Wikipedia: A non-fungible token (NFT) is a unique digital identifier that is recorded on a blockchain, and is used to certify ownership and authenticity. It cannot be copied, substituted, or subdivided.[1] The ownership of an NFT is recorded in the blockchain and can be transferred by the owner, allowing NFTs to be sold and traded. NFTs can be created by anybody, and require few or no coding skills to create.[2] NFTs typically contain references to digital files such as artworks, photos, videos, and audio. Because NFTs are uniquely identifiable, they differ from cryptocurrencies, which are fungible.
Proponents claim that NFTs provide a public certificate of authenticity or proof of ownership, but the legal rights conveyed by an NFT can be uncertain. The ownership of an NFT as defined by the blockchain has no inherent legal meaning and does not necessarily grant copyright, intellectual property rights, or other legal rights over its associated digital file. An NFT does not restrict the sharing or copying of its associated digital file and does not prevent the creation of NFTs that reference identical files.
The trading of NFTs in 2021 increased to $17 billion over just $82 million in the previous year.[3] NFTs have been used as speculative investments and they have drawn criticism for the energy cost and carbon footprint associated with some types of blockchain, as well as their use in art scams.[4] The NFT market has also been compared to an economic bubble or a Ponzi scheme.[5] In 2022, the NFT market collapsed; a May 2022 estimate was that the number of sales was down over 90% compared to 2021.[6] The three biggest platforms were Ethereum, Solana and Cardano.[7]
Characteristics
An NFT is a data file, stored on a type of digital ledger called a blockchain. It which can be sold and traded.[8] The NFT can be associated with a particular asset – digital or physical – such as an image, art, music, or recording of a sports event.[9] It may confer licensing rights to use the asset for a specified purpose.[10] An NFT (and, if applicable, the associated license to use, copy, or display the underlying asset) can be traded and sold on digital markets.[11] However, the extralegal nature of NFT trading usually results in an informal exchange of ownership over the asset that has no legal basis for enforcement,[12] and so often confers little more than use as a status symbol.[13]
NFTs function like cryptographic tokens, but unlike cryptocurrencies, NFTs are not usually mutually interchangeable, and so are not fungible.[a] A non-fungible token contains data links, for example which point to details about where the associated art is stored, that can be affected by link rot.[15]
An NFT solely represents a proof of ownership of a blockchain record and does not necessarily imply that the owner possesses intellectual property rights to the digital asset the NFT purports to represent.[16][17][18] Someone may sell an NFT that represents their work, but the buyer will not necessarily receive copyright to that work, and the seller may not be prohibited from creating additional NFT copies of the same work.[19][20] According to legal scholar Rebecca Tushnet, “In one sense, the purchaser acquires whatever the art world thinks they have acquired. They definitely do not own the copyright to the underlying work unless it is explicitly transferred.”[21]
Certain NFT projects, such as Bored Apes, explicitly assign intellectual property rights of individual images to their respective owners.[22] The NFT collection CryptoPunks was a project that initially prohibited owners of its NFTs from using the associated digital artwork for commercial use, but later allowed such use upon acquisition of the collection’s parent company.[23]
