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Arts & Communication Blockchain and royalties in China’s art market

that the journey to a fully sustainable blockchain ecosystem holder’s authorization constitutes infringement, especially
is far from complete. concerning reproduction rights. However, in jurisdictions
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This shift to PoS, while a monumental step toward like China, Terms of Service agreements used by platforms
mitigating the environmental impact, does not entirely such as Alibaba or Tencent can help navigate these ethical
eliminate the carbon emissions associated with blockchain waters by ensuring that purchasing an NFT not only grants
operations. The move, heralded by the Ethereum ownership of the NFT but also includes the copyright of
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community and detailed in related discussions, highlights a the underlying work, including attribution rights.
conscious effort within the blockchain industry to address In the art industry, blockchain’s ability to automate and
sustainability issues. However, the residual environmental enforce resale royalties is a crucial but little-known feature.
effects underscore the importance of ongoing efforts to Resale royalties provide an essential source of income for
develop more eco-friendly technologies and practices artists, allowing them to profit from later sales of their
within the blockchain and NFT sectors. 102 works. Blockchain technology and smart contracts present
Blockchain’s hallmark of transparency, while a previously unheard-of chance to quickly and openly
revolutionary for authenticating the provenance of digital trace the provenance and sales of artwork, guaranteeing
art, paradoxically raises privacy concerns and opens that artists are fairly compensated for any subsequent sales.
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avenues for sophisticated scams. The immutable record However, operationalizing such a system poses its own
of transactions, accessible publicly, can inadvertently set of challenges. To mitigate these issues, a multifaceted
expose transaction patterns and potentially sensitive approach is essential. First, the development and adoption
information about market participants. This transparency, of privacy-enhancing technologies within blockchain
while deterring some forms of fraud, ironically opens networks can balance transparency for verification with
avenues for sophisticated scams, where fraudsters exploit privacy for security. Techniques such as zero-knowledge
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public data to craft targeted phishing attacks or manipulate proofs allow for the verification of transactions without
market sentiment. 104 revealing sensitive information, reducing the risk of targeted
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The transparent nature of blockchain might also fraud. Alongside privacy considerations, establishing
complicate the verification process. While it ensures the mechanisms for clear ownership and attribution is
authenticity of digital artworks and ownership through equally crucial. Such measures ensure the transparent and
time-stamped records, this very openness can lead to verifiable documentation of ownership, effectively tackling
information overload, making it difficult for participants the problem of orphan works and ensuring that artists and
to discern genuine transactions from fraudulent ones creators are rightfully acknowledged and compensated
without advanced analytical tools. This transparency can for their work. In this vein, smart contracts present a
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inadvertently expose transaction patterns and potentially robust solution by facilitating the precise definition and
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sensitive information about market participants, enforcement of digital rights and permissions. This not
complicating the verification process and necessitating only safeguards the interests of copyright holders and NFT
advanced security measures and digital literacy. 99 owners but also fosters a trustworthy and equitable digital
art ecosystem, where the integrity of creators’ rights is
Furthermore, the NFT market is characterized by its
high price volatility, attributed to its speculative nature and maintained across transactions.
the liquidity of digital assets. This volatility is not merely a Second, to combat the risks posed by market volatility
financial risk but also poses ethical concerns. Uninformed and speculative trading, educational initiatives are crucial.
participants, lured by the prospect of quick profits, may These programs should aim to inform potential investors
find themselves at the mercy of market manipulations and creators about the inherent risks of the NFT market,
and the whims of more savvy investors, exacerbating including its speculative nature and the potential for
economic disparities within the digital art ecosystem. significant financial loss.
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Addressing these concerns requires a multifaceted strategy Finally, the establishment of comprehensive regulatory
that includes privacy-enhancing technologies, educational frameworks is imperative. Such frameworks should not
initiatives focused on market risks, and comprehensive only aim to protect market participants from fraud and
regulatory frameworks aimed at ensuring fair practices financial harm but also strive to ensure a fair distribution
and protecting participants from fraud. of wealth generated in the digital art market. Regulations
Moreover, NFTs bring to light specific ethical issues could include measures to enhance the transparency of
regarding copyright and intellectual property rights. platform fees, ensure fair royalty distributions, and protect
Unauthorized minting of NFTs without the copyright against market manipulation.

Volume 3 Issue 1 (2025) 13 doi: 10.36922/ac.2875