It is difficult to predict the future with certainty, but non-fungible tokens (NFTs) have seen significant growth in recent years and have the potential to significantly impact various industries such as art, collectibles, gaming and more. But like any new technology, the future of NFTs will depend on their widespread use and how they are used by people and businesses.
In addition, further developments and advancements in technology and standards may also affect the future growth and success of NFTs in the future.
What are NFTs?
NFTs are digital assets that represent real-world objects and cannot be replaced or exchanged due to their unique properties. Much of the current hype surrounding NFTs is the use of technology to sell digital art.
NFTs are bought and sold online with cryptocurrency and run on the blockchain, a decentralized digital ledger that documents transactions, ownership and validity so that each one can be tracked.
How do NFTs work?
NFTs can only be owned by one person at any one time, and their use of blockchain technology makes it easy to verify ownership and transfer tokens between owners. When someone buys a non-fungible token, they gain ownership of the content, but this does not prevent the NFT from being seen all over the Internet. Essentially, there are many copies of the same artwork, but there is only one original.
This fact alone makes NFTs very attractive to artists who may previously have had no way to sell their artwork, and who now have the ability to digitize their artwork as a means of wider circulation. When an NFT becomes popular, it can be shared so many times online and this can help develop the value of these artworks.
Challenges with NFTs
As NFTs continue to evolve at a faster pace than the law, more challenges will emerge. As mentioned above, NFTs are unique and there can only be one owner of an NFT at a time. However, the fact that a person (collector) owns an NFT does not mean that the collector owns anything else in the NFT apart from the NFT itself. So the fact that a person buys an NFT from a collector does not in itself mean that the buyer also owns the intellectual property rights in the NFT. Ownership of the intangible rights in NFT will only be transferred from the owner of the rights to the buyer if this is explicitly stated in the smart contract coded into NFT.
NFTs are powered by smart contracts that control the various actions such as:
- Confirms ownership
- Manage portability
If the intellectual property rights are not included in the smart contract, the buyer only buys the NFT without intellectual property rights, and the creator of the NFT will own the intellectual property rights. As such, the owner of the NFT will not be able to use the NFT without permission from the owner of the intellectual property rights. Each buyer of an NFT must then be very careful to assess exactly what that buyer is buying.
Another challenge that may arise from the increase in NFTs is money laundering. NFTs are purchased with cryptocurrency that does not have a central issuing or regulatory authority, but rather uses a decentralized system to record transactions and issue new units.
This means that cybercriminals can now use NFTs as a means of money laundering, and this can prove difficult to track or trace.
In conclusion, NFTs have given artists and other creatives a great opportunity to sell their artwork and pieces digitally, and the amount of money generated by NFT markets may be an indicator that NFTs may be here to stay for the foreseeable future. As such, it is imperative that the law also needs to be developed at a faster pace to deal with the likely legal problems this growth may present.
The content of this article is intended to provide a general guide to the subject. You should seek specialist advice about your specific circumstances.
