdings to validate transactions.

Changing consensus algorithms can be a divisive ordeal, and switching from PoW to PoS on a network as large as that of Bitcoin or Ethereum would require achieving agreement among the majority of participants, which can be extremely difficult. 

Sharding is another Layer-1 scaling strategy. Sharding breaks transaction sets into smaller chunks called shards, which the network can process at a much faster rate. Think of cutting a PBJ sandwich into small pieces (shards) versus eating it bite by bite. Each small piece you eat is a finalized transaction, whereas the latter approach would require the whole sandwich to be eaten before the transactions are final. 

Attempting to implement scalability measures on a Layer-1 blockchain would require a full or partial network update, which is a slow and contentious process; if things go sideways, the entire network could face enormous damages. 

Many projects have been launched to provide users the scalability that the more legacy cryptocurrency projects have struggled to do. 

For example, chains like Solana, Cosmos, and Cardano (yet to launch anything) have emerged in attempts to unseat Ethereum as the most popular blockchain network for dApps, primarily targeting its scalability issues and low-hanging fruit. 

The user experience tends to be much faster and cheaper on the newer Layer-1s– transactions on Osmosis, a decentralized exchange built on Cosmos, cost around a penny. In contrast, the Ethereum DEX UniSwap can cost dozens or hundreds of dollars. 

However, the opportunity to scale the world’s most popular Layer-1s instead of launch new ones from the ground up is an admirable and lucrative challenge accepted by many. 

They do so through Layer-2 blockchain innovation

Layer-2: Attempts at Scalability

Layer-2s are essentially sandboxes for creativity with minimal or zero disruption to the underlying network.

There are two types of Layer-2 blockchains: state channels and nested blockchains.

A state channel allows for two participants who would otherwise interact on the blockchain to interact off the blockchain, limiting the congestion of the network. 

Imagine Bitcoin’s or Ethereum’s blockchain as a 10-lane superhighway with bumper-to-bumper traffic. A state channel would be the back-road approach you could take to avoid driving into a slow, expensive network and get to your end destination at a fraction of the time and cost. 

Here’s how state channels work: 

  1. A blockchain segment is sealed off through a smart contract or multi-signature means, where all participants agree on the conditions. Lightning Network and Raiden Network used Hashed Timelock Contracts (HTLCs) for their state channels. 
  2. The transaction participants can then directly interact without needing to submit their request to the miners on the Layer-1. 
  3. When all the transaction sets on the state channel are complete, the final state is added to the blockchain. 

So, while a transaction is technically not “final” until added to the blockchain, state channel projects like Bitcoin’s Lightning Network and Ethereum’s Raiden Network effectively carry out the role of policing and verifying transactions. 

The idea is that these “batched” transaction blocks can effectively internally settle; when they do, the entire batch is added to the blockchain. As such, Lightning Network enables fast microtransactions (low fees, fast settlement), and Raiden does the same thing for Ethereum’s broader functionality. 

However, state channels have some limitations. 

Nested blockchains aim to increase scalability exponentially, whereas state channels are more linear. 

Ethereum is a popular breeding ground for decentralized apps to solve scalability issues. OmiseGO, for example, is experimenting with a nested blockchain scaling solution called Plasma. 

In Plasma, multiple levels of specific-use blockchains sit on top of the leading blockchains in parent-child connections. The parent chain then dedicates specific work to child chains, such as a social network or decentralized exchange.

The root chain still calls all the shots and sets the ground rules, but nested blockchains relieve some load. 

Final Thoughts: What You Should Know About Blockchain Scalability

While the differences between Layer-1 and Layer-2 solutions might seem exclusively technical, it’s worth considering that by collecting NFTs, holding tokens, and using dApps, you’re the direct stakeholder in the whole ordeal. 

While Ethereum enjoys a considerable first-mover advantage for NFTs (and DeFi), boasting multi-billion-dollar dApps like OpenSea, competitors are gaining on its tail. 

As an NFT investor or creator, being aware of broader industry trends like scalability is an excellent way to keep your ear to the ground, whether that be for the purpose of finding the next BAYC (on another chain) or creating the next homerun NFT brand for a diehard layer-1 alternative. 

Perceptual Hashing For NFT Verification

In providing accurate NFT verification services, neither humans nor computers are sufficient. However, using a technology called perceptual hashing, mountainous digital files can be reduced to perceivable attributes such as shapes, patterns, and colors that can easily be compared by both humans and computers.

By combining perceptual hashing with human verification, NFT verification services can easily and accurately identify forgeries. 

NFTs are an exciting application of blockchain technology and smart contracts that have attracted substantial attention from creatives and markets alike. However, as with anything of value, scammers will attempt to fool unsuspecting buyers into shelling out large sums of money for a forgery. 

This is where an ingenious technology called perceptual hashing becomes valuable. However, perceptual hashing alone isn’t enough to automate the job of verifying the authenticity of NFTs. In order to provide valuable NFT verification services, we need a combination of computer and human perception.

The following guide explores how a technique known as percentual hashing is used by NFT verification services to flag potential forgeries and bring them to the attention of humans.

What Makes NFTs valuable?

First, let’s take a moment to explain what it is we’re trying to protect in simple terms. 

NFT stands for “non-fungible token.” 

“Fungible” means, essentially, interchangeable. Take fiat currencies, for example. Every U.S. dollar is worth the same amount as every other U.S. dollar. U.S. dollars are fungible. All currencies are fungible, including cryptocurrencies. If you loan someone a $1 bill or 1 ETH, they can pay you back with any other $1 bill or 1 ETH. 

NFT’s are not interchangeable as each one is unique. 

A token is something that represents something else. For example, an arcade token represents a quarter. However, while the token has value to the holder, they can’t spend it at a convenience store. 

They first have to convert the token back into a fungible quarter. 

So an NFT is a crypto token that stands in place for a non-fungible asset.

How Do NFTs Track Asset Ownership?

Like currencies, NFTs have a value. However, as we explained, unlike currencies, NFTs are not interchangeable. Each NFT is, in essence, a contract that spells out who owns a particular digital token. The token represents the underlying asset. They can be tied to a physical object or they can represent a digital asset such as an image.

Let’s use cars as an example of how NFTs work. When a particular model of car is built, every car with the same features has the same price (in theory). However, as soon as you buy one of those cars, its value diverges from the value of all the other cars on the lot. They might be similar, but they’re not interchangeable. 

When you buy a car, you get a title. The title is obviously not the vehicle itself, it’s essentially a token denoting ownership of that specific vehicle. Each vehicle has its own unique vehicle identification number (VIN). A database of VINs matches titles to owners. You need that VIN so you can search the database of titles (tokens) for that specific car to see who owns it. 

When you sell the car, the title needs to be signed over to the new owner. The same is true with NFTs. When you sell an NFT, the change in ownership is immutably recorded on the blockchain.

NFTs can represent any type of unique asset. 

Digitally Verifying the Authenticity of NFTs

There’s a huge challenge with digital NFTs. Like cars, NFTs can cost tens or hundreds of thousands of dollars and more. Unlike cars, however, digital files can be copied an infinite number of times. The image itself doesn’t have an identification number on it. And if it did, that would easily be copied too. 

Without some way to verify the authenticity of a digital image, its value would be nil. 

Any serious collector of physical artworks needs a way to verify that a particular painting is not a forgery. For this, they hire a professional service that specializes in identifying forgeries. Likewise, serious NFT collectors also need a way to verify the authenticity of an NFT.

A scammer can easily create an account on an NFT marketplace using the same or similar name as the original artist, then make a copy of the image and list it as a new NFT. 

How can the potential buyer be sure that the NFT is authentic?

Comparing Original and Counterfeit NFTs

Theoretically, you could compare the NFT to a database of original NFTs. However, that would be a monumental task. For starters, you need to store a copy of every NFT for comparison. Then you would need to check every single bit and byte to make sure they match. 

But what if the nefarious seller changes the NFT ever so slightly by making it a tiny bit darker or lighter or smaller or larger or framed or cropped. In these cases, comparing the image to files in a database would be useless as they won’t match. A computer would fail miserably in identifying even a slightly changed copy. 

A person would be able to match the two images quite easily through human perception. The problem is, however, that it would take a human being eons to go through every NFT for comparison. 

Perceptual hashing for verification of NFTs

How do we solve this problem? By using a technique known as perceptual hashing.

Hashing simply refers to the process of recalculating something to reduce it to a particular set of basic properties and get rid of unnecessary data. 

A good example of this is private and public wallet keys. The private key is hundreds of characters long. The public key is a shorter version of the private key created through a complicated algorithm. (It’s near impossible to reverse the process and generate a private key from a public key. This intensive task would require the theoretical power of quantum computers, which don’t exist to the degree of sophistication needed to crack a blockchain.) 

Perceptual hashing is the process of using an algorithm to convert an image into a set of easily perceivable attributes — such as shapes, patterns, and colors — that can easily be compared. 

Human vs. Computer Perception

Perceptual hashing is a powerful tool for comparing images. In order to verify the authenticity of NFTs, however, we need the cooperation of humans and computers. The computer can easily compare highly similar images using perceptual hashing. However, if the image is sufficiently modified, the computer can only identify similarities between features in the original and the copy. It can’t make the call, so to speak.

If a computer using perceptual hashing determines that two images are identical it can flag the latter copy as a forgery without human intervention. If the computer sees no similarities between the two files, it can verify that an image is unique without human intervention. 

However, if the computer sees some similarities between two images, but can’t verify that one is a copy of the other, it can flag them as being similar. A human being can then very quickly look at the two files and verify whether they are unique or if one is a slightly revised knockoff of the other.

Various NFT Verification Schemes

Stock photography services have been using perceptual hashing to identify copies and near copies of their assets for many years. Google Images, for example, uses perceptual hashing to help users find copies and variants of an image on the internet. 

Perceptual hashing is also being used by services like YouTube to detect unlicensed use of videos and music. However, NFT collectors need more assurance than a Google search.

Being such a nascent technology, NFT authentication services are still in their infancy and a wide variety of proposals are being tested. For example: 

  • Pastel is a first-of-its-kind blockchain that uses perceptual hashing as part of its proprietary technology to find near-duplicate NFTs. Pastel’s Sense Protocol utilizes deep learning models using Tensorflow with Keras Applications to turn each NFT into an “NFT fingerprint vector” of over 10,000 numbers. Then, it determines a correlation between that fingerprint and all other NFT fingerprints on Pastel, other NFT marketplaces like OpenSea, and open databases like Google. Its relative rareness score is between 0% (the NFT is identical to another already registered NFT) to 100% (the NFT is completely unique). Pastel’s algorithms can be bolted onto any NFT marketplace. 
  • Mintable NFT marketplace offers reverse image searches for its own offerings using perceptual hashing.
  • Blockchains such as Stellar use various trust-building mechanisms. 
  • Adobe allows artists to embed the creator’s wallet address and social media information into their NFTs. 
  • And Twitter helps owners of popular NFTs (such as Bored Apes) verify that they are, indeed, the rightful owner.
  • Another NFT marketplace, Rarible, hand curates all artists and NFTs before they can be listed on the site.

Although it’s still early in the game, NFT collectors are already spending hundreds of thousands and even millions of dollars on NFTs. So there’s a fast-growing need for third-party NFT verification services. With such a demand, supply is sure to increase quickly.

Final Thoughts: NFT Verification as a Service

As you might imagine, NFT verification services are invaluable to serious buyers and sellers. 

However, the concept of NFT verification services is still in its infancy. As such, a variety of new schemes are being developed and implemented. 

No matter which of these developing schemes proves to be useful and becomes widely adopted, one thing is for certain: computer algorithms alone to compare NFT images is insufficient, so far. 

By combining perceptual hashing and human verification, we can provide a high level of trust for legitimate NFTs and easily weed out forgeries. 

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.