NFT Art and its effect on Internet Society

-- By TorahikoMasutani - 20 Oct 2021

What is NFT art?

   A non-Fungible Token (NFT) is a digital asset (digital token) issued on a blockchain such as Ethereum without alternative possibility; however, it has not been defined in relevant laws and regulations. NFT has existed since around 2017, but it recently and rapidly attracts many people as it is used for digital art and digital trading cards, and such art and trading cards are sold for millions of dollars and more. Recently, NFT art has been one of the hottest topics in a digital society. For instance, Nyan Cat, a 2011-era GIF of a cat with a pop-tart body, sold for nearly $600,000 in February 2021 (Robyn Conti, John Schmidt, What You Need To Know About Non-Fungible Tokens (NFTs) (https://www.forbes.com/advisor/investing/nft-non-fungible-token), May 14, 2021).

Effect of NFT (and NFT Art) to development in digital technologies

   Basically, digital data can be copied for free and easily and such feature of digital data has supported growth and innovation in digital (and internet) technology. However, NFT uses blockchain technology and enables the creation of unique and one-of-a-kind data. It is totally different from a traditional feature of digital data.    How does NFT (and NFT art) affect our view and attitude to digital data? Does it have an undesirable effect on the development of digital technologies? At this moment, I do not believe that it has a strong or adverse impact on digital technologies. NFT only serves for the satisfaction of its buyer. However, if NFT comes to be used to trace the transfer history of particular digital data, it may deeply hurt the value of digital technologies and hinder their development. Thus, we should carefully observe the influence of NFT in the future.

Legal right to NFT – No Ownership

   As NFT is the unique digital data, it is often said that "NFTs enable data ownership" or "NFT holders acquire ownership and copyright of digital art.”    If NFT enables us to acquire ownership of digital data, it completely changes our relation of rights in digital (internet) society as ownership of digital data has not been approved. However, even with NFT, ownership of digital data is not granted under relevant laws and regulations (at least in the U.S. and Japan). NFT is merely a token issued on a blockchain, and the transfer of NFT does not imply the transfer of rights outside the blockchain. Further, it is sometimes unclear what exactly is being transferred when parties trade NFT.    Therefore, NFT does not make any difference in the fundamental legal relationship of digital data. Besides, a creator of digital art has copyright as a creator of real art.

NFT Art and its value – Legally No Value

   NFT art is digital art that records the history, etc. of the holder of the digital artwork on a blockchain. However, the artwork or its expression of NFT art itself is not unique, and the “image data” of the artwork itself can be digitally reproduced by anyone.    The value of artwork expressed on a physical medium such as canvas is based on the scarcity of the original work, which is the only one artwork in the world. On the contrary, artworks expressed in digital media are less valuable than Real Art because they can be reproduced by anyone without any costs. Further, in many deals, the buyer of the NFT Art owns a "token" that proves he owns the "original" work, though the artist of such NFT Art still retains the copyright ownership of their NFT Art after he sold his NFT Art, so they can continue to produce and sell copies.    If so, what makes NFT Art so expensive? Some people say, "I actually do think there will be a bubble, to be quite honest. And I think we could be in that bubble right now" about the circumstances that many people sell and buy NFT Art at such a high price (BBC, What are NFTs and why are some worth millions? (https://www.bbc.com/news/technology-56371912), September 23, 2021). Honestly, I also think that it is something like a bubble, and NFT Arts is valueless other than the buyer's satisfaction. As stated above, no right such as ownership or copyright is connected to NFT Art. Thus it has legally no value at this moment. It is totally different from traditional real art. Whether NFT Art becomes legally valuable or not depends on the future legal system.

Possibility of NFT Arts

   As mentioned, NFT Art is legally valueless at this moment. However, its characteristic that we can trace the transfer history of such digital data may be helpful to monitor and confirm the dignity of digital data (used as much more accurate “hash”) in its transaction and development. However, such traceability may harm our privacy. Thus, we think it carefully when we use NFT to trace the transfer history.

The concept of "legal valuelessness" at the center of this essay is unestbalished. You offer no legal sources: astonishingly, the only source cited is a BBC feature story.

A bitsttream with a digital signature on it is legally worth what someone will pay for it. It's a "collectible," like a baseball signed by a prominent player, or a ballpoint pen used by the President of the United States signing important legislation. If you buy it and then resell for a higher price you owe capital gains tax on the profits.

The route to improvement of the draft is to get to the legal analysis the present draft assumes it doesn't need. The factual presentation can be cut to one paragraph with appropriate links to authoritative sources, leaving room to do the real work.


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