Welcome to the Wild West of Web3
As the Web3 space gains momentum, the intersection of blockchain, decentralised technologies, and traditional legal systems is becoming increasingly complex. In this article, we delve into three intriguing cases that showcase the challenges and disputes emerging within the Web3 and NFT (or, digital collectible) landscapes.
- A Bored Ape and the Million-Dollar Offer: Chris Chapman used to own one of the most valuable commodities in the crypto world: a Bored Ape Yacht Club NFT of a spiky-haired ape dressed in a spacesuit. In December 2021, he listed his Bored Ape for sale for US$1 million on Open Sea, the largest NFT marketplace at the time. Two months later, OpenSea notified him that his NFT had been sold for roughly $300,000. How did this happen? A crypto scammer found a flaw in OpenSea’s system to buy the ape for only 30% of its actual price on the market. So did Chapman get his money back? The news on this has gone quiet but it remains a prime example of the vulnerabilities within Web3, that can lead to a significantly lower sale price and a contentious compensation negotiation. This case is not helped by news that OpenSea is “in trouble”, an OpenSea employee has been convicted in the first insider trading case and the masses are decamping to Blur. Watch this space!
2. Banksy, Pranksy and a game of ‘Digital Whodunnit?’: In 2021, an NFT called Great Redistribution of the Climate Change Disaster appeared on OpenSea, linking to British street artist Banksy’s website. It was an 8-bit image of a CryptoPunk figure smoking a cigarette in front of four factory chimney stacks emitting plumes of smoke—an issue Banksy has been vocal about. Naturally, this created a buzz on whether Banksy had joined in on the NFT fray. Quick to jump the gun, a collector named Pranksy (not a joke!) quickly bid more than $330,000 on the piece, which was promptly accepted by the vendor. After it was sold, Banksy’s publicist Jo Brooks formally announced that the artist “has not created any NFT artworks” and that “any Banksy NFT auctions are not affiliated with the artist in any shape or form.” Pranksy believes Banksy’s website was hacked, which implies the mastermind is still on the loose—but who could it be? A curious detail: Pranksy’s cover photo on Twitter is of a pixelated red and white aeroplane, not dissimilar to the aesthetic in the fake Banksy NFT. When asked if he was part of the hoax, Pranksy denied any involvement. So—was he the scammer or the scammed? The question remains to be answered, but one thing’s for sure: there are no refunds on the blockchain! This illustrates the need for reliable verification methods and robust security measures in the Web3 space.
3. AI's Artful Dodger: Stability AI Faces Copyright Storm: Getty Images has filed a copyright claim against Stability AI, the creator of a free image-generating tool. The case will no doubt set the tone for the global debate around intellectual property ownership in the age of AI. Getty claims that Stability AI had “unlawfully copied and processed millions of images protected by copyright…to benefit Stability AI’s commercial interests and to the detriment of the content creators.” Meanwhile, lawsuits are also piling up on the other side of the pond. More American artists are filing class-action suits against Stability AI, Midjourney, DeviantArt, and similar companies, after they discovered that these companies used their artwork to train their AI systems through Stable Diffusion. As lawsuits surrounding the use of copyrighted material in AI training increase, the global debate on intellectual property ownership in the context of Web3 and AI technologies intensifies.
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These cases highlight the importance of developing comprehensive legal frameworks and guidelines that can address the unique challenges posed by the Web3 space. Thankfully, at least in the field of AI, the European Union has been hard at work developing a new draft of the Artificial Intelligence Act that will require companies that make generative AI tools to disclose if they have used copyrighted material in their systems. This would be the first set of comprehensive laws related to AI regulation in the world.
Until then, there really is no clear conclusion, at least for now. At the moment, we can see that there are several gaps to be filled in the world of Web3. So, how do we move forward from here? I’ve developed three actionable points that can aptly be summarised in three letters: N-F-T!
📚 Need for education: One of the most important steps is to educate the public about the risks and potential scams associated with the world of Web3. People need to understand what they are buying, how to verify the authenticity of digital collectibles, and what they can or cannot do with their property. Further, people should stay informed about ownership of AI generated materials in their country as every jurisdiction is different. This can be done through public awareness campaigns, educational materials, and continuous community discussions. Read about the difference between copyright protection for AI-generated works in Singapore versus in the UK here.
⚖️ Focus on regulation: Increased regulations might mean: mandatory disclosures, verification of requirements (such as KYC), and licensing for NFT marketplaces. All of these will help ensure that buyers are protected from scams and fraud every step of the way.
🫥Total transparency: Marketplaces for NFTs and creators of generative AI should strive to be as transparent as possible about the products they sell. New regulations may include disclosing the data inputs used to create AI art. Stay tuned for updates!
So, in conclusion - whether or not you believe Elon Musk’s open letter that warns of AI’s “profound risks to society and humanity” in light of him launching X.AI, now more than ever, everyone must stay informed and vigilant as they navigate the intricate and rapidly evolving world of Web3.
Now that you’re all caught up–what are your thoughts on NFTs and AI? Let’s chat in the comments!