Some commentators are canceling non-fungible tokens (NFTs) As a fad, just a high-priced profile picture of a crypto riche set whose long-term value and relevance are dangerous and unpredictable. There is certainly a risk of navigating when entering this early space. But NFTs are important and will be with us for a very long time.
Digital cryptocurrencies like Bitcoin and Ethereum were the first commercial applications of blockchain technology. NFT represents ownership of digital assets based on blockchain, a distributed ledger technology, and is the second major commercial application of blockchain.
With NFTs, you can “tokenize” any digital. In other words, it can be represented by a digital record stored in the blockchain. This can include all types of digital files, including image files, music or audio files, and video files.
What are the rules?
When a new NFT is “minted” (that is, created) on the blockchain, the specific rules for that NFT and the transactions associated with that NFT are recorded in software on the blockchain called “smart contracts”. These automatically enforced rules include who can buy or sell NFTs, how and to whom to distribute revenue streams to the digital wallets of different parties at the time of initial sale or resale, and commercial. Or if you have intellectual property rights, you can include what is being communicated. NFT.
The rules encoded in a particular NFT’s smart contract are very important to investigate and understand when assessing the value of that NFT. For example, these rules control what IP rights are transferred when a particular NFT is sold or purchased. In the field of art and collectibles, IP rights that create derivative works or exclude others from the use or access to IP are usually not included.
For example, buyers of the “NBA Top Shot Moment” video highlight the collectable NFTs of Stephen Curry in the Golden State Warriors, and it’s raining three pointers on the half-court. You do not have the right to use this footage to create a documentary about a three-point shoot. Nor does the purchaser have the right to stop others from seeing the shot on the NBA’s YouTube. channel.
In contrast, an “IP-NFT” provided by an entity in the field of research science may convey exclusive intellectual property rights to the purchaser.
Digital art, collectibles, and “ownership”
Digital art and digital collectibles are a large and high-profile asset class, with NFT sales of art such as Beeple’s “Everydays: The First 5000 Days” composite digital artwork (sold at Christie’s Auction for $ 69 million). Very high dollar value, NBA top shot digital basketball “card” highlight video ($ 1 billion sales since its launch about two years ago), Jack Dorsey’s first tweet (originally sold for $ 2.9 million) Collectibles such as cultural or historical markers, However, reselling something close to it has proven difficult) and has received a lot of attention.
Indeed, the lack of “digital art” is hard to wrap around your head. Because, by its very nature, digital things can be perfectly copied and are often completely copied. (Consider finding an image you like on the internet, right-clicking and saving it for yourself).
However, it is worth noting a few points in this regard. First, “original” ownership makes sense, even when an essentially complete copy is available, as in the case of digital assets. For example, today’s digital printers can digitally print the perfect replica of the Mona Lisa, but no one would rate it the same as the Mona Lisa in the Louvre.
Second, the value and appreciation of art in the real world is very subjective and often surprisingly high. Perhaps the same applies to digital art, of course.
However, when thinking about NFTs, it’s important to think bigger than digital art and collectibles.As some The commentatorNFTs can be compared to computer files in the sense that their types and use cases are very diverse.
Today, NFTs offer an incredibly wide variety of “digital content”, including in-virtual space or in-game assets within the Metaverse (clothing, weapons, other possessions and accessories, avatars, virtual skills, etc.). It can be covered. Transforms real estate, buildings, or vehicles) into a mechanism for more efficient tracking of real-world items such as real estate, car titles, insurance claims, and more.
And the most basic reason people are excited about NFTs is that they provide a viable mechanism for monetizing digital assets (which has always been very difficult to monetize).
Web3, the next-generation Internet based on blockchain, provides power decentralization, more individual control of data and wallets, and market access for small people (artists, manufacturers) away from large gatekeepers. It has great potential for greater democratization. , And creators.
In the reality of our supercapitalist big companies, it is inevitable to some extent that some of these same big companies and power structures will be rebuilt at this new frontier. But hopefully some of the promises can be fulfilled. It is culturally important for more vibrant artistic and technological innovation.
Finally, a word about cryptocurrencies. NFTs and cryptocurrencies are based on the same underlying distributed ledger technology (blockchain) and are linked to each other in that they can be used to buy NFTs, but they are very different.
Cryptocurrencies like Bitcoin, Ethereum, and other lesser-known token scores are very volatile, unregulated at this time, and a very risky investment.
Currently, NFTs are associated with cryptocurrencies, but you don’t have to. Mastercard announced You will be able to purchase NFTs using your credit card instead of cryptocurrency. Do not mistakenly ignore the possibility of NFTs as you doubt the long-term or current feasibility of cryptography.
I think Web3 and NFTs would be a big mistake just because they are newly developed spaces through growing pain, shakeouts, and volatility (characteristics often associated with emerging technologies during the period of innovation and technological growth). increase.
This article does not necessarily reflect the views of the State Department or its owners, who are the issuers of the Bloomberg Act and the Bloomberg Tax.
Michael Kasdan A partner of Wiggin and Dana’s Intellectual Property Group in the New York office. He is co-chair of the company’s Blockchain and Digital Assets Group and has partnered with the company’s Emerging Companies and Venture Capital Group to provide startup clients and entrepreneurs with legal services in the IP and corporate arena.