What’s a Non-Fungible Token (NFT) and is it a form of intellectual property (IP)?
First, some background on NFTs. As the New York Times explains,
An NFT is an asset verified using blockchain technology, in which a network of computers records transactions and gives buyers proof of authenticity and ownership. The current boom is mostly for digital assets, including images, GIFs, songs or videos. Most importantly, NFTs make digital artworks unique, and therefore sellable.
As Business Insider noted, a crypto art version of the Nyan Cat meme (the inspiration for the costume shown above) sold for $590,000.
Since NFTs are based on blockchain, they’re related to the most famous blockchain technology: cryptocurrencies like bitcoin.
Most NFTs are, in fact, part of the Ethereum blockchain. (Ethereum, like bitcoin, is a form of cryptocurrency.)
An NFT can be anything digital. For example, Jack Dorsey, the co-founder and CEO of Twitter, recently sold his first tweet – the first tweet on Twitter – for $2.5 million in a charity auction.
The same buyer offered more than $1 million for Elon Musk’s first NFT, a techno song clip that includes the lyrics, “NFT for your vanity. Computers never sleep. It’s verified. It’s guaranteed.”
Musk turned down the offer—via Twitter.
As The Verge explains,
Non-fungible more or less means that it’s unique and can’t be replaced with something else. For example, a bitcoin is fungible — trade one for another bitcoin, and you’ll have exactly the same thing. A one-of-a-kind trading card, however, is non-fungible. If you traded it for a different card, you’d have something completely different. You gave up a Squirtle, and got a 1909 T206 Honus Wagner, which StadiumTalk calls “the Mona Lisa of baseball cards.”
As the Times reported,
a JPG file made by Mike Winkelmann, the digital artist known as Beeple, was sold on Thursday by Christie’s in an online auction for $69.3 million with fees. The price was a new high for an artwork that exists only digitally, beating auction records for physical paintings by museum-valorized greats like J.M.W. Turner, Georges Seurat and Francisco Goya.
The file was described by the auction house as “a unique work in the history of digital art.”
Like with bitcoin, the price of NFTs can be incredibly volatile and thus NFTs are risky as an investment. Collectors tend to be “die-hard crypto fans” and “the crypto-wealthy,” as the Times notes.
As the Times notes,
Being pegged to the price of cryptocurrencies, whose ups and downs resemble the route of a fearsome mountain cycling race, the market for NFT art has a reputation for volatility. But for many in the analogue art trade, the possibility of making significant sums from inventory with no physical presence remains a mesmerizing prospect.
But back to the original question: is an NFT a form of intellectual property?
The short answer is “no.”
An NFT doesn’t fall into any of the existing categories of IP. It’s not subject to copyright – even though the underlying artwork can be. It’s not patentable. It’s not a trademark.
An NFT is closest to a form of deed, or receipt, or certificate of authenticity. It merely verifies that the owner of the NFT owns the “original” of something that may have an infinite number of digital copies. But what “original” means in this context is somewhat unclear.