NFT Activity Teases Resurgence: The Good, The Bad and The Ugly

The non-fungible tokens (NFT) niche appears to be staging a comeback, at least according to recent on-chain activity and the recent buzz fueled by the latest developments in the sector. The renewed interest in the space this year has swollen this month, with several brands either announcing their entry into the space or advancing their existing initiative. Meanwhile, some NFT collections have been caught up in legal issues as the spotlight returns to the once-flourishing market. Here are the latest stories around NFT ecosystems thus far:

Spotify is working on a new NFT integration feature

Global music streaming service Spotify on Wednesday confirmed a new integration on its music platform in the form of token-enabled music playlists which select users can access. Participating NFT groups and communities will generate and curate community playlists that will then be accessible to users holding those specific tokens. For the pilot initiative, the music platform has partnered with various music gaming and metaverse communities, including Overlord and Kingship.

The function will be available in four countries outside the US: – Australia, Germany, the United Kingdom, and New Zealand, to users who stream via the Android platform. The latest feature adds to Spotify’s leveraging Web3 aspects to make its platform more appealing. Last May, the music giant debuted another NFT initiative for embedding NFT galleries on artists’ profiles to promote their work. The integration allowed users to preview the NFTs with a purchase option available via a redirect to the OpenSea NFT marketplace.

Music NFTs are allowing artists to escape the horrors of ‘the middleman’

Music NFTs have become popular in recent months as developers realize more use cases of the underlying technology. They have also been touted as a potential solution to a major problem. For context, the music industry is heavily centralized, with ownership mainly under the control of major record labels, especially in the monetary aspects, such as royalties. Even though the advent of music streaming platforms has enabled a more democratic approach, there’s still a void in artists’ ability to grow a dedicated fanbase, distribute their music, and bag the entire revenue generated.  In a way, music NFTs offer a solution for the trilemma of issues as they provide an avenue for fans to support their favorite artists directly.

Observers also note that they could help build a stronger relationship with fans by allowing direct interaction and ownership of digital assets. Musicians can issue free NFTs to fans as a way of rewarding their loyalty and growing their audience, which can also boost website traffic, subscribers, and new listeners. As a potential revenue stream for independent artists, NFTs allow the minting and selling of digital assets such as music in a more direct way than traditional methods – without the middleman. Artists can transition into this new model of monetizing their work without relying on royalties from streaming platforms.

Court implies NBA Top Shot Moments NFTs qualify as security

The Chinese business unit of the National Basketball Association (NBA) announced Tuesday plans to launch basketball-themed NFTs following its partnership with Chinese fintech giant Ant Group. The professional basketball league has previously integrated NFTs and Web3 into its business model. Last year, the NBA joined forces with blockchain gaming company Sorare to introduce a blockchain game where participants can win and trade NFT basketball cards.  In 2020, the NBA partnered with consumer-focused blockchain game development company DapperLabs to launch a sports-inspired NFT collection, NBA Top Shot.

The collection, which ranks seventh in all-time trading volume as per CryptoSlam, has been the subject of debate on Thursday after a federal judge ruled that the NBA Top Shot Moments may qualify as a security under the Howey test. In a Feb 22 court filing, the judge said that NFTs offered by Dapper Labs are “investment contracts” and gave a green light on a class-action lawsuit filed against the company to continue.

“Ultimately, the Court’s conclusion that what Dapper Labs offered was an investment contract under Howey is narrow. Not all NFTs offered or sold by any company will constitute security, and each scheme must be assessed on a case-by-case basis […] It is the particular scheme by which Dapper Labs offers Moments that creates the sufficient legal relationship between investors and promoter to establish an investment contract, and this is a security, under Howey,” the judge ruled.

DapperLabs, which focuses on digital collectibles and blockchain-based gaming experiences, is the subject of the lawsuit, filed in May 2021, alleging NBA Top Shot NFTs are securities. The company’s CEO filed a motion to dismiss the same, but it was denied on Wednesday alongside the ruling. The case is now expected to proceed. A spokesperson from the NBA Top Shot developer objected to the federal judge’s ruling, adding that the company will “vigorously defend its position in court” in the coming days.

NFT marketplace wars: Blur dominates OpenSea

Hype around the Blur NFT marketplace has been rife in the past few days. Launched last October, Blur, which brands itself the fastest NFT marketplace for pro traders, completed its highly anticipated airdrop of BLUR governance tokens to NFT traders on the Ethereum blockchain last Tuesday. The platform released 360 million tokens during the token unlock event. Alongside the airdrop announcement, the marketplace said it saw a trading volume of $1.18 billion in NFTs and 146,823 unique users in the first four months from launch, emerging as a fierce competitor to OpenSea in the NFT market.

Airdrop lived up to the hype, NFT activity is buzzing

Blur has dominated OpenSea in terms of NFT trading volume for most days since the start of February. In the last seven days, the marketplace has logged a volume of $601 million, compared to OpenSea’s $104 million, according to Dune Analytics data. These figures translate to a market share of 85.2% commanded by Blur marketplace against 14.8% for OpenSea.

Blur vs OpenSea. Source: Dune Analytics

This contrast also extends to daily volume figures. DappRadar data shows that in the last 24 hours, Blur has recorded a trading volume of $98.6 million, while OpenSea, in second place, has only managed $17.92 million. In addition, its daily average trade price has been consistently higher than on OpenSea.

Worth noting, Blur has built its rewards model such that it avoids incentivizing volume to prevent wash trading.  The marketplace has sought to break beyond OpenSea’s restrictive system by optimizing its royalties reward scheme to incentivize users to block the competing marketplace. Blur communicated in a Feb 15 blog post that it had reinstated royalties – fees paid to creators when their NFTs are traded on the secondary market – but will require users to block OpenSea to be eligible for full royalties.

The marketplace’s management said this policy shift is a defensive strategy intended to ensure its survival – it was compelled to choose this course of action due to OpenSea’s non-competitive stance.  Creators who authorize OpenSea and Blur cannot receive royalties from both platforms. OpenSea automatically sets royalties as optional for creators when it identifies trading activity occurring on Blur.

OpenSea matches up and implements temporary 0% fees

In response, OpenSea announced a massive revamp of its marketplace structure last Friday, citing a shifting landscape. The platform said that it has always made efforts to protect creator earnings for all collections, explaining that its’ Operator Filter’ was introduced for on-chain enforcement of the same. OpenSea’s team argued it was the best way to ensure that creators receive revenue from the ongoing resale of their work.

To keep up with the challenge, the marketplace said it had enacted a limited-period zero percent fee on all secondary sales, a change from the usual contentious 2.5%. OpenSea also noted that while sellers may be able to pay any amount of royalties they wish to, it has now adopted an optional creator earnings (minimum 0.5%) model for all old and new NFTs that do not employ on-chain enforcement. The third change the NFT entity introduced to woo back its veering user base was adjusting its operator filter. The updated filter will now permit the sale of NFTs on marketplaces with equivalent policies, such as Blur, meaning creators will no longer be compelled to choose between collecting earnings on OpenSea or another marketplace.

A changing landscape: Blur is leaving OpenSea in a hazy

OpenSea said its new era had dawned courtesy of recent events, among them being Blur’s decision to remove creator earnings even on filtered collections and forcing creators to choose between liquidity on their platform or OpenSea. The premier NFT marketplace also decried that, presently, nearly 80% of the ecosystem’s total volume does not offer full creator earnings, and most of it has migrated into a zero-fee environment.

The marketplace promised to continually work to optimize incentives for all actors in the ecosystem, including creators, collectors, and high-volume traders. OpenSea’s decision means it’s giving up a lot in trading fees. Still, most believe only a token drop would bring back the traders to its platform.  On Blur, activity remains ablaze. The amount of ETH burned by the marketplace in the last 24 hours amounts to 340 ETH, according to UltrasoundMoney. Notably, its ‘Marketplace 2’ contract leads the burn leaderboard on both 24-hr and 7-day timeframes.

Yuga Labs concedes to alter its BAKC logo following claims of IP rights infringement

Creator of the Ethereum premier NFT collection Bored Ape Yacht Club Yuga Labs this week scrapped the logo for its Bored Ape Kennel Club (BAKC) after it came out that the image used was obtained without the approval of the artist and respect for the rights protecting it. The fiasco began with one Twitter user singling out the unerring similarity between BAKC’s emblem and the wolf skull drawing initially published on Apr 5, 2021, by Easy Drawing Guides – an online resource offering walkthroughs to kids and beginners on creating cartoon-like images.

BAKC’s version came into play when the collection launched in June 2021, and Yuga even applied to trademark it the following November.  In response to the tweet, Easy Drawing Guides confirmed that it retains all intellectual property rights to the drawing and echoed its terms and conditions that strictly prohibit using its proprietary content for commercial reasons. The platform only offers a limited license to access its website, exclusively for personal, non-commercial use.

Co-founder blamed a contracted freelancer

Yuga Labs co-founder Greg Solano said the claims regarding the BAKC logo were news to the company, but it had commenced an investigation into the matter.vSolano appeared to deflect blame on any misdoings to a freelancer that Yuga had contracted to create the design. The previously pseudonymous NFT creator added that Yuga has since contacted the freelancer responsible, as well as Easy Drawing Guides. BAKC nixed the logo, and Solano said the collection would launch a new one soon.

He also clarified that the BAKC has always been active in raising funds for charity and lauded the project for having already generated more than $1 million for animal-related causes. Still, Yuga Labs has benefited from the project, as its website shows that only royalty fees collected in the first six weeks (amounting to over $1 million raised from the 2.5% fee on secondary sales) were put into the charitable initiatives. Worth mentioning, the logo incident is not Yuga’s first mention as far as issues with intellectual property rights go.

The case of Ryder Ripps vs Yuga Labs

In a recent filing in the litigation pertaining to the alleged infringement of NFTs, the BAYC creator posited that its dispute with Ryder Ripps is primarily centered on trademark infringement and false designation of origin rather than defamation or copyright-based claims.  However, counterclaims filed by Ryder Ripps and Jeremy Cahen, the creators of RR/BAYC, raised intriguing questions on the classification of rights of AI-generated works that could potentially impact the legal landscape for NFTs and other forms of digital art. A recent update from artist Ryder Ripps suggested that Yuga Labs had formally admitted to all counterclaims in accordance with an order issued by the US District Court, Central District of California. Ripps disseminated an electronic copy of said court order via Twitter.