NFT stands for non-fungible token, it is a non-interchangeable unit of data stored on a blockchain. The meaning of fungible describes an item that is the exact equal value and interchangeable with each other.
Digital files can be easily duplicated, with NFTs, artwork can be “tokenised” to create a digital certificate of ownership that can be bought and sold.
NFTs are “one-of-a-kind” assets in the digital world that can be bought and sold like any other piece of property, but have no tangible form of their own.
The digital tokens can be thought of as certificates of ownership for virtual or physical assets.
Where Bitcoin was thought of as the digital answer to currency, NFTs are now pitched as the digital answer to collectibles. Digital artists see their lives changing thanks to massive sales to a new crypto audience.
The most expensive NFTs ever sold was the artwork, called Everyday: The First 5000 Days by Mike Winkelmann an American Digital Artist, Graphic Designer and Animator.
What do you own once you purchase an NFT?
In most cases, the NFT holder is simply obtaining a non-exclusive license to the underlying intellectual property rights of an asset and only for non-commercial purposes. NFTs allow digital works to at least be traded. While tokenising a digital work doesn’t prevent it from being downloaded, it can ensure there is only one original and that the original is assigned to one individual person.
NFT sellers will need to ensure that smart contracts clearly outline the rights that are being assigned as part of the NFT. For example, copyright on a work will not transfer unless it is expressly allowed for. An NFT is essentially a license to specific content.
Three people have been arrested in the UK in the first ever UK law enforcement for NFT’s. Several NFTs were seized in relation to a suspected VAT fraud involving 250 alleged fake companies.
Nick Sharp, Deputy Director Economic Crime, said the first seizure of an NFT “serves as a warning to anyone who thinks they can use crypto assets to hide money from HMRC”.
“We constantly adapt to new technology to ensure we keep pace with how criminals and evaders look to conceal their assets.”
Date: March 14, 2022