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A non-fungible token (NFT)
A non-fungible token (NFT)
is a unique and non-interchangeable unit of data stored on a digital ledger
(blockchain).[1] NFTs can be associated with reproducible digital files such
as photos, videos, and audio. NFTs use a digital ledger to provide a public
certificate of authenticity or proof of ownership, but it does not restrict
the sharing or copying of the underlying digital file. The lack of
interchangeability (fungibility) distinguishes NFTs from blockchain
cryptocurrencies, such as Bitcoin. NFTs have drawn criticism with respect to
the energy cost and carbon footprint associated with validating blockchain
transactions as well as their frequent use in art scams.[2][3] Further
criticisms challenge the usefulness of establishing proof of ownership in an
often extralegal unregulated market.[4]
An NFT is a unit of data stored on a digital ledger, called a blockchain, which can be sold and traded.[5] The NFT can be associated with a particular digital or physical asset (such as a file or a physical object) and a license to use the asset for a specified purpose.[6] An NFT (and the associated license to use, copy or display the underlying asset) can be traded and sold on digital markets.[7]
NFTs function like cryptographic tokens, but, unlike cryptocurrencies such as
Bitcoin or Ethereum, NFTs are not mutually interchangeable, hence not
fungible. While all bitcoins are equal, each NFT may represent a different
underlying asset and thus may have a different value.[8] NFTs are created when
blockchains string records of cryptographic hash, a set of characters
identifying a set of data, onto previous records therefore creating a chain of
identifiable data blocks.[9] This cryptographic transaction process ensures
the authentication of each digital file by providing a digital signature that
is used to track NFT ownership.[9] However, data links that point to details
like where the art is stored can die.[10]
Copyright Ownership of an NFT
does not inherently grant copyright or intellectual property rights to
whatever digital asset the token represents.[11][12] While someone may sell an
NFT representing their work, the buyer will not necessarily receive copyright
privileges when ownership of the NFT is changed and so the original owner is
allowed to create more NFTs of the same work.[13][14] In that sense, an NFT is
merely a proof of ownership that is separate from a copyright.[12][15]
According to legal scholar Rebecca Tushnet, "In one sense, the purchaser
acquires whatever the art world thinks they have acquired. They definitely do
not own the copyright to the underlying work unless it is explicitly
transferred."[16] In practice, NFT purchasers do not generally acquire the
copyright of the underlying artwork.