Much has already been written about cryptocurrencies, blockchain and tokens. There are also several definitions of Non-Fungible-Tokens, basically unique and non-interchangeable units of data stored on a digital ledger / blockchain (among others, see A. Guadamuz, The Treachery of Images: Non-fungible tokens and copyright, in Journal of Intellectual Property Law & Practice, Volume 16, Issue 12, December 2021), something like digital information materially represented by a string of non-replicable and exchangeable numbers.
In other words, an NFT is the encryption of an intangible asset in which a set of metadata, information that has its own digital identity and alphanumeric value, due to its scarcity, is saved immutably in the blockchain. So the information related to a specific asset is stored “on-chain”, while the asset as such remains “off-chain”. Then, NFTs can be sold and purchased within a blockchain network using cryptocurrencies (such as Ethereum) for payment. The intangible assets that can be associated with NFTs may be easily-reproducible items such as photos, videos, audio, and other types of digital files, which are deemed to be unique items / files (associated to a certificate of authenticity) and can be owned, using the blockchain technology to give the NFT a public proof of ownership.
Understanding how NFTs technically work is essential to try to analyze the legal implications of this new technology, which, since NFTs are usually associated to digital artworks, mainly relate to the application of copyright law.
Hence, here are a few cornerstones, or better a few coordinates to try to navigate in this new water, gathered directly from the technical characteristics of NFTs:
- An NFT is not a copyright license, it can just be used to prove the ownership of the related digital asset.
- An NFT does not automatically confer ownership of any IP right nor grant a license to use the underlying digital asset.
- The market for NFTs enables authors to sell their works without relying on copyright at all: the NFT can be traded, but most of the time it is not the intention of the rightsholder to trade any ownership of IP rights with it, and even if they did intend it, the token may not be enough to express it in a legally binding manner.
- The digital asset associated to an NFT is not naturally restricted to the owner of the NFT but can be copied and shared like any other digital file.
