Smart collectibles; use case of NFT tokens

Abstract

Non-Fungible Tokens (NFTs) have garnered remarkable investor attention recently, with some NFTs securing selling prices that may have seemed unthinkable for a non-fungible virtual asset. This raises fascinating questions about “value” and “scarcity” with respect to blockchain technology, through a prism of non-fungibility of a digital asset, and this paper aims to draw attention to these questions insofar as they may shape an alternative space of blockchain development and exchange going forward. We find that NFT submarkets are cointegrated and feature various causal short-run connections between them. The success or adoption of younger NFT projects is influenced by that of more established markets. At the same time, the success of newer markets has an impact on the more established projects. The results contribute to the overall understanding of the NFT phenomenon and suggest that NFT markets are immature or even inefficient. This article will tackle these questions from a UK perspective, specifically looking at cases from England and Wales and Scotland, while also covering a few relevant CJEU decisions. This is a relatively recent technology, which will require a lengthier technical explanation to analyse the legal issues that are raised. In some instances, the public perception will be dealt with as well, as it has become evident that there is considerable misunderstanding not only about what an NFT really is, but about the ownership and copyright issues that surround the technology. While NFTs are not entirely related to copyright, and in some way they’re trying to bypass legal transactions in favour of technical solutions, this paper will concentrate on the copyright questions, but it will also tackle some of the emerging issues about the technology. A quick note about balance. This work will take a generally neutral approach to the study of NFTs, but this is a subject that is not devoid of controversy. There have been concerns raised about the viability of this model from various perspectives, but it is not the remit of the work to tackle these, and the approach will be to view non-fungible tokens at face value. The concerns range from the environmental cost of running blockchain technology,9 to the use of tokens for money laundering,10 to the existence of often crippling transaction fees that could make it difficult for artists to profit from their work.11 It is important to highlight these here, although they will not be the subject of further analysis.