At this point, we've heard many stories and had our collective awe (maybe a little envy) of the NFT artists who have made millions on these expensive digital artworks.
Now, you, like myself, have probably consumed your fair share of Tik Toks, Tweets, and news headlines on what exactly these NFTs are. Are they art? Are they rights? Is it an entry ticket? Is it a joke? Or is it something else entirely? The most obvious question being, why can't I just download a NFT off the internet and have a funny ape character?
Well, it turns out, Geoffrey Huntley, an Australian engineer, had a similar thought and took some considerable effort to copy all NFTs and allow them to be freely downloadable on his torrent site "The NFT Bay." Geoffrey’s motivation for the project was to bring awareness to uneducated buyers who are all too often taken advantage of and swept up in the consumer frenzy of rising prices. He hoped this exercise would motivate potential purchasers to research their NFTs and ensure their purchase is truly existing on the blockchain – not simply a link to “instructions” on how to access the image of the NFT (an all too common mistake).
All jokes aside, what exactly is Geoffrey warning us about?
Let’s start from the beginning, what’s an NFT?
Simply, an NFT, or Non-Fungible Token, is a unique and non-interchangeable unit of data stored on a digital ledger. In plain English, this means it is unique string of data that exists on the blockchain. NFTs can be visualized in various forms that the average person has at this point come to recognize, such as a GIF of a monkey, trading card, or sometimes a picture of a tweet. What makes this string of data unique is its intrinsic connection to the blockchain, creators really only have their imaginations to limit the possibilities of their uses. A very simple example is the transaction of rights between a buyer and seller. For example if you have a San Francisco Giant’s NFT that grants its holder backstage passes and meal vouchers, you could sell those rights to a buyer and chain of title would be instantly verifiable.
Now, how can you have rights in a GIF?
Many NFT marketplaces indicate that when you purchase NFT, you don’t own the underlying code but receive a license to the underlying image. Imagine “owning” a GIF and think of it as being similar to owning a limited edition collector’s item. For example, I may own a Lebron James playing card, of which thousands of identical copies may have been sold. Mine may even be signed, stamped, and a limited edition, but owning the Lebron James playing card gives me no rights in the person appearing on the card, their signature, the team logos/company brands, etc. or related intellectual property other than the ability to resell the playing card that I own. Ownership of an NFT may provide less rights (restricting the ability to transfer), or more/different rights (access to special events or royalty on future sales) than owning that playing card, depending on the terms. Ownership of the NFT does not necessarily give me the right to display, distribute copies, or make derivatives of the image, rights that are usually exclusively retained by the copyright owner of the actual underlying visual or art work.
You own or create an NFT but don’t really know what to do?
With news of NFT Bay hot off the presses, time will tell the consequences that the now famous engineer may face. As an owner or issuer of an NFT, you should have a complete understanding of your rights and limitations in the use and creation of your NFT. Further, you should understand the implications of selling or issuing those NFTs and the legal ramifications of doing so.
If you have any questions about these rights, please do not hesitate to contact our cryptocurrency experts at Hopkins & Carley.