Articles by Adam Marcus

Adam Marcus was Chief Operating Officer for TechFreedom and a Research Fellow & Senior Technologist at The Progress & Freedom Foundation. Prior to PFF, he worked as a technical writer for Citrix Systems, Inc., the Centers for Disease Control and Prevention, and the Department of Transportation. He has also interned at the California Public Utilities Commission and the Cato Institute and provided technical consulting to a number of non-profits. Marcus received his law degree from Santa Clara University, his MA in Communications, Culture & Technology from Georgetown University, and his BA in English from the University of Florida. In his spare time he re-flashes the firmware on every device he can, re-wires his home media center, and re-programs his universal remote control.


Another NFT Explainer

by on March 29, 2021 · 0 comments

I don’t understand the hype surrounding Non-Fungible Tokens (NFTs). As someone who has studied copyright and technology issues for years, maybe because it doesn’t seem very new to me. It’s just a remixing of some ideas and technologies that have been around for decades. Let me explain.

For at least 100 years, “ownership” of real property has been thought of as a “bundle of rights.” As a simple example, you may “own” the land your house sits on, but the city probably has a right to build and maintain a sidewalk across your yard and the general public has a right to walk across your property on that sidewalk. The gas company has the right to walk into your side yard to read your gas meter. Pilots have a right to fly over your house. Some other company or companies may have rights to any water and minerals in the ground below your house. Your homeowners association may even have a right to dictate what color you paint the exterior of your house.

This same “bundle of rights” concept also applies to copyright. Unless explicitly granted by contract, buying an original painting doesn’t mean you have the right to take a photograph of the painting and sell prints of the photograph. If you buy a DVD, you have the right to watch the DVD privately and you have the right to sell the DVD when you’re no longer interested in it. (That second right is called the “first sale doctrine” and there have been numerous Supreme Court cases and laws defining it’s exact boundaries.) But unless explicitly granted by contract, purchasing a DVD doesn’t mean you have the right to set up a projector and big screen and charge members of the public to watch it. That requires a “public performance” right.

When you buy most NFTs, you get very few of the rights that typically come with ownership. You might only get the right to privately exhibit the underlying work. And if you decide to later resell the NFT, the contract (which is embedded in digital code of the NFT) may stipulate that the original artist gets a 10% royalty on every future sale of the work.

The second thing you need to understand is the concept of “artificial scarcity.” As a simple example, in the art world, it’s common for photographers and painters to sell numbered, “limited edition” prints of their works. There’s no technological reason why they couldn’t print 1,000 copies of their work, or even register the print with a “print on demand” service that will continue making and selling prints as long as there are people who want to buy them. But limiting the number of prints made (even if each print is identical to any other print), is likely to raise the price. This is artificial scarcity. Most NFTs are an edition of one. Even if there are other exact copies of the underlying artwork sold as NFTs, each NFT is unique. This is like an artist selling numbered prints but not putting a limit on how many numbered prints they make. Each numbered print is technically unique because each has a different number. But without some artificial scarcity, the value of any one print may stay very low.

So if buying a NFT doesn’t get you any real rights and the scarcity is purely artificial, why are NFTs selling for hundreds of thousands of dollars? Here’s where all the technology really makes a difference. If you spend millions on a Picasso painting, you’re taking a lot of risks. First, you’re taking the risk that it’s a forgery, which would drop the value to near-zero. Second is the risk that the painting will be stolen from you. Insurance can help deal with both problems, but that adds more complications. If you’re buying the painting as an investment, these complications reduce the “liquidity” of the asset. Liquidity is the ease with which an asset can be converted into cash without affecting the market value of the asset. Put more simply, liquidity is how easily the asset can be sold. Cash has long been considered the most liquid asset, but NFTs are arguably much /more/ liquid than cash. NFTs don’t require anything physical to trade hands. And even electronic currency transfers take time and are subject to government oversight. NFTs are so new, they’re barely regulated. But by using blockchain technology, they can be easily and safely bought and sold anonymously. NFTs are a money launderers dream. It’s unclear if NFTs are actually being used to launder money, but it’s a concern.

The other reason I think NFTs are so popular is speculation. Because NFTs are so liquid and because there basically doesn’t even need to be an underlying work, the initial cost to “mint” (create) a NFT is near zero. And by using blockchain systems, NFTs can be resold with little overhead. (Though they can also be configured to ensure a certain overhead, e.g. that 10% of every resale goes to the original artist.) These characteristics, along with the newness of NFTs make it a popular marketplace for speculators, people who purchase assets with the intent of holding them for only a short time and then selling them for a profit.

NFTs started to enter the public consciousness in February 2021, after the 10-year old “Nyan cat” animation sold for over half a million dollars. This is also just a few weeks after the Gamestop stock short squeeze made a compelling case that average investors, working in concert, could upset the stock market and make millions. So it’s no wonder that there is rampant speculation in NFTs.

In conclusion, NFTs will be a tremendous benefit to digital artists, who did not previously have a way to easily prove the authenticity of their works (which is of tremendous importance to investors) or to provide a digital equivalent to numbered prints in the physical art world. But the hype about NFTs is just that. It’s driven by speculators and you’d be crazy to think of this as a worthy investment opportunity.

TechFreedom president and TLF contributor Berin Szoka will be speaking today at the
Economics of Privacy conference hosted by the Silicon Flatirons center
at the University of Colorado and co-sponsored by TechFreedom. The
entire conference will be livestreamed (embedded below) begining at 11am EST; Berin’s
panel begins at 4:30pm EST. Highlights include a keynote conversation
with FTC Commissioner Julie Brill and keynote speeches by FTC Bureau of
Economics Director Joseph Farrell and Carnegie Mellon University
Information Technology and Public Policy Associate Professor Alessandro
Acquisti. Check the schedule for full details. The Twitter hashtag for
the event is #flatirons.

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At last Thursday’s FCC Open Commission Meeting, the Commission proposed to require television stations to make their “public inspection file” available online. But availability is not accessibility.
If the FCC follows its usual practice of having filers submit PDFs
(many of which are often scanned from printed documents), this data may
be nearly useless to the small number of researchers who would really
benefit from having a large set of public inspection files available
online. Continue reading →

TechFreedom, in association with the Family Online Safety Institute (FOSI), will host a lunch panel with a number of leading experts to discuss the FTC’s recently-proposed revisions to the Children’s Online Privacy Protection Act (COPPA). Opening remarks will be delivered by the Federal Trade Commission’s Phyllis Marcus, a Senior Staff Attorney at the Division of Advertising Practices. Afterwards, the panel will discuss the FTC’s proposals and what they mean for children, parents, Internet companies and innovation.

FOSI CEO Stephen Balkam will serve as master of ceremonies. The panel will be moderated by Berin Szoka, President of TechFreedom, and will include:

The event will take place at the Top of the Hill Banquet and Conference Center at the Reserve Officers Association (One Constitution Ave NE, Washington DC 20002) on Wednesday, October 12 from 12:30 to 2:30pm, and include a complimentary lunch. Space is limited so please click here to register.

In addition, you can let everyone else know you’ll be coming or watching the livestream (page will be updated when event begins) by joining the Facebook event page.

You can also keep up with the event by following the Twitter discussion at the #COPPA hashtag.

If you’re in DC this week, join Kevin Bankston from EFF, myself, fellow TLFers Berin Szoka, Geoff Manne, and Larry Downes, starting at 5:30pm at Johnny’s Half Shell, 400 North Capitol St NW. This event is being co-hosted by TLF and the Electronic Frontier Foundation (EFF). Please RSVP on Facebook so we have an idea how many people are attending. Attendees must be 21 or older. Space is limited.

And ALF 15 is already in the works. We’re planning to do it in conjunction with Digital Capital Week on November 8th. Stay tuned for more details!

The Supreme Court’s 6-3 decision in Sorrell v. IMS Health has been heralded as a major victory for commercial free speech rights and raised serious questions about how to reconcile privacy regulations with the First Amendment. The high Court struck down a Vermont law requiring that doctors opt in before drug companies could use data about their prescription patterns to market (generally name-brand) drugs to them. But what does the Court’s decision really mean for the regulation of advertising, marketing, and data flows across the economy? Has free speech doctrine fundamentally changed? Will existing privacy laws be subject to new legal challenges? How might the decision affect the ongoing debate about privacy regulation in Congress and at the FTC? Continue reading →

The Supreme Court will be issuing its opinion in the case Brown v. Entertainment Merchants Association any day now (TLF’s previous coverage is here). The case was previously known as Schwarzenegger v. Entertainment Merchants Association, but Mr. Schwarzenegger has been trying to stay out of court of late. I was just sent a draft of the statement that the Eagle Forum Education & Legal Defense Fund, which filed an amicus brief in the case, is planning to release if the decision goes its way. The Eagle Forum Education & Legal Defense Fund was founded by Phyllis Schlafly.

[Not really. This is a joke (but the quotes are true).]
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Have you heard about 3D printing yet? Bre Pettis, founder of Makerbot, a company that sells a $1300 home 3D printer, was Wednesday night’s guest on the The Colbert Report. And back in April, Public Knowledge kicked off what’s sure to be a long public debate over the legal and policy questions raised by 3D printing with a half-day conference here in D.C.

Also called “additive manufacturing,” 3D printing is the process of “printing” a three-dimensional object layer-by-layer with equipment that’s not much different from ink-jet printers. Combine 3D printing with 3D scanning and you’ve got the first real step towards something that seems at first like total science fiction: A Star Trek replicator.

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The U.S. government doesn’t need to pick winners and losers and the last thing we should think about doing is messing up the Internet with inappropriate regulation.

Amen, sister! The above quote comes from Victoria Espinel, the U.S. Intellectual Property Enforcement Coordinator for the Office of Management and Budget (AKA the Copyright Czar), speaking at the World Copyright Summit in Brussels about how corporate innovation is often more effective than laws. She went on to explain that the cloud-based music services now offered by Apple, Amazon, and Google “may have the effect of reducing privacy by giving value to consumers …” Espinel is an Obama appointee, which calls into question the concerns voiced a year ago that the RIAA is taking over the Department of Justice.

The next stop on her speaking tour should be the Federal Communications Commission.

At yesterday’s Gov2.0 Summit conference, "rogue archivist" Carl Malamud gave a great speech about what’s wrong with government IT and what should be done about it.

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