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15 June 2021

The Problem with Solutions

By Amalyah Keshet, Senior Consultant

Photo caption: Who killed cock robin? Photo credit: McGill Library on Unsplash

Determined to explore other subjects in this month’s post, it seems I’ve fallen like Alice further down the NFT hole. As luck would have it, though, there I encountered some very relevant discussions of subjects like “Why NFTs aren’t the solution to museums’ deaccessioning dilemmas, or any other big problems either.”[1] This article quotes the views of both Professor of Finance and Business Transformation David Yermack and of Assistant Professor of Visual Arts Administration Amy Whitaker – both of New York University – and there is much to contemplate here for anyone working in a museum or other arts organisations. For more about museums and the art market, and what blockchain technologies could and could not do for them both, click through to this additional article here. This should be of particular interest to provenance researchers, collections database managers, and registrars. 

For those involved in art and antiquities restitution, there is another article by Amy Whitaker which advocates for blockchain tech for museums and archaeology, provenance, and equity sharing, view this article by clicking here.

Whitaker’s approach is balanced by two must-read resources on NFTs and the Law, the first of which is a paper on art collaborations from the Serpentine Legal Lab, this can be found here. In it, art lawyer and curator Alana Kushnir examines amongst other things “the details of a dispute between an artist and a 3D-modeller over the copyright ownership and sale proceeds of ‘the world’s first NFT House’… the first broadly publicised example of the tensions between NFTs in their current form and cross-disciplinary collaborations, … an early warning sign of what is to come.”   A recording of the related web discussion held by the Lab together with the New Museum and Rhizome on 7 June 2021 should be on the Serpentine Legal Lab website soon. Fascinating issues are raised in both resources, such as who can mint an NFT v. who can hold copyright, do NFTs contradict certain moral rights, what happens with artistic collaborations, in whose “wallet” does an NFT reside, what happens when heirs and other parties involved want a share of the profits? How will the URL in an NFT token be maintained?  By whom? For how long?  Are so-called “smart contracts” coded in an NFT token legally enforceable? (Most likely not; NFTs are only markers to something else.) What actually happens when an NFT is sold?  Who has custody of the related digital artwork (file) during the sale process?  What are the hosting maintenance obligations of the creator, minter, auction house?  These and other brilliant questions were posed by Kushnir and art lawyer Megan Noh from Pryor Cashman LLP.

The other must-read is the story of Contract Killers, a project by artist Nancy Baker Cahill that directly challenges “smart contracts” in NFTs, find this article here. The artist partnered with technology studio Snark art and the open source blockchain platform Tezos to create an AR series pointing out the deficiencies between owners and creators of NFT’s and “the greater imbalance of power and lack of trust that underlays society.”

“To Baker Cahill, the promise of blockchain, of a decentralized network and accountability, has not only failed to deliver but ‘simply offered new and unregulated means for existing structures to creatively re-entrench and rebrand themselves.’ Her project not only speaks to the ‘ephemeral quality of contractual agreements inherent in digital art and the exploitation of artists by galleries and auction houses, but also reaches further and attempts to comment on years of social inequalities.”  To the fine arts lawyer accompanying the project, Sarah Odenkirk, there is ‘…a need for accountability surrounding digital art and NFT’s and their “smart contracts” …there’s not really much of a contract there, other than enough information to sell the piece, … because there’s no way of checking to see if whoever minted the NFT actually made or had the rights to the work,” and that affects, for example, the resale royalties idea that is touted for NFTs.  Sellers can go off-blockchain and use Venmo or PayPal to sell a work on the secondary market, avoiding the resale royalty. “… there has to be some enforcement mechanism, because there is not really much in an NFT that protects anybody.”

NFTs are problematic in myriad ways, Odenkirk goes on, “the two most glaring of which have to be their inability to establish a reliable provenance, and the lack of recourse should the embedded link to a purchased work of art break, or the location of that work disappear.” “Despite claims to the contrary, the current structure of NFTs neither guarantees true authenticity nor establishes a reliable provenance for artwork assets. Nor do NFT transactions address concerns around intellectual property ownership and appurtenant rights; or remedies in the event that built-in resale royalties’ provisions are ignored by transacting off-chain. And, perhaps most glaringly, there is no recourse in the event that the embedded link to the purchased asset breaks or the location of the asset disappears. Thus, a key component of this project is to suggest enforceable contract terms that will create a rational path to NFTs becoming a sustainable vehicle in the marketplace.”[2]

The contract for this project is in fact available on the artist’s website.  It makes fascinating reading. As the contract itself says, “This Agreement is intended to be readable and understandable by non-lawyer, NFT purchasers, so that there is no confusion as to intent, application, and scope of the terms,” so do not hesitate. It is useful for illuminating the nature of an NFT purchase and the many issues involved that are relevant not just to artists and private collectors but, obviously, to museums as well.[3]   

Over in the music world, there are signs of “a particular convergence between the plight of musicians [streaming] and the plight of contemporary artists working in digital media… thinking about how they can be paid for their labour, not their output… because a ‘lack of respect for digital makers’ inside collecting circles means most software-based artworks remain unlikely to sell…Most artworks, period, remain unlikely to sell. But a small subset sells multiple times on the resale market, for earth-shaking prices, with only the owner-turned-seller directly profiting from the upside.”[4] It was this imbalance that motivated the U.K., France, and other countries to legislate a resale royalty right for artists based in their countries. In the U.S., interestingly enough, the idea failed.  Whether or not the claim that NFTs can promise resale revenue in secondary markets is valid may turn out to be one of the most interesting issues to follow. 


There’s always a limerick:

The NFT market has grown,

As eight-figure auctions have shown.

The overall price is

A worse climate crisis

For art you pretend that you own.

Tweet from @Limericking 8:51 PM · Mar 15, 2021


Interested in finding out more about NFTs and copyright? Read Amalyah’s first two blogs on the subject, “NFTs, obviously” part 1 and part 2.


[1] https://www.thegray-market.com/blog/2021/5/7/why-nfts-arent-the-solution-to-museums-deaccessioning-dilemmas-or-any-other-big-problems-either 

[2] https://drive.google.com/file/d/1rYRswms6m0_cwF_TZWySgCqGBWyoQ-M1/view

[3] https://drive.google.com/file/d/1XS6xqa_pCtp6NA9RVPPVKbpkSX89HwmW/view

[4] https://www.thegray-market.com/blog/2021/5/13/what-spotifys-broken-artist-royalty-model-can-teach-us-about-inequities-in-the-art-market    


© Naomi Korn Associates, 2021. Some Rights Reserved. The text is licensed for use under a Creative Commons Attribution Share Alike Licence (CC BY SA)

Disclaimer: The contents of this blog post are based on the assessment of Naomi Korn Associates Ltd at the time in which the resource was created (June 2021). The contents should not be considered legal advice. If such legal advice is required, the opinion of a suitably qualified legal professional should be sought.