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Who’s Who Legal featured this article by Ben Natter in August, 2022.
Non-fungible tokens (NFTs) are digital assets made of data stored on a decentralized ledger known as a blockchain. NFTs were originally created to show provenance in the digital art market and are created, or “minted” to reflect ownership of a digital file or physical asset. Because the blockchain is decentralized and entries only change when assets are transferred, NFTs provide an accurate record of who owns a digital asset at any given time. While the term “NFT” is used to refer to a digital image, the actual item being purchased is an entry on the blockchain that links to the digital image being sold. In other words, NFTs are public receipts that are used to prove ownership of goods that would otherwise be difficult to authenticate.
Because NFTs are based on the same digital framework that underlies cryptocurrencies like Ethereum and Bitcoin, the asset class has undergone a period of speculative investment and prices fluctuate erratically. Individuals and brands hoping to further monetize their intellectual property, have begun to create NFTs with the hopes that enthusiasm amongst speculators is high. The breakneck pace of the market has lead individuals and online collectives to mint NFTs using allegedly appropriated intellectual property in the hopes of financial gain.