If you are the artist Mike Winkelmann (aka Beeble), you have over 90 million reasons to celebrate the rise and acceptance of “non-fungible tokens” (NFTs) as a way to sell a digital artwork*. Think blockchain, think crypto, think about disruptive technology and then think again.
An NFT is a unique digital asset that exists on a blockchain and cannot be replicated. The current market for NFT’s are collectibles (digital sports cards and artworks). Recently, Twitter founder Jack Dorsey sold an NFT of the first ever tweet for US$2.9M. Hardly a token.
Why are you reading about this in a lawyer’s blog and not in the art, or technology sections? Because what underpins the workings of NFT’s are ‘smart’ contracts which, coupled with the consensus system which facilitates blockchain applications and authenticates ownership, set out the terms of the deal. The contract terms should guarantee that the asset will not be replicated – but it can be tricky. What about copyright? Normally, purchasing an artwork does not allow the purchaser to replicate it and sell physical or digital editions of it, unless the artist (copyright owner) agrees. (Not surprisingly, artists rarely, if ever, agree).
A digital asset is a representation of either a physical or virtual asset and it is the creator of that asset, not necessarily the NFT creator, that is the copyright owner. Only the copyright owner can license what is permitted under copyright laws.
NFT’s present some interesting opportunities for sale of a number of physical assets, including real estate. Who will be the first to create segments of the single asset and trade the segments in another market? You could own a fraction of Jack Dorsey’s first tweet.
In June, Tim Berners-Lee, recognised as the “inventor” of the internet, is selling the original source code for the web as an NFT through Sotheby’s auction house. Creators, artists, dealers and collectors should get advice.
* In March this year, that artist known a Beeble sold a work titled “Everdays: The First 5000 Days” for $US69.3 (AU$90M)
Peter English is founder and director of Surry Partners Lawyers.