Exploring NFTs and their mainstream potential at London Tech Week
23 June 2022
During London Tech Week which was held at Queen Elizabeth II Centre last week, few things generated the sort of excited buzz that Non-Fungible Tokens (NFTs) and their potential did.
NFTs are rapidly moving into the digital art and collectible world, with artists, organisations, and celebrities investing in these unique tokens.
What Are NFTs?
To comprehend what non-fungible tokens are, we must first understand how they compare to fungible tokens. Fungible tokens, such as Bitcoin, are those tokens that can be substituted or traded for one another, whilst being divisible. This is so because they are all the same and therefore interchangeable. On the other hand, NFTs are a unique, one-of-a-kind asset which cannot be divided. While it is unfortunate that the term starts with ‘non’, that is now the accepted term.
NFTs originated in 2014, however, of late they have gained notoriety because of the astronomical prices some of them have commanded in the marketplace and at auction. Most people reckon that it is crazy to pay millions for the digital image of a ‘Bored Ape’ or even of Jack Dorsey’s first tweet, but these transactions have taken place and are likely to continue.
How They Work:
Blockchains hold NFTs and record their trades, with most of the NFTs forming part of the Ethereum blockchain. They represent an array of digital assets (only) including art, audio, digital game characters and animations.
In essence an NFT is the front-facing link to a piece of code stored on a blockchain that has a visual representation. For instance, had the Louvre Museum to mint an NFT of the Mona Lisa, then in the case of fire or destruction of the actual piece of art, the NFT would or should provide a permanent and authentic reminder for future generations of what this piece of art by Leonardo Da Vinci looked like.
There are number of challenges facing the use and application of NFTs, not least the development of a strong link between the NFT and its underlying asset. Currently, the link is frequently a standard https:// link which is far from foolproof.
What You Need To Know:
NFTs can be purchased through a range of platforms, depending on the asset in question. For example, if you are looking to buy trading cards, they can be bought on Digital Trading Cards.
To purchase an NFT, one needs to set up a digital wallet to hold NFTs and cryptocurrency.
Due to the current demand for NFTs, they are frequently referred to as ‘drops’ and often sell out quickly. For this reason, collectors register for updates on their site of choice.
Each NFT is its own unique asset with its own value, meaning that the same creative asset can be replicated visually, however it will hold a different identity and value.
NFTs guarantee authenticity because each asset has traceable metadata and an ownership history transaction record. Each NFT is assigned a code that can be tracked back to its creator and each transaction, thereafter, allowing for the verification of authenticity on any platform over time.
Security of metadata and transaction records are also provided by the blockchain, making it nearly impossible to replicate an NFT.
The Holy Grail for NFTs is clearly mainstream application. A lot of work is already being done in this respect by both the technical and the legal community internationally.
At AE, we participate on a regular basis in international forums via our membership in the international legal network Multilaw, led by our Multilaw partners in London, Penningtons Manches Cooper LLP represented by the IP, IT & Commercial partner Joanne Vengadesan.
Should you wish to discuss any ideas in which you seek to employ NFTs for commercial use, reach out to us and we will bring the full weight of international thinking on the subject to your door.