NFT Ownership: What Does That Actually Mean?
By buying an NFT you will simply own a piece of code on the blockchain that is made up of various bits of information.
Nowadays Non-Fungible Tokens (NFTs) are taking the digital art world by storm. The lives of digital artists have changed due to huge sales to a new crypto-audience. The metaverse provides new opportunities for celebrities to connect with fans. We can say that digital art is only one way to use NFTs. They are used to represent ownership of any unique asset, like a deed for an item in the digital or physical realm.
It turns out that the legal status of virtual “owners” in the metaverse is significantly more complicated. In fact, the current ownership of metaverse assets is not governed by property law at all, but rather by contract law. And what many companies are calling “ownership” in the metaverse is not the same as ownership in the physical world, which means that consumers are at risk of being misled.
Beeple, a digital artist, real name Mike Winkelmann, sold an NFT attached to a work of art, “Everydays: The First 5000 Days”, for more than $69 million through international auction house Christie’s. This sale proved that NFTs represent a revolutionary new avenue for the marketing, trading, and ownership of digital art.
What’s an NFT?
NFT stands for a non-fungible token and is used to represent ownership of unique items. NFTs enable us to tokenize things like art, collectibles, even real estate. They can only have one official owner at a time and they’re secured by the Ethereum blockchain – no one can modify the record of ownership or copy/paste a new NFT into existence.
NFTs are not interchangeable with other items because they have unique properties. On the other hand, fungible items can be exchanged because their value defines them rather than their unique properties. For example, ETH or dollars are fungible because 1 ETH / $1 USD is exchangeable for another 1 ETH / $1 USD.
The authenticity of ownership of the NFT is encrypted in a blockchain, which includes all NFT transactions made, so ownership cannot be forged or fabricated. As ownership of digital art can be transferred and validated, digital artists get the chance to market their output.
Artists can sell their work for potentially huge sums of money without the need for an agent or a consultant. Winkelmann said to CNBC, “I think that people don’t understand that when you buy, you have the token (or NFT). You can display the token and show you own the token, but, you don’t own the copyright.”
Owning an NFT
NFTs are a way for the owners of a limited work or collection to reach their audience directly. Years ago it was not possible to sell something like the first ever tweet, or a taco-themed gif, or indeed a piece of art online. But nowadays individuals, companies or cultural organizations who are the rightful owner can do so.
According to UK copyright law, copyright arises automatically when a work is created and it reflects the “author’s own intellectual creation”. Thus we mays say that the creator of a work is the copyright owner, and can do what they want with it.
When buying an NFT from the creator, you obtain ownership in the sense that it becomes your property. In other words, an NFT represents the purchase of a digital asset, traceable on the blockchain.
When people buy an NFT, they are not necessarily buying the bundle of rights that accompany copyright ownership. For example, solely buying an NFT does not bestow the rights to display or copy the work. Others, including the NFT’s original author, may maintain those rights
The situation is the same with a physical collectible. When you own a painting it does not automatically give you the right to display it in public. You also don’t have the right to sue for infringement of copyright if someone reproduces the image in the painting without permission. To obtain such rights, you either need to be the copyright owner of the work or have the copyright assigned to you by the creator (in writing and signed).
Buyers of NFTs can’t share, copy and reproduce digital content without the permission of the right holder, otherwise, they would be infringing the copyright. The only way such rights can be transferred is through the terms embedded in the NFT, in the form of a license.
There are cases when the buyer of an NFT is granted the right to use the copyright in a limited way. For example, owners of CryptoKitties NFTs have been allowed to make up to US$100,000 in gross revenues from them each year.
The main reasons to buy an NFT are the speculative investment and the pleasure of having something unique from an admired artist, brand, sports team, or whatever.
Moreover, buyers should also be aware that the blockchain cannot absolutely know whether a creative work is authentic. One can take another person’s work and tokenize it as an NFT, thereby infringing the rights of the copyright owner. You need to be sure that you are buying something that originated from the creator.
In short, owning an NFT is analogous to having possession of the deeds to a house. The deeds are a record of ownership, not the house itself. Similarly, an NFT is a record of ownership or authenticity of an asset, not the asset itself.
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