1 The Problem
Understanding digital art’s fragmented landscape and core bottlenecks to growth.
Abstract
The digital art market, currently valued at $4B and poised to triple by 2030, faces systemic challenges that impede growth and deter potential investors. Rampant theft, fraud, and spam—totaling an estimated $6B annually—undermine trust and devalue creators’ work. Compounding these issues, most digital artworks lose critical IP-protecting metadata (see Section 1.2), making it impossible to verify authenticity at scale. Without uniform standards or governance, disparate marketplaces proliferate, further fragmenting the ecosystem and increasing transaction costs for both artists and collectors. Legal uncertainties surrounding AI-generated content add another layer of complexity, intensifying ownership disputes. Recognizing these hurdles is vital for investors: each challenge signals a potential risk but also an opportunity for solutions like Artalytics, which aims to establish secure provenance, preserve metadata, and bring much-needed verification to a rapidly expanding market.
Introduction
As the digital market grows from its’ current value of $4B (estimated to triple by 2030), it faces significant structural challenges that hinder potential growth and deter investment. We’ll dive into each challenge and provide additional insights, context, and evidence.
Widespread Theft, Fraud, & Spam
The global art market has been dealing with issues of theft and fraud since its inception. Polk (2025) has published findings suggesting that fraudulent art transactions account for up to $6B annually, while some estimates suggest that over 50% of the global artwork in circulation are forgeries (Art 2023).
Digital artworks are even more susceptible to theft and unauthorized distribution due to the ease of which digital assets can be manipulated and shared. Section 1.2 delves deeper into the loss of IP protecting information on digital artworks shared online.
The Prevalence
As reported by DeviantArt (2022), nearly 400,000 infringements were flagged by DeviantArt’s protection feature in the first year of its’ roll-out. Furthermore, OpenSea, one of the largest NFT marketplaces (last valued at more than $13 billion) admitted in a Twitter thread that more than 80% of the artwork created on its site were “plagiarized works, fake collections and spam”.
These statistics highlight an alarming rate of unauthorized use, eroding trust and deterring serious investors and collectors, as reflected in a survey published by UN Trade & Development Conference (2023):
Nearly 70% of art buyers cite lack of authentication and widespread fraud as major barriers to investing in digital art.
The rampant infringement undermines artists’ rights while resulting in substantial financial losses for creators. High-profile incidents, such as unauthorized minting of artists’ works as NFTs without consent, have brought this issue to the forefront.
Creator Frustrations
Renowned artists like (RJ Palmer 2021) and (Loish 2021) have publicly voiced their frustrations over their work being minted and sold without their consent, highlighting an urgent need for robust protections in the digital art ecosystem.
Despite taking precautions, I’ve found my art on NFT platforms without my permission multiple times– Loish
It’s incredibly frustrating to see my work minted and sold as NFTs without my consent– RJ Palmer
Incidents of IP theft are felt by the majority of digital artists today. In fact, according to recent industry reports, over 70% of digital artists have experienced some form of art theft, including unauthorized reproductions and sales (Market Research Future 2023).
Unchecked theft and spam not only erode artist revenue but also deflate overall market confidence—reducing liquidity and long-term investor returns.
The scale of theft, fraud, and forgery is only possible due to the very nature of digital art– most commonly just a simple image1. Because image files can be easily manipulated and uncontrollably shared online, identifying their true origins becomes nearly impossible without built-in IP and creator details (metadata)– a challenge we discuss next.
Metadata Loss & Creation Ambiguity
When artworks are shared in common formats like JPEG or PNG, essential metadata that proves authenticity and records the creative process is stripped away. A 2018 study by Imatag (2018) found that of 40 million images published online, only 15% retained metadata, while 3% contained information about the author, rights, source, or description.
According to Deloitte (2023), the art market is undergoing a generational shift where younger collectors, on average, spend the most on digital art and collectively (80%) agree that blockchain tech, though important, is just one part of a comprehensive authentication process.
When 97% of digital artworks lack crucial IP metadata, verifying authenticity becomes a guessing game—driving away serious collectors and diminishing long-term asset value.
As explained by Glover (2022), while NFTs provide a clear ledger of ownership history, “the challenge lies in the time before that image hits the blockchain.”. Further elaborating on this issue, Will Allen, a former VP of Product at Adobe, adds:
Without that sort of capture of the artwork provenance that happens before it’s minted, you only have half the story.
Centralizing Digital Artwork Assets
In order to secure the metadata that protects artists’ intellectual property, as well as provide collectors a trusted source for verifying the authenticity of purchases, a centralized repository for digital artwork assets is one solution to this market challenge provided by Artalytics.
Without the ability to protect the valuable digital assets created by artists, the digital artwork ecosystem will continue to be vulnerable to fraud, theft, and market inefficiencies.
Impact on Artwork Valuations
Younger collectors, who are increasingly driving the market, highlight the importance of artwork valuation. 41% of collectors now cite financial value as their primary motivation for buying art, surpassing social value (38%) for the first time in 12 years2.
Collectors increasingly seek diversification, inflation protection, and ROI through artwork investments.
Artalytics capitalizes on these trends by offering a platform that caters to collectors’ preferences for digital ownership, verified authenticity, and valuation tools and analytics.
Ambiguity of Artwork Origin
Metadata loss also contributes to recent challenges introduced by AI content. Section 1.5 discusses the legal challenges around IP ownership with AI, an issue that Artists need urgently addressed. However, one problem of metadata loss is the resulting ambiguity around the creation process– a problem that nearly all collectors have expressed needing a solution for and one that stifles the valuations of artworks these collectors are purchasing: labeling that identifies artworks as either AI-generated or human made.
These insights (published by Gold (2023)) suggest that collectors believe human created artwork is inherently more valuable than AI-generated art, and overwhelmingly desire clear labels identifying the creation process.
As technology reshapes traditional notions of originality and value, the need for robust authentication solutions is more and more urgently needed.
Artalytics addresses these challenges through its PixelSense Authentication Engine, ensuring buyers can confidently distinguish between AI-generated and human-created works.
This pervasive metadata loss highlights the urgent need for a unified approach to validating artwork origins. However, without industry-wide standards or governance frameworks to guide authentication (discussed next), the problem will continue to remain unsolved.
Lack of Standards & Governance
In addition to metadata loss, the market suffers from uncertainty due to a lack of standardized protocols for comprehensive authentication of digital artworks. Despite an overwhelming need to address fraud, less than 3% of marketplace platforms today offer minimal verification, leaving a major gap in trust for buyers and sellers.
In a market without unified verification protocols, no single authority can guarantee authenticity. This gap raises investor risk, undermines consumer trust, and stifles broader adoption.
The absence of clear regulatory frameworks complicates cross-border transactions and legal recourse, increasing risks for all market participants. Furthermore, there’s an urgent need to provide a comprehensive solution addressing the most fundamental challenges– driven by a market expected to triple in the next five years, a growth rate only surpassed by the rapid proliferation of siloed marketplaces, discussed in the next section.
Market Fragmentation
The digital art market is fragmented across numerous platforms lacking interoperability and a common framework of verification standards. This problem has been exacerbated by the booming number of individual marketplace platforms where digital artwork can be purchased.
Marketplaces vs Volume
Since 2019, number of active NFT marketplaces has exploded from under a dozen– to hundreds by 20253; In Figure 2, we see that despite fluctuations in trading volume (notably 2022-2023), marketplaces continue to multiply, complicating any centralized approach to combating fraud and plagiarism, while only compounding challenges for artists and collectors.
| Impact on Liquidity | Market Inefficiencies |
|---|---|
| A lack of verification standards hampers market liquidity. Collectors face difficulties in finding authentic artworks, deterring investment while diminishing overall market activity. | The absence of a system of governance or trusted source of truth for stakeholders, leads to higher costs and reduced trust among participants, bottle-necking growth and artwork valuations. |
The explosion of siloed marketplaces drives up transaction costs, complicates fraud prevention, and hampers liquidity—all of which curtail potential returns for investors in digital art.
Curation and Context
While decentralized NFT marketplaces have lowered barriers to entry, they have also given rise to significant spam and plagiarized content in a market that already lacks expert curation and robust authentication– leaving market stakeholders vulnerable:
Collectors
Hesitate to buy when stolen/copied work is listed alongside legitimate art.
Artists
Must compete with unauthorized or low-quality pieces and hesitant buyers.
Institutions
Lack participation in a market hampered by verification issues.
Based a recent survey by Gold (2023), views towards digital art have significantly shifted in recent years. The figure below demonstrates the significant influence the traditional art world has on digital art collectors.
The research from Gold (2023) also shows the high level of importance digital collectors place on curation and contextualization, serving as another strong indicator of traditional art world influences shaping the digital art space. In [Chapter
Given the level of spam and fake collections reported, the digital art market struggles to establish the same level of trust found in the traditional art ecosystem. Furthermore, when asked about their primary sources of information used when purchasing, collectors overwhelmingly identified social media channels and discord communities as the top 2.
There is a clear disparity evident in today’s digital art (NFT) market. These factors highlight a significant gap in the market—while interest in digital art is surging, the lack of reliable standards erodes trust and impedes broader adoption.
In the following section, we’ll explore how these challenges pave the way for a solution that can unify standards, reduce fraud, and elevate the digital art ecosystem for both artists and investors.
Legal Challenges with AI
Without industry accepted standards, metadata already lacking, and an increasingly fragmented market, AI content can further blur lines of authorship, creating an even larger gray area for theft claims. Current laws often do not adequately address challenges in determining ownership and copyright–brought on by the rise of AI-generated artwork, leading to confusion and disputes4.
| Risk of Infringement | Need for Clear Frameworks |
|---|---|
| Artists and collectors may inadvertently infringe on intellectual property rights due to unclear guidelines, exposing themselves to legal liabilities. | Establishing clear ownership and rights for AI-generated content is essential for fostering innovation while protecting creators and investors. |
The current complexities and disorganized legal landscape has further increased the likelihood of infringement as well as magnified the current need for establishing a framework and foundation for trust.
Artalytics embeds permanent IP protections in all digital assets associated with an Artwork verified through the platform. These protections ensure an artwork image can be traced back to the original creator regardless of where it’s distributed
Unresolved AI ownership disputes introduce added uncertainty for art investors, potentially creating legal liabilities and further discouraging mainstream capital inflows.
Conclusion
A comprehensive solution that addresses these challenges is crucial for unlocking the full potential of the digital art market while protecting all stakeholders. For investors, failing to address these obstacles can stifle growth, limit returns, and deter mainstream acceptance—hence the urgency for a solution like Artalytics.
Section J in the Appendix dives into specific challenges of AI facing artists (e.g. the unauthorized use art in AI training data), and then presents a solution from Artalytics that directly addresses each one.
In the next chapter, we present how Artalytics offers ground-breaking solutions to these pressing issues through its’ comprehensive proprietary technology, positioning itself as a transformative force in the industry.
What is digital artwork?
The term digital artwork commonly refers to a simple image shared online. However, the image is actually just one of the digital artwork files exported from a larger canvas file.
The canvas is what the artist created using applications like Procreate or Photoshop. However, to share these artworks online they are commonly exported as image files and most often scaled down in size for a better online viewing experience.↩︎The Block (2023); Art Basel and UBS (2023); Hiscox (2023); Deloitte (2023); Market Research Future (2023)↩︎