We are currently seeing the emergence of so-called NFTs (non-fungible tokens). For example, the video clip of LeBron James’ dunk against the Sacramento Kings in-game dated November 15, 2019, was sold to user “kyloren” as NFT for over $208,000 (€180,055), while the video itself can be viewed for free on the TopShot website. platform.
What are NFTs and why are they so popular in the market?
Non-fungible tokens (NFTs) are certificates of ownership stored on a blockchain and backed by technology blockchain (e.g. Ethereum) commonly associated with a digital item: visual arts, videos, music, or collectibles.
Unlike fiat currencies or cryptocurrencies, which can be easily substituted and replaced, each NFT is unique or “non-functioning” and cannot be revoked or counterfeited. In comparison, a euro in my pocket is worth the same as a euro in my neighbor’s pocket, while The Garden of Earthly Delights hanging in my living room and The Garden of Earthly Delights on display in the Prado Museum are not interchangeable. This is the essence of the NFT concept.
In recent months, NFTs seem to be the blockchain and cryptocurrencies in terms of popularity. They present a new way of thinking about artistic property, which partly explains why they have turned the art world upside down.
Revolution in the art world
Digital works can, by their very nature, be endlessly copied and reproduced. NFTs do not eliminate this risk, but they do create a unique digital document that authenticates ownership of a particular version of a digital work.
Christie’s auction house has sold a digital artwork, Every day: the first 5000 days by digital artist Beeple, for over $69 million as NFT last year, ranked alongside paintings by Picasso, Rothko, Van Gogh and Monet as some of the most expensive works ever sold to consumers.
NFTs offer new revenue opportunities for artists, who today are subject to several constraints: risks of illegal reproduction of their works, counterfeit or illegal products, high prices, saturated distribution chains, need for physical interaction, etc. Moreover, users of the digital age already spend on average more time online than sleep, which makes NFT marketplaces excellent showcases for showcasing artistic talent to a wider audience.
And outside the art market
The music industry has already entered the world of NFTs, looking to expand fan bases, connect with existing fans and generate new revenue streams.
For example, the band Kings of Leon auctioned an NFT with four front row tickets to a show on their worldwide tour, a meet and greet with the band, merchandise from the tour and the use of a limousine.
There are also different types of NFT games ranging from racing to virtual worlds where users can buy land and goods. Or simulation games with unique collectibles that make them attractive to everyone gamer on a global level.
In the publishing world, interest in NFTs is only growing. This technology allows writers to sell their works directly on the Internet, ensures traceability of the use made of the work and offers many opportunities to build reader loyalty. Consider, for example, the “tokenization” of a book signed by the author, which has an added value compared to an identical copy of the unsigned book. In the event that the author decides to enter into a publishing contract with a publisher, marketing copies of the work via NFT prints will allow for better traceability of the work, rationalization and transparency regarding the benefits offered by both parties are obtained.
The next area of tokenization expansion should be linking NFTs to objects in the physical world. The expansion of the tokens is such that in August 2021, the NFT gaming network MyMetaverse announced the launch of real estate NFTs that can be won by playing the video game Minecraft. So we are talking about investing in real estate through video games.
NFTs as a key player in the metaverse
NFTs also seem to play a key role in what is known as the metaverse. After the global pandemic, is it an exaggeration to think that concerts or business meetings in the future will be purely virtual? What if the metaverse became the virtual stage for certain areas of our lives, in addition to our physical reality?
Owning NFTs allows you to virtually join a host of exclusive experiences in the metaverse and physical world, which will enhance social and community experiences. NFTs also allow users to take full ownership of their land and spaces in the metaverse. Even companies like Adidas, H&M, Nike or Zara have already showcased virtual fashion collections in the metaverse, all via NFT.
Legal Matters Relating to NFTs
No country has yet specifically regulated NFTs. The EU launched a comprehensive legislative proposal on crypto assets (MiCA) in September 2020.
It is important to consider intellectual property law, in particular copyright. When you buy an NFT, you are not buying the digital work as such. The buyer is only given a collection of codes or metadata that reference the “real” version of the work in question. This metadata is written to the blockchain and include information about the location of the original work and the owner of that particular version of the work. In addition, we must be aware of anti-money laundering, tax, data protection, antitrust and consumer protection rules when we ask questions about an NFT.
Future Legal Challenges
The legislator’s job is very complex, especially as the applicable regulations are generally country specific, while NFTs can switch hands without borders of jurisdiction in digital markets. The anonymity that technology offers blockchain also makes it difficult for the parties to such a transaction to invoke any kind of intellectual property or contractual rights in the event of a possible infringement.
Given the regulatory issues caused by the rise of virtual packages and the crypto economy, it is therefore not surprising that we are talking about MetaLaw or Legal metaverse as the law of the virtual world intended to ensure the security of providers and their users/consumers.
If a global metaverse is realized, the question of jurisdiction and applicable law will be essential to the resolution of conflicts arising in a network of inherently “transnational” legal relationships. Some are already considering opening law firms in the metaverse or even creating their own dispute resolution mechanisms in this virtual environment. We will have to be alert to the evolution of this sector, however dystopian it may seem to us today.