The outburst of non-fungible tokens (NFTs) makes it apparent that many innovations will happen in the crypto industry. It is an indication of the continuous global adoption of cryptocurrency and how individuals and organizations are leveraging cryptos to build new products and offer new services. But a genuine question holds to the buzz of NFTs existence.
This question revolves around the authenticity of NFTs and the need to understand why you are buying and your perception of its ownership. You need to ask yourself what you truly own when you purchase a portion of NFTs. Yes, you are purchasing a digital art or collectible. But is that all there is to buying an NFT?
This question keeps reverberating in the NFT ecosystem since the exploding tokenization of various items. It is now becoming a norm to virtually create tokens for things that exist and do not exist. But people are concerned about how individuals can take a bunch of their money to purchase items that live in the digital space. Or how do you rationalize your participation in buying digital artworks for million-dollar sales?
Anybody can right-click an image or digital content and download it, but what exactly is the reward from every purchase buyers make. Then, another instance of NFTs that disappear became a topic of discourse. These tokenized images disappear from the centralized servers when their storage rights expire.
Despite this impending question, the growth of the NFT market won’t stop because more tokenized digital content or collectibles are sold for millions of dollars. But there is no definite answer to the question yet. What exactly do people buy when they make an NFT purchase? Are they buying only digital content made into a file? Or the intellectual property (IP) rights associated with it?
Or are they buying the rights to view the image? Or do they only possess the collectible? Or can the purchase only be regarded as buying to establish abstract ownership executed on a blockchain? Ultimately, we can ask a big question that requires a detailed answer.
How do NFT creators plan on managing what they sell?
Intellectual Property Ownership with Ambiguity in the NFT Space
It is natural for individuals to think a digital image, sound bite, or video clip is what NFT is all about. But NFT is beyond the media file despite having that association with the media piece. The digital content is not the NFT.
There are a few lines of code attached for every token released. The codes are written on a blockchain. And they consist of rights awarded to the holder with some sets of conditions. Most significantly, the right for ownership transfer. That is, you have the right to transfer your NFT ownership to your buyer after a complete transaction.
The actual thing you own when you purchase an NFT is the right you buy with it. As a result, you will be able to view the token ID and transaction records of an NFT when you are viewing it on its home blockchain. Likewise, you will discover a link that contains the metadata. This metadata includes information on the hosting of the associated media. This link is within the smart contract.
However, you won’t find information about the token representing other rights related to the NFT associated media. Likewise, you won’t know the technical bond these rights have with the token.
The Tussle of Punks and Phunks
Despite the buzz around the NFT ecosystem, there is ambiguity about who owns a particular thing in the NFT world. When you want to confirm this, you can critically examine what happened in July with Larva Labs CryptoPunk. The owner requested OpenSea, an NFT marketplace, to take down a Lava Labs CryptoPhunk.
This caused some confusion in the industry because users were not sure if the NFT’s owner was withholding the Punk’s intellectual property (IP) rights of an NFT token and how they possess the authority to request Phunk’s removal.
Regardless of the resolution made between both parties regarding the removal case, NFT participants ask questions about IP in the NFT ecosystem. We are not sure who owns an NFT’s IP. Can it be the original creator? Or the current owner? In addition, we should ask how IP ownership will change when you fractionalize an NFT or when you sell it to another entity. How do we manage these rights with time?
The genuine truth is, there is no sure way to measure the intrinsic value of an NFT. There is no effective mechanism to manage intellectual property in the NFT space. Due to the questions of ownership rights, “bridges” that connect NFTs with IP rights may be where the industry needs to start making an amendment. We can use this to create a standard of IP deployment in those assets.
Creativity Experiencing Liquidity
With the exploding tokenization of NFTs, the future of the creator economy may wear a new hat. We can experience a new industry where creators are rewarded based on their creative input and effectively receive payments for every work done. But the liquidity of a creative economy enabled by NFT will experience some constraints due to problems associated with managing intellectual property (IP) rights.
This problem will cripple the effect of value and creativity on each NFT piece. As a result, it is crucial to have an IP management tool that moves at the same speed as NFT transfer. This will help us to maximize the benefits associated with the NFT economy. Once we have the standard to manage IP rights, we can leverage smart contracts to obtain derivatives of IP rights.
The NFT space needs tools created on the blockchain to manage IP rights. With this tool, customization will be efficient, and the rights will move at the same speed as creating and selling the token. With Web 3.0, this ownership mechanism should allow IP right to transfer as fast as creativity move in the space.