With the paradigm shifting sale at Christies of Beeple’s digital artwork ‘Everyday: The First 5000 days’ for $69.3 million plus fees, Non Fungible Tokens, or ‘NFT,’ have burst into the mainstream consciousness.
An NFT is an intangible asset which records, and constitutes, ownership to property (typically, but not necessarily, another digital asset), on a distributed ledger, or ‘blockchain’. The blockchain is, in very short terms, a record of every transaction that has been made using the relevant protocol, a copy of which is held by every computer (or ‘node’) operating the software (space preludes a more detailed analysis of smart contracts; an excellent introduction can be found in Green and Sanitt , ‘Smart Contracts’, in Davies and Raczynska (eds.), The Contents of Commercial Contracts: Terms Affecting Freedoms (Hart, 2020)). Each token is unique (that is, ‘non fungible’) and any transaction in the token is verified and immutable on the ledger. There is no inherent connection between NFTs and digital art, which was created and traded long before the advent of blockchain. However, NFTs have been crucial to the recent meteoric rise in the value of some digital art.
Although a digital image, a YouTube video, or a tweet, may be publicly available, only the holder of the NFT owns the ‘original’ version of that work. That uniqueness brings value, and the valuable right is transferable. In many ways this is nothing new: in general terms, the value of an NFT in a digital artwork is analogous to the value of a photograph; whilst the original may command a high price, an ostensibly identical reproduction will be very much less valuable. The principal difference between owning a photograph and an NFT is that the NFT is not the work itself, but merely the smart contract conferring rights in that work.
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