Nonfungible Tokens and the Law
Like most Americans, I was intrigued by the recent Christie's auction in which "Beeple," a digital artist, received $69.3 million for a digital artwork that was authenticated by a "nonfungible token" (or NFT).
Like most Americans, I hadn't the foggiest clue what an NFT was.
As a lawyer, I represent quite a few artists, photographers, writers, software developers and other content creators, and I know it's only a matter of time before they start asking me, "Is this something I should be doing?"
So, I've done some research, and, in the words of Mr. Spock from "Star Trek," I find the NFT "fascinating."
NFTs transform digital works of art and other collectibles into one-of-a-kind, verifiable assets that are easy to trade on the blockchain. A content creator can digitize or "mine" his or her works and upload them to one of several NFT marketplaces, which charge a network fee called "gas" for the privilege.
Because NFTs currently can be sold only for cryptocurrency, the creator will also need to open an account on Coinbase to accept payments in the cryptocurrency Ethereum.
Then, at least in theory, the creator can sit back and wait for the digital payments to flow in the door as people buy their NFTs.
So, what's good about NFTs?
First, each NFT is a unique creation. When you buy the NFT of an artwork, you own an "original" of that artwork, just the same as if you bought an oil painting at a brick-and-mortar art gallery.
Second, each purchase and sale of an NFT is recorded on a blockchain, making it almost impossible for someone to sell knockoffs of the artwork without getting caught. If your name does not appear in the chain of title for an NFT, you have no legal right to that artwork. What you have instead is a copy, which may be an authorized reproduction or an illegal knockoff.