Christie’s has announced the launch of ‘Christie’s 3.0’; an “on-chain auction platform dedicated to exceptional NFT art”. Basically, NFT sales at Christie’s will now take place directly on the Ethereum blockchain.
Users must have a digital wallet before they can set up a Christie’s 3.0 account, which will be used to bid on the NFTs. This is the first time a major auction house has switched to selling directly on the blockchain and gives an exciting nod to the future of Web 3.0 in the art world.
But what exactly is an NFT?
Despite the fact that the word “NFT” is becoming more and more common, it is still useful to take a step back and take stock of what an NFT itself actually is. Contrary to popular belief – an NFT is not just a digital work of art. It is a chain of code that exists on the blockchain, which is usually attached to a digital (or physical) asset, to prove ownership of that digital (or physical) asset. An analogy can be drawn between NFTs and a (say) Chanel bag authenticity card. The authenticity card confirms that the bag is authentic. So using this analogy the NFT would be the “card”, it would not be the Chanel bag.
The most commonly used asset associated with an NFT is a digital artwork (such as Bored Ape Yacht Club monkeys). However, an NFT can be linked to a wide range of things. For example, it can verify ownership of a piece of music, membership in a club, or a ticket to an event (Ticketmaster recently announced a new initiative where event organizers can link NFTs to each attendee ticket).
An exciting aspect of NFTs is therefore how they can be integrated into our everyday lives in the future. So while initiatives such as “Christie’s 3.0” open up exciting opportunities for artists and collectors, the continued development of the technology behind NFTs means that we are likely to see a large number of different “use cases” and innovative applications of NFTs in the future. The utility, community and ownership that NFTs can offer are exciting aspects that will be interesting to follow.
What do you own when you buy an NFT?
Since there still seems to be some confusion about what an NFT actually is, it is not surprising that disputes arise and work their way through the courts. When someone buys an NFT, it can only be assumed that they own the NFT itself, i.e. the code chain. As a starting point, without more, ownership of an NFT does not confer any additional legal rights other than owning the code chain. When you acquire an NFT that represents a digital (or physical) asset, this is can attract additional legal rights, such as rights under a contractual license to use or intellectual property rights such as copyright. However, there is no general implication that the owner of the NFT has a license or rights to the asset.
In the context of an NFT of a digital artwork, the NFT is not the digital artwork itself. It is the record stored on the blockchain that confirms ownership of the digital artwork (or which asset the NFT is linked to). When you purchase an NFT associated with a digital artwork, this does not automatically mean that you will own the intellectual property rights to that artwork. In fact, under English law, by default the original artist retains the copyright to their artwork, even after it has been sold. The same principle applies to digital artwork. In addition, it is not possible for an artist to sell/transfer his ‘moral rights’ in a work of art to a buyer.
Interesting questions also arise when NFT creators include elements in their artwork that relate to other brands. There are some high-profile cases working their way through the US courts dealing with these issues, and you can keep track of them by following our NFT litigator here.
The rights you acquire will ultimately depend on the underlying legal position and the wording of NFT’s smart contract. If you are buying an NFT it is therefore very important to seek advice to ensure you understand exactly what you are buying.
