A nonfungible token (NFT) can be both a representation of a physical or digital asset that only exists on the internet — a programmable piece of art. It provides ownership of an underlying asset, like a painting, and it can also represent a digital asset in the form of a software code. Therefore, I like to conceptualize NFTs in a more technical view:
“An NFT is a pattern of smart contracts that provides a standardized way of verifying who owns an NFT, and a standardized way of ‘moving’ nonfungible digital assets.”
Before discussing the legality of an NFT, it is necessary to check what nonfungible tokens mean digitally. In its most general sense, an NFT is the digital representation of a nonfungible asset in the form of a serial number. Take a look at the image below.
In this article, I will try to point out numerous legal and judicial issues related to how a serial number can represent an asset on digital media and what is included in that code. It is important to keep in mind that, in addition to showing the property of a nonfungible asset, an NFT also indicates where the content of that asset has been located since its inception.
Owning an NFT
Is owning an NFT different from owning the rights of the underlying asset that compounds it?
In our current society, we are used to a piece of paper indicating or representing property rights and some work. We all have had contact with such kinds of papers in our daily lives: a deed to a property, a certificate of vehicular ownership, or a lease to a house. We already understand the value of these legal pieces of paper. That could be a good way of looking at NFTs as well, although there are some differences regarding the rights linked to them.
There is a generalized perception that an NFT is an original asset itself. But is that perception correct? Wouldn’t an NFT be a receipt of owning a determined asset? As with everything else in the world of law, the correct answer is: it depends. It depends on what kind of underlying asset the NFT represents. An NFT can either be the original asset or an asset that only exists in the digital virtual world, like CryptoKitties or CryptoPunks. At the same time, an NFT can be the receipt confirming that you own a determined asset in the real world, such as real estate, or a physical piece of art exhibited at the Louvre Museum in Paris.
With that in mind, let’s go forward and discuss the problems that exist for internet-era creators that could be solved by registered NFTs via blockchain technology.
How does blockchain help the creators of content represented by NFTs?
Since the advent of the internet and peer-to-peer (P2P) networks, the content creators and the industry of intellectual property have been looking for a way of turning an asset, copyright protecting it and proving its scarcity and property in a digital realm. It was necessary to have a registering system that could provide immutability and precedence, while proving scarcity on the internet. But that became only possible after the double-spending problem which was solved by the invention of blockchain technology.
An NFT registered via blockchain turns the content marketed on the internet immutable and unique, allowing artists to protect their creations from falsification and duplicity in the digital realm. Thus, blockchain-registered NFTs solve the problems of digital piracy and high costs of financial intermediation, among others, making a new type of economy feasible. One that is governed not by the traditional trust validators, but by those who produce and create value.
What rights are necessary for a person to create or coin an NFT?
That is a very up-to-date question. This spring, DC Comics sent a notice for artists involved in the creation of their superheroes comics prohibiting the…
Read More: cointelegraph.com