NFTs

Question 1

Non-fungible

Answer 1

Fungible - Something which cannot be distinguished from something else so is interchangeable
Unique, defies easy interchangeability

Question 2

What makes an asset non-fungible

Answer 2

Unique, non-exchangeable
In the real-world, time can make copies of a thing unique.
Takes on non-specific value when it has been possessed for a period of time (condition changes)

Question 3

Making digital assets unique

Answer 3

Tokens, uniquely identifiable and ummitable
Associated with digital files
Ownership of tokens transferrable
Exchange of ownership on blockchain

Question 4

NFT definition

Answer 4

Non-fungible token. Unit of data stored on blockchain
Associated with asset, digital or physical. Can also have license to use asset
Can be traded and sold on digital markets
Cryptographic transaction process ensures authentication of digital file with digital signature which tracks NFT ownership

Question 5

NFT creation

Answer 5

Minted from digital objects which represent both tangibile and intangible items

Question 6

NFT Ownership

Answer 6

NFTs can only have one owner at a time
Easy to verify ownership and transfer tokene between owners
Owner can also store specific information inside them.

Question 7

NFT Creator

Answer 7

No single creator of NFTs. Concepts emerged over time.

Question 8

NFT Concerns

Answer 8

Intellectual Property Rights
Artist and Buyer Fees
Royalties
Plagiarism and Fraud
Data Hosting and Storage
Data Protection Laws

Question 9

Other NFT Legal Pitfalls

Answer 9

Property law
Money laundering
Regulatory
Taxation issues

Question 10

NFT Industry Change

Answer 10

Can create completely new markets and increase investment opportunities
Tokenising a piece of work removes middlemen who control distribution and promotion

Question 11

NFT Marketplace

Answer 11

Minting and selling of NFTs
Both parties require crypto wallets
Sales: Fixed price, auction, best offer etc
Fees: Gas and service fees
Royalties: % of sale price each sale to NFT creator.

Question 12

Intellectual Property Rights from an NFT

Answer 12

Ownership of an NFT doesn’t inherently grant copyright or intellectual property rights to the digial asset a token represents.

Buyer will not necesarily receive copyright privileges when ownership of the NFT is changed. Original owner can create more NFTs of the same work.

NFT is proof of ownership (Separate from copyright)

Question 13

Artist and Buyer Fees

Answer 13

NFT Marketplaces charge the artists and buyers fees for minting, listing, claiming and secondary sales
Most NFTS sold for less than $200. Platform fees make up most of the amount sold for. On average fees make up more than the price meaning artists on average pay more money in fees than they make in any sales.

Question 14

NFT Royalties

Answer 14

Smart contracts in the code of NFTs allow for the distribution of funds for the payment of royalties to the creator each time the work is resold
Royalties not necessarily occurring unless NFT resold through the same platform.
US law doesn’t recognize resale rights relating to creative works unlike in the UK and the EU. No recourse for unpaid reslae royalties.

Question 15

Plagiarism and Fraud

Answer 15

Artists having their work sold by others as an NFT without permission
Ease of creating plagiarised NFTs, anonymity of minting NFTs. Difficult to pursue legal action against NFT plagiarists
DeviantArt bot compares user art to NFT marketplaces. Assists user in taking art down from NFT marketplaces.
NFT Marketplaces creation of “takedown teams” to respond to artist complaints in cases of plagiarism.
No market incentive for NFT marketplaces to crack down on plagiarism

Question 16

Data Hosting and Storage

Answer 16

NFT and digital asset is represents are stored separately
NFT is stored on blockchain containing information on asset location.
NFT connected to digital asset via link.

If digital asset deleted or the server hosting it fails or otherwise goes offline.
Link in NFT breaks and NFT will be worthless. No longer associated with digital asset so no way to back up the NFT.
NFT is unique and cannot be replaced. Purchaser can be left without resource.

Question 17

Data Protection Laws

Answer 17

Data protection laws give individuals the right to the erasure of their personal data.
Blockchain immutable poses an obstacle to the execution of this right

Also give individuals the right to rectify inaccuracies in their personal data. Blockchain technology can make this functionally impossible to exercise.
NFTs containing personal information might violate data protection laws

Question 18

Property law

Answer 18

Which legal system governs your ability to sell or secure NFT.
Asset’s location generally determines property law. However, NFTs represent a unique copy of the asset rather than the underlying asset itself.

Question 19

Money laundering

Answer 19

Use of NFTs and cryptocurrency to circumvent anti-money laundering regulations.

Question 20

Regulatory issues

Answer 20

Unregulated NFT transactions (“wash trading”) banned in traditional investment markets like equities as they give an artificial impression of demand for an asset.

Question 21

Taxation issues

Answer 21

Law not caught up with NFTs and taxation. Difficulties determing where NFTs are situated for tax purposes, NFTs fall into a “tax black hole”