Blockchain and art intertwine: use cases, flaws & possible solutions / Sasha Shilina

Transcript

foreign my name is Sasha I am a researcher at Paradigm and humanote also I'm an artist and today I want to give a talk that will link topics I'm interested in that uh Technologies and art and phenomenon that connect them is non-fungible tokens nfts

the lack of conceptualization and concrete and systematic review of nfts potential for Creative Industries was the main limitation and the driver for conducting This research it contributes to a deep understanding of the features of nft Technology and gives an overview of their use cases benefits and challenges and proposes possible solutions in 2021 you all probably saw this nft hype as they certainly took blockchain Space by storm they've been big news ever since peoples every days 70 million dollars sale hit the headlines

on the crypto Banks collection successfully auctioned on Craigslist and Southwest and fetch Millions earlier this year Twitter launched nft profile picture picture verification Instagram introduced nfts a few weeks ago a while Spotify makes plans to support them also Nifty galleries are opening all over the world and this year Venus BNL is getting its first art nft exhibition these are just some notable examples and while some argue about the longevity of this phenomenon

and others are convinced that the hype is here to stay the numbers speak for themselves as nft sales reached nearly 80 billion dollars in 2021 up from 8 82 and a half million dollars in 2020 a jump of more than 200 times and what's more analysts predict that the global nft market will continue to accrue as it is expected to reach about 21 billion dollars this year so what makes nft technology so attractive for Content creators and collectors are there any drawbacks or pitfalls that need to be looked at and

addressed let's guess the answers first of all what is an nft I guess many of you know but I will briefly describe them for those who are not familiar with them adjective non-fungible is usually used in economics to denote the possession of unique items and to describe things that cannot be replaced by others because they have a set of exceptional properties a token as a unit of account is a record in a distributed Ledger that is controlled by a computer algorithm of a smart contract on which values of the balances on the accounts of token holders are recorded making it possible to transfer them from one wallet to

another so the time nft refers to a crypto asset and a tangible digital file such as an image a video and game collectible and other creative products moreover it seems like anything that it did that is digital today can be an nft thus it may be a worldwide web source code which was recently sold by its inventor for a five and a half million dollars it may be designer sneakers real estate I took it to a festival for example a lifetime passes took our cello Festival it may be a nice murderous or even genetic data

here on the slide you can see the main characteristics of nfts first of all it is uniqueness as in like cryptocurrency which requires all tokens to be identical each Nifty is unique the authenticity of each Nifty is possible because each token has verifiable metadata that makes particular asset different from the rest as well as a transaction log that can help prove the history of ownership Rarity and scarcity are also important ingredients in the recipe that makes nfts so attractive also transferability means that nfts can be

fully traded unlike for example sbts solve our tokens a concept that was introduced by vitalik buterin a few weeks ago and last but not least since token activity can be opened for public verification nfts ensure transparency and Trust and if the challenges have created many benefits on the one hand as well as several challenges on the other and so benefits so there are a lot of them first of all nfts address long-standing digital art scarcity issues of how to keep virtual artworks rare if they can be copied digitally also nfts are flagships of

decentralization transparency and Trust as I mentioned before with nfts ownership records are stores on the blockchains every nft has an owner and this is of public record subsequently users can view the entire history of the artwork with a previous private prices also in of this great the possibility to eliminate intermediaries from the communication process allowing content creators to connect directly to the audience um due to this they no longer have to depend on the creative Industries middlemen such as galleries auction houses or major record labels

also content creators have now a unique opportunity to honestly monetize their work as due to the advantages of blockchain technology they can claim royalties directly additionally nfts open up a new monetization opportunities for artists thanks to them today a digital artist can receive a percentage of secondary sales in a fully automated way what's more a blockchain platforms are designed to make the experience interactive and profitable not only for artists but for the audience as well by offering all kinds of incentives for example for compiling personalized

collections or contributing to increasing the database of artists venues or events another nft Advantage is availability anyone can create nft regardless of age or geographical occasion all that is required is the registration on the nft platform of Interest Furthermore with nfts artists can access Global markets and easily reach the collectors and the community of like-minded people and last but not least nfts could introduce Millions to people to cryptocurrencies for the very first time this leads to a more diverse industry and accelerates

the adoption of the technology blockchain technology and innovation a summarized version of nft's potential use cases is given on the slide they include prominent ones like art fashion music gaming and other which are of Greater importance for the creative Industries on the slide they're highlighted as well as they include Sports the fire tokenization of Real World objects domain name ownership licenses certifications and others virtual art is the most common use case

for nfts decentralized art marketplaces built on blockchain continue to emerge and increase confidence in online art sales and platforms as a mediator moreover they continue to reduce the overhead associated with maintaining a physical gallery and open the doors of investment to Art lovers democratizing art investment the most visited and used platform for hosting nfts is open CMS Marketplace a universal platform that allows users to trade nfts create nft is and view data on them

one of the reasons it is so popular is that is a self-service based and not created like for example a Nifty Gateway or Superior crypto Collectibles are also a significant in Trend among kind of these use cases they are designed in most cases to be bought sold or traded like baseball cards in fact Collectibles were one of the most very first ways that introduced the idea of nfts to the to the general public through cryptokitis game in 2017.

furthermore the use case hit the mainstream over the introduction of NBA collectible trading cards NBA Top Shot Jack dorsey's first nft is an excellent example of an nft collectible while for example a crypto Punk is collectible and virtual visually artistic and this nft has value Purity for its collectibility music nfts are also have a lot also a large devoted community and is on the way to adoption like a picture or a video or user scan attached audio

to an nft to create a collectible piece of music thus music nfts can be seen in terms of a digital first edition of a record aggregators like openc has dedicated catalog for music nfts but most artists prefer to launch on music specific marketplaces one of the biggest decentralized music platforms is audios with about a dozen million monthly users also nfts gained significant attention from The Gaming Community and developers as they provide an opportunity to own data for in-game items and to fuel in-game economic systems

in the new game model is named play to earn players play games to run nfts that can be sold on marketplaces for higher prices one of the most prominent examples of this model is x infinity and the popularity of the game has character on Philippines with people quitting their jobs to play the game full time and if these are also being used by guts and chained my crypto Heroes and other blockchain based games in fashion is still a relatively new concept as a blockchain technology they have been able to seamlessly fit

into the Fashion World granting benefits for the participants in the supply chain consumers could easily verify the ownership information of the products digitally thereby reducing the risks of counterfeit fraud there are also metaverses which are basically simulated digital environments that combine multiple elements of Technology such as AR VR blockchain and social media Concepts to create spaces to enrich users interaction by mimicking the real world the metaverse concept has been one of the hottest Trends in the tech space

lately especially after a Facebook's announcement that it was rebranding to matter and the giant companies like Microsoft to Google and Sony dived into the metaverse with their platforms All-Stars is investing in the nft based meta versus users can own things like avatars land digital clothing and other items and move them between platforms they can fit into an nft Gallery check out a live concert play games trade assets basically Multiverse ecosystem covers nearly all nfts use cases other nft use cases are presented on

this slide thus and if this could be a driver to flourishing virtual events and identity management real estate is also one of the most nft radio use cases there are also the main nfts nfts ledgers can store our individual medical records without compromising kind of confidentiality and nfts are the best way of producing and maintaining membership groups for clubs events and communities and much much more on the main industry players where categories are presented on the slide

however despite the apparent advantages of the nft technology it is difficult not to pay attention to several problems as some known issues are fraud risk Storage security and privacy issues environmental concerns difficult difficulty in determining the value of the nft and complexity for non-tech users to enter the space the main is authenticity problem that relates to a difficulty in finding the original owner and as well as difficulty in assessing the weakness of an nft and understanding how many copies exist

when uploading content to an open non-created platform never stop wondering that absolutely any media file can be sold on your behalf no matter if it is a selfie taken a few seconds ago a picture found on the internet or a masterpiece of a well-known artist significant issues that are linked with authenticity problems cyber security and fraud risk as copyright theft copying of popular nfts or false air jobs and nft giveaways are some of the major issues here also similar to cryptocurrencies nfts confront the barriers like management

from the government on the other hand how properly regulating this Nissan technology with the corresponding Market is also a challenge there is still no official public registers of copyright no Global standards of licenses Seasons different rules apply in different regions or storage issues also remain as blockchain layer ones are often Limited in the amount of unchanging storage capacity therefore not only nfts are stored on this level and require another Storage Solutions as a result nfts are usually stored in a distributed file systems such as ipfs or

airwave or even centralized ones so any Nifty can be a potentially manipulated the storage problem is deeply connected with the security in privacy issues in the majority of affinity projects the cryptographic hash instead of a copy of a file is stacked with a token and then recorded on the blockchain thus the original file must be might be lost or damaged moreover anonymity and privacy of nfts are still understudied most Nifty transactions rely on ethereum layer 1 or layer 2 networks which only provides pseudonymity rather than strict

anonymity and privacy users can partially hide their identities if the links between their real identities and corresponding addresses are known by the public otherwise all the activities of users under the exposed addresses are observable there are also risk of smart contracts and nft maintenance as there are several scenarios where hackers attack the fire Networks and still large amount of crypto because if a smart contract haven't even even a tiny flow and if the holders cannot expect complete Security examples are a poly Network hack and recent incident with the running Bridge

there is also an extensibility of nfts it is an issue as the ability of the system to interact with other ecosystems unfortunately our most nfts platforms adopt ethereum so this indicates that they share a similar data structure and can exchange under the same rules while while a secondary issue there has been increased concern about energy consumption related to nfts and proof of work blockchains most Nifty platforms are ethereum based which still uses proof of work a single nft transaction requires as much electricity as an average home for about a day and a

half also there is a difficulty in determining the value of nft there are considerable fluctuation in the prices of nfts because there is no fixed standards for any particular type of nft the price might be depend on creativity uniqueness scarcity and a lot more moreover the quality of many works is rather doubtful since anyone can be into an nft without having any creative skills there are also problems with usability as a measurement of Effectiveness efficiency and satisfaction when utilizing nft Services most nfts games are built on the ethereum

so the main drawbacks of ethereum are inherited are the two major challenges that have direct impact on the user experience high gas prices and slow confirmation conquering this these issues requires a redesign of the blockchain topology optimization of its structure or Improvement of the consensus mechanisms also for the for the audience and consumers it is still more common to use familiar major services like Spotify instead of audios for example as well as for the majority of non-techy artists much more simplification is needed so nfts are easily to use for people who

know nothing about blockchain all these problems exists and researchers and Engineers are passing over the solutions as we saw authenticity copyright protection and usability are Beyond doubt the main problems within within the nft space and what we came up with is that Biometrics have the potential to rescue here for instance humanoid project creates the decentralized biometric identification layer that is not only used on the native humanoid platform but can be used in a variety of platforms and decentralized applications and nft

marketplaces this biometric identifications ensure that the nft is unique and authentic and partially eliminate the copyright problem also there are two scanning Solutions and transition to ethereum proof of ethereum 2.0 and consensus layer are the answer to visibility issues and the existing privacy preserving Solutions such as homomorphic encryption multi-party computation or zero knowledge proof that have not been yet widely applied in the nft related schemes are most likely likely to solve anonymity in privacy issues implementation of suitable laws

and management from the government will eliminate legal pitfalls and the upcoming ethereum transition to proof of stake hopefully will solve environmental issues that's it thank you [Applause] okay do we have any questions from the audience okay we've got a question down here if we can wait for a microphone to come perfect I mean I have a bunch of questions for you first of all you made a statement that nft minting across as much energy as like an average home we really like to see your numbers on that uh which numbers commercially Christie yeah I don't know exact numbers

okay let's just move on [Music] as a proof or like fraud proof you said that you know Biometrics can be used sure where are you going with that idea so everything that you have including a Biometrics have to be public on a blockchain ledger that opens up a huge Pandora's Box for let's say data mining my Biometrics to use it for whatever I want it's just private parametrics it is not stored on blockchain your data will not be stored on blockchain so how does an nft get access to it then and how do you if people just scan their faces through life liveness detection like in kyc providers too and the platform understands that it is you

and all this that is probably all this information is private is is stored in private enclaves so no one gets access to and you're back to where you said that there's a problem with centralized storage in nfts so your solution is now you you get for different well problem is different solution Biometrics is just one of the solutions okay okay do we have any more questions from the audience oh we've got a question over here yes Robert um thank you for some of your presentation I'm wondering as a researcher given your informed opinion about the subject you've had a slide which shows the flaws of nfts

I'm part of an nft project myself and wondering give the amount of flaws do is your expectation that we can solve them with technology being developed or would you say that we're forcing too much utility upon a limited medium excuse me can you repeat the question that um well let's say given the amount of the sectors jumping into nfts it's been seen as the Holy Grail to solve a lot of let's say it has a lot of potential let's put it that way but you showcased a slide with the flaws I don't know if we can pull it you know knowing if we can pull it up and I'm wondering because you presented some possible solutions

if your expectation is that we can actually solve all these flaws or that we will have to drop some of the potential of these nft opportunities why there was so much flows and not so many opportunities no I mean do you think we can solve all the flaws I hope so as you see there are a lot of solutions out there so I guess okay thank you that's a hopeful thank you for your question okay well if there are no more questions thank you very much Sasha foreign