What do you really get when you buy an NFT?
NFTs or non-fungible tokens became one of the best cryptocurrencies to catch the public’s attention after a digital collage by artist Beeple was sold for US$69 million in 2021.
Since its inception, NFTs have been used in various other ways. For instance, some of the more popular ones such as the Puggy Penguins have been sold on various exchanges.
You Fancy a Penguin?
Even though it looks like a unique digital artwork, NFTs are basically tradeable images or gifs. Unlike physical collectible items, they cannot be displayed in their owner’s home, except on a screen. So what do you really get when you buy an NFT? What do you possess from a legal point of view?
The term NFT (Non-Fungible Token) contains the term fungible, which is referred to as fungi, meaning the ability to perform. In this context, the term means interchangeable and is related to whether something can be exchanged.
Money is fungible, and NFTs are not and cannot be exchanged, that’s because each is totally unique and a limited edition.
How are NFTs created?
NFTs can be created in various ways, such as by computer-generated content.
NFTs can also represent a collaborative work, such as artist Andy Carne’s visual collaboration with singer-songwriter Imogen Heap. They can also represent a single work such as Beeple’s artwork, or a series of items such as the Kings of Leon’s “NFT Yourself” series that combined various elements such as music albums and special concert tickets.
NFTs are digital platforms that allow the owner of a limited collection or work of art to reach their audience directly. Previously, a themed gift or a piece of digital art couldn’t be sold.
The creator can do this because, under UK copyright law, copyright automatically arises when a work is created. This means that the work owner can do anything they want with it.
When someone purchases an NFT from the creator, they become the owner of that digital asset. Hence, an NFT is an online certificate of ownership representing buying a digital asset that is traceable on the blockchain.
The NFT holder doesn’t have other rights to the digital work. This involves the rights under the copyright law such as the right of making the asset accessible to the public, or the right of reproduction.
This law also applies to physical collectibles. If you own a painting, you simply cannot display it in public. And if someone else has copied or reproduced it without permission, then you do not have the right to sue them for infringement of copyright. Such rights are possessed by the copyright holders of the work, or when they assign the ownership of the work to their respective clients.
Due to the nature of content in online platforms, it can be easily copied or reproduced. As a result, buyers of NFTs should know that they would be violating the rights of the holder if they do not obtain permission before doing so. The only way these rights can be obtained is through the license embedded in the NFT.
Some NFTs have been given the right to use copyrighted work in a limited way. For instance, CryptoKitties holders have been permitted to make over US$100,000 annually from the platform. While on the other hand, creators like the king of Leon had their NFTs restricted for personal use only and were restricted to all commercial use of the work.
CryptoKitties holders making over the US $100,000 annually from them.
Clearly, the main reason why people buy an NFT is to own something unique and exclusive from an artist, brand, or sports team. Unless the terms permit it, buyers only have a limited ability to reproduce or share the work publicly.
Also, it is very important to note that creative works are not guaranteed to be authentic. There are also cases where someone steals another person’s work and tokenize it as NFT, thereby violating the rights of the copyright owner. You need to make sure that you are buying the original work from the creator.
NFTs are here to stay, but they also raise questions about copyright law. It is crucial for you as a buyer to make sure and understand what you are getting for your money.
To know more about NFTs and protect yourself from legal complications, reach out to us and we will explain to you all what you need to know about Crypto and legal for Crypto.