Risks & Mitigation

Launching and scaling ArtsiAI comes with several risks that must be addressed to ensure sustainability, fairness, and long-term adoption. Below are the major risks identified, along with mitigation strategies.

1. High Gas Costs

• Risk: Ethereum mainnet transactions, particularly for minting and trading NFTs, can incur prohibitively high gas fees. This creates barriers for artists and collectors, especially for smaller creators who may not afford frequent interactions.

• Mitigation:

  • Layer-2 Integration: ArtsiAI will integrate with L2 solutions such as Arbitrum, Optimism, or zkSync to significantly reduce costs while still benefiting from Ethereum’s security.

  • Lazy Minting: Instead of requiring upfront gas costs, artworks will only be minted on-chain at the time of purchase, shifting costs to the buyer and reducing friction for creators.

  • Batch Transactions: Where possible, multiple actions (e.g., metadata updates, batch mints) will be bundled to minimize cumulative gas fees.

2. Royalties Bypass

• Risk: Certain marketplaces allow buyers and sellers to trade NFTs without respecting creator royalties, undermining artists’ long-term revenue streams.

• Mitigation:

  • On-Chain Enforcement: ArtsiAI will leverage smart contract standards (e.g., ERC-2981 or improved royalty protocols) to enforce royalties at the protocol level.

  • DAO Governance Proposals: Community-driven governance will allow the DAO to vote on new mechanisms, such as blacklisting non-compliant marketplaces or rewarding royalty-compliant trading platforms.

  • Incentive Alignment: Additional benefits (such as staking rewards or DAO voting power) may be tied to compliance with royalty standards.

3. Legal & Intellectual Property (IP) Ambiguity

• Risk: AI-generated art raises unresolved legal questions around copyright, ownership, and licensing. Artists may face disputes regarding originality or legal protection of their works.

• Mitigation:

  • Standardized License Metadata: Each artwork minted on ArtsiAI will include explicit license metadata, clarifying usage rights (e.g., commercial, non-commercial, derivative works).

  • Legal Advisory Board: ArtsiAI will collaborate with legal experts in digital copyright and IP law to help define best practices and update policies as regulations evolve.

  • DAO Role in Disputes: In unclear cases, the DAO can vote to mediate disputes, providing community-driven resolution pathways.

4. Centralized AI Dependency

• Risk: Relying on closed-source or proprietary AI models (e.g., third-party APIs) introduces risks of censorship, bias, high operational costs, and dependency on centralized providers.

• Mitigation:

  • Open-Source Transition: While early development may rely on established providers (e.g., OpenAI, Stability), the long-term goal is to integrate decentralized, open-source models (e.g., Stable Diffusion, local LLMs) directly into the platform.

  • Community Model Contributions: Artists and developers within the DAO can contribute and fine-tune open models for use on ArtsiAI, decentralizing ownership of the creative pipeline.

  • Decentralized Compute: Exploration of decentralized compute networks (e.g., Render, Akash, Golem) for distributed AI inference, further reducing dependency on centralized infrastructure.

5. Market Volatility & Speculation

• Risk: As with any crypto project, speculative trading and token volatility may overshadow the utility and artistic mission of the project.

• Mitigation:

  • Utility-First Design: Ensuring that $ARTSI token utility (staking, governance, royalties distribution, access to AI features) drives demand rather than speculation alone.

  • Treasury Stability Fund: A portion of DAO treasury may be diversified into stablecoins or other assets to safeguard against extreme volatility.

  • Education & Transparency: Providing community education on sustainable token use, long-term value creation, and risk awareness.

6. Adoption Barriers

• Risk: Complex onboarding processes and lack of user-friendly tools can discourage non-crypto-native artists and collectors.

• Mitigation:

  • Fiat Onboarding: Integrating fiat-to-crypto gateways for easy participation.

  • Intuitive UX: Building simplified, mobile-friendly interfaces with guided minting processes.

  • Partnerships: Collaborating with art schools, digital collectives, and creative communities to expand awareness and accessibility.