NFT is the most discussed digital trend right now. While some users have joined the chase for the most unusual crypto-art, others do not understand the real value of tokens. 

NFTs are incorrectly classified as digital currencies because they are digital certificates of ownership; that is, they are intellectual property objects, as they are the result of human intellectual activity.

Let’s deal with the concept of NFT

Often “token” refers to any cryptocurrency or crypto-asset, which, in fact, only creates more confusion. The closest to the truth defines a token as a certain unit of account, which itself is not a cryptocurrency. In fact, it is a special registry entry that certifies that a certain person owns the right to a certain asset.

The term non-interchangeable can also be replaced with the word “unique” – its specificity is that each token is specific and cannot be exchanged or replaced with another token of the same kind.

It turns out that NFT is a unique record in the registry, confirming a person’s right to a particular asset. As a rule, NFT is used to secure the right to unique objects from the virtual world, which are most often intellectual property objects.

NFT copyright. Is it real?

An NFT is only a certain record that confirms the right to a unique object – the token itself cannot be copyrighted.

This is because the non-interchangeable token itself, although it has its expression in objective form, was not created by creative labor, and this is the key criterion for recognizing a particular object as a copyright object. Also, the attribution of the NFT itself to intellectual property objects simply does not fit into the logic of its essence: the NFT – something that certifies the right to the object of intellectual property.

BAYC monkeys – a club for a select few

NFTs are now actively used to sell digital objects. For example, one of the most popular has become a collection of NFT BoredApeYacht Club (BAYC), which presents a collection of pictures of “cartoon” monkeys, which are procedurally generated by an algorithm. Why did the creators of these pictures decide to use NFT to distribute their works?

NFT contains information about the rights to the image to which it is “attached”. In the case of BAYC, this is exactly the situation: ownership of NFTs gives their owners access to a closed online club, exclusive in-person events, and also certifies their exclusive right to the said image and the character depicted in it.

In this case, non-exchangeable tokens are very much like uncertified securities, which also certify binding and other rights and also have no tangible medium.

Where are the borders?

For many people, it is not obvious that an NFT associated with a work or an object from the real world may not give the owner of a token any exclusive rights to that object. Unless the terms of purchase specifically state that an NFT certifying an exclusive right to an intellectual property object is transferred to the purchaser, it must be assumed that the NFT merely certifies ownership of a digital copy of a particular object.

By acquiring NFT, its new owner can not dispose of the rights for the work itself, to prohibit third parties from using or independently process the work without the consent of the right holder. He can only determine the fate of the copy he has inherited, without becoming the copyright holder for the work itself. The rights holder himself/herself is not restricted to create a few more digital copies of his/her work, issue new NFTs to certify ownership of them, and sell them to other purchasers.

It will work the same way in the other direction – if a person is not the owner of the exclusive right to a work, he is not entitled to issue an NFT certifying the right to such a work either.

Conclusions

It may seem that an NFT is just a risky investment which cannot perform any useful function. That’s not entirely true: in addition to selling images of monkeys and other digital art, NFTs can be used for more useful purposes

Recently the Japanese startup ABCRECORDS created a marketplace where anyone can buy NFTs entitling them to use a piece of music in their social networks and, subject to a special questionnaire and an agreement with the rights holder, the owner of the token can also obtain the right to use the music for commercial purposes.

If the NFT is resold, these rights will pass to another person, and the author of the work whose rights are certified by the NFT will receive a certain percentage of the resale amount.