CC0, More Possibilities for NFTs
Integration of CC0 license and NFT market
NFT and IP
The NFT market has experienced a boom in the past year and reached its ATH monthly trading volume of $6B in January 2022.
NFT trading platforms like LooksRare and Magic Eden were developing rapidly and threatened the dominance of OpenSea. Nansen’s reports in April also indicated that the NFT market is growing more than the crypto market in the first quarter of 2022.
However, the market quickly turned over after Luna’s collapse and Celsius’s suspension. Liquid assets in the crypto market were greatly reduced after U.S. Federal Reserve increased its benchmark interest by 75 basis points, which forced holders to sell their NFTs and regain their cash flow. The price of NFTs got dumped corresponding with the sharp drop in digital currency prices. Blue-Chip NFTs like BAYC and Azuki dropped over 50% from their ATH.
Besides the price reduction, the future direction of the NFT market is still foggy. The NFT was initially created to properly demonstrate the copyrights of creators in the digital world using blockchain technologies. It provides creators with a new distribution channel that directly connects them with their fanbases/communities.
The value of any NFT comes from the copyright it represents when compared with its photoshoots. However, when we consider whether an NFT is more expensive than others, we are talking about its cultural gene, community, and self-identity. In general, IP is the core value of NFTs.
Since NFT has high market potential, the debates surrounding IP rights never stop. In the past few years, approaches for building brands, communities, and content through IP differ between NFT projects. Let’s take a look at Cryptopunk and BAYC.
Before Larva Labs’ acquisition by Yuga Labs, CryptoPunks only allowed its holders to use the NFT as their profile picture. Bored Apes, on the other hand, allowed its collectors to monetize the Ape they have. The looser copyright management approach of BAYC resulted in the appearance of its derivatives like Bored Wine which let collectors transform their Apes into a label on vintage wine. BAYC gives more free space for content creation that avoids messy copyright complications to stimulate the creativity of the community, so the projects can gain extroversion that expands the community size.
Some other NFT projects have gone even further by completely removing copyright protection from its project. The recent rise of Sudoswap, which removes royalties, also indicates the days of making money from copyrights are gone.
What CC0 brings to NFTs
Creative Commons Zero license, so-called CC0, means “no rights reserved” on intellectual property (IP). CC0 license allows content creators to make derivative works and profit from NFTs without worrying about legal consequences, which maximizes the liberation of creation.
Nouns project, launched in August 2021, is considered the first influential CC0 NFT project. It was an experimental attempt against the copyright protection approach of Cryptopunk by bootstrapping identity, community, governance, and a treasury that can be used by the community. The use of its copyright is determined by the NounsDAO composed of its collectors, which has approved over 130 derivative projects like collaborating with Budweiser, putting out a documentary, and even creating a Nouns coffee brand. This experiment is successful since it secured about $45 million in its DAO treasury.
There are also many other NFTs using the CC0 license after the Nouns project, but the outcomes are quite different.
The Goblintown project, which was released with “No roadmap. No utility. No Discord. CC0,” states on its website, took over the trading volume ranking chart of OpenSea on June 2, 2022, that achieved over 43.7% of the total trading volume on the platform with its derivatives.
The Goblintown is a challenge to the creator-led NFT community type as it completely eliminates the influence of the creator. CC0 license allows the Goblintown community to be fully autonomy and independent from the original version of NFT itself. It enhances two important attributes of NFT, culture gene and meme-ability.
As we just stated, the CC0 license of Goblintown drives expansions of the original project to create a more engaged community. Additionally, since new derivatives keep producing, attention from external parties can switch back to the original content, and strengthen its position in the collective unconsciously. This cycle creates a flywheel effect that each new derivative raises the value of the original and feedback to itself. There are some other famous NFT projects that benefit from the CC0, such as mfer, Loot, and Cryptoadz.
The CC0 license does not necessarily bring positive effects to its collectors, especially for projects that switch to CC0 after launch. MoonBirds project founder, Kevin Rose, announced they are going to CC0 on August 4, 2022. Though some collectors welcomed this surprise move, many collectors got pissed off. It was considered as a betrayal to its collectors since developers did not consult the community before giving away their IP rights.
The well-known collector and NFT thought leader Pranksy pointed out a crucial distinction, after MoonBirds’ announcement, between a project that goes CC0 from launch and one that changes its mind after that. “Whether the developers should be responsible for any loss of collectors after the switch.” “Whether it reduces the confidence of community after taking the copyrights from them.”
These debates lead to an in-depth question about whether an NFT project should go CC0 at a specific time.
Pros and Cons
There is no universal answer to this problem, as the traits may vary between NFTs. Still, we can find some shared characteristics of NFT projects that go CC0.
Nouns, Cryptoadz, MoonBirds, and Blitmap are all pixelated NFT collections. In other words, they all have a low-fidelity resolution that reduces the barrier for third parties to create derivatives. Also, these pictures lack enough details to express a specific cultural gene and other characteristics of the project.
Compatibility and extensibility are keys for CC0 NFTs. Collectors can use this NFT anywhere they want to, which incentivizes community expansion. Third-party creators can receive most IP benefits with the least creative barriers. These features are not only aimed at derivatives on-chain but also connected with a more brand vision of NFTs. Loot bags are fundamental primitives that make sense for all types of adventure games; the Nouns brand is fittable for glasses.
These two features can also become pain points for investors who aim to build commercial products on top of the NFT they hold since collectors of any CC0 NFT can’t exclude others from creating content for the same IP. Investors must choose wisely when their motivation to purchase an NFT is not aligned with the value brought by the CC0 license.
For now, CC0 NFTs’ developers mostly benefit from the royalties generated in the secondary market like OpenSea. CC0 empowers the prosperous derivatives ecosystem that brought attention to the original NFT collection and boosts its trading volume of it. However, the rise of SudoSwap recently may change this approach as it refuses to pay royalties to creators.
This is an inevitable change in the expansion of the NFT and Crypto market, because not every collector is unwilling to pay for the royalties, especially for investors that purchase NFT for commercial purposes. The current revenue model of CC0 NFT projects is unsustainable for developers when the NFT market goes bigger. The CC0 strengthened the IP overall, but shred the profit from it.
CC0 license is not a general solution to the struggles of the current NFT market. It only provides an alternative for creators to bootstrap their projects. We expect to see an NFT-origin license along with the development of blockchain technology and NFT communities.
Disclaimer: This research is for information purposes only. It does not constitute investment advice or a recommendation to buy or sell any investment and should not be used in the evaluation of the merits of making any investment decision.
Sources:
Goblintown Derivatives Have Taken Over OpenSea’s Volume Chart
