Non-Fungible Tokens (NFTs) have recently burst onto the scene as a new and legitimate way to own, license and commercialise assets, changing what we previously conceived as ‘truly owning’ both digital and real-world assets.
NFTs have gained a lot of traction in the past 6 months in terms of its recognition, particularly in the art sphere, as the ownership of digital art takes on a new meaning thanks to NFTs. The ease of verification, transaction and monetization of digital art through the use of NFTs no doubt posed as a threat to the familiar structure of the existing art market – the many heated conversations discussing the matter on Clubhouse is evidence enough to suspect that artists, curators, gallerists and everyone in between, are thrown into a frenzy by the very existence of NFTs.
The reaction is justified for the following reason. A digital artist utilising NFTs to represent their art earns more in royalties than an artist creating traditional, tangible art, who will be held accountable to giving a huge sum of the sale of their art to the gallery who houses and sells their work. The digital artist however, bypasses this due to the medium of the market they are operating in. Blockchain technology has without a doubt, improved the working conditions for the digital artist, which leaves traditional artists questioning and further challenging the structures of the art market as they have been for years.
In short, NFTs have made way for digital artists to obtain a certain level of autonomy which would be unusual in the traditional art setting, an autonomy of which is not to be taken for granted, and one for traditional artists to strive for. Should this autonomy be realised fully in the traditional art world, it wouldn’t be far fetched to predict that this new system of art ownership and commercialisation could potentially do away with big art corporations and middle management in the art market. NFTs can change what seems like an immutable art market forever, and that is why we should take heed to it.
What is a non-fungible token?
To understand non-fungible tokens, we must first understand what fungible tokens (FT) are. Fungible tokens is a unit that can be interchangeable with any other unit of its kind. A real-life example would be currencies. A euro is the same as another euro. Therefore, a Bitcoin is the same as another Bitcoin. A Litecoin for a Litecoin, and so forth. Fungible tokens are also divisible. These properties of fungible tokens make them highly popular as its characteristics facilitates the ability to trade and make payments in the blockchain world.
Non-fungible tokens on the other hand, are unique to its own. Only one unique NFT can exist at every one time, and this is enabled by the information made available in the NFT itself. This information can disclose important details such as ownership of the asset. Although NFTs can be bought with fungible tokens, NFTs cannot be divided, and certainly cannot be traded for another NFT, making thems significantly different from fungible tokens. These properties of the NFT make them highly appropriate for keeping and retaining ownership of digital assets.
How does one use a non-fungible token?
NFTs are most commonly tied to digital assets. They are prevalent in the gaming community as NFTs work as digital collectibles, more precisely scarce or individuated items in the gaming world. This eases the processes of owning, managing, selling and buying digital assets in the gaming sphere. We have also previously mentioned digital art, whereby NFTs allow the artist to prove ownership and to maintain their intellectual property. This is extended to other art forms, such as music, literature, films, so on and so forth. NFTs have also been used to tokenise sensitive information, as users seek to reinstate data they wish to protect in a secured configuration.
The move from digital to real-world assets for NFTs has been gradual but becoming. NFTs can be used to represent scarce physical assets, akin to rare digital assets in the gaming community.
What does NFTs have to do with intellectual property?
NFTs could be used to enforce an individual’s intellectual property rights given its ability to identify historical ownership. It has been reported that intellectual property firms have begun to license NFTs. While NFTs are in its early days of anchoring itself as a key player in the intellectual property sphere, the legal aspects of NFTs, such as distribution and regulation, are still unclear and in development.
However, businesses and organisations have looked on the bright side of NFTs as blockchain technology demonstrates great potential for verifying authenticity. In 2019, Nike patented a system for tokenising shoes on the Ethereum blockchain. Traditional art auction house Christie’s is to auction its first digital-only artwork, sold in the form of a pixel JPEG file and an NFT.
As NFTs continue to prove itself as a trustworthy solution to tokenising digital and non-digital assets in identifying ownership and traceability, intellectual property firms must learn how to maneuvre and adapt to the ever changing landscape of blockchain technology.
Sources and further, detailed reading are linked below.
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