Non-fungible tokens (NFTs) are known to be confusing when it comes to understanding exactly what it is you own. An NFT is a digital asset in which the proof of ownership is proved via the blockchain — also known as a decentralized digital ledger. So, what might your NFT give you, theoretically?
When you purchase an NFT, you own anything that is disclosed in the terms of the smart contract, although additional rights may be included in the description of the NFT, or other applicable terms.
Generally, the most common ownership right granted to you is ownership of the NFT, along with the right to view or display the NFT for your personal use.
Less commonly, you may receive:
- Intellectual property rights in the NFT artwork, or specific rights to use the artwork
- A physical good to go along with the digital asset
- Various types of utility such as access to exclusive groups and experiences
- The digital artwork, along with the ability to display that artwork for personal use
Keep in mind that although these additional rights may be included in the terms of your NFT, they won’t always be. That is why it is important to understand everything that is included with the purchase of your digital asset.
The common misconception seems to be that when you acquire an NFT you don’t actually own anything. Many people tend to believe that taking a screenshot of a non-fungible token provides the same value as the person who actually owns the token. This is simply not the case.
Owning an NFT means you own and benefit from whatever is described within the terms of the sale. If you were to take a screenshot of an NFT which someone else owns, you do not gain access to any perks that go along with the token as described in the sale terms.
Let’s further discuss what owning an NFT really means for the token holder and the different perks that may apply.
If you are buying an NFT, then you may have the opportunity to own intellectual property (IP) related to that NFT, or to use the NFT in certain ways allowed by the creator.
IP rights — such as the right to display the artwork publicly, or the right to distribute copies of the artwork (for example, selling t-shirts that include the artwork) — belong exclusively to the creator(s) of the artwork. That means, in order to allow another person to use their creation, the creator must specifically grant the rights to someone else. The ways you are able to use an NFT you’ve collected will depend on the terms of the sale and what uses have been granted by the creator.
While most NFTs currently do not come with any specific rights to the collector beyond the ability to display the artwork for personal use and to re-sell the NFT, occasionally some creators empower more uses, such as allowing the collector to share the work on social media.
Rarely, you may be granted more noteworthy IP rights with the purchase of an NFT, such as the ability to distribute the NFT artwork, and even earn a profit from it. CryptoKitties’ NFT License is one example where the NFT ownership of a CryptoKitty allows you to sell certain products using your NFT’s IP.
IP rights are an amazing perk to have, especially if the brand is respected and has a large community built around it. Also, you have the potential to earn from allowing others to use your IP in their own work.
When you buy a beautiful piece of art, it can be difficult to tell how many pieces were created or if you are even purchasing the original piece from the artist. NFTs allow art to be sold directly from the artist straight to the collector.
Collecting art from an artist in the form of a non-fungible token normally allows you to display that artwork, but usually only for your private viewing pleasure. The added benefit of collecting art digitally as an NFT is the proof of ownership of that NFT, issuance quantity, and ease of verification of the authenticity.
Purchasing a non-fungible token guarantees that you are the owner of that token, which is indisputably proven via the digital ledger known as the blockchain.
Just because you are buying a digital asset doesn’t mean you don’t have the opportunity to secure a physical good to go with your digital token. Some NFTs may offer distribution of a physical product upon attaining your digital asset.
Whether you are buying a piece of art, a toy, a vehicle, or perhaps a house, non-fungible tokens can go hand-in-hand with any physical good someone may want to pair together.
For example, some artists are known to sell their art as an NFT and include the original physical piece to go with the digital token. This allows the artist to supply additional value to their collectors and still transact in a transparent and trustworthy manner.
Physical goods that accompany NFTs are not limited to pieces of art; however, physical goods can coincide with numerous digital assets. The only thing standing in the way of what type of physical items may be offered along with an NFT is the creator and the contract terms. Just about anything can be made into a non-fungible token.
Utility is one the most intriguing perks of owning an NFT. Utility can appear in many forms, from VIP access to exclusive memberships to unique experiences.
I believe that utility is one of the best perks when it comes to possessing your very own NFT. Utility allows the creator to build a more personal relationship with the consumer and deliver a special experience that other non-holders may not have access to.
Musicians have the ability to offer backstage access and meet-and-greets, for instance. This is just one example of utility being used to add further merit to a non-fungible token. The possibilities are endless and the potential is solely limited by the creative boundaries of the person behind the creation of the asset.
Understanding NFT ownership
Where NFTs differ from traditional assets is in the transparency of the transaction and ownership. Whenever you purchase a non-fungible token, every single detail of the transaction is stored permanently on the blockchain. This includes the buyer, seller, date, time, purchase price, and gas fee where applicable.
This is why they are called “non-fungible” tokens. Non-fungible means that something is unique and can’t be replicated or replaced with something else. It’s a true one of a kind asset in which the entire transaction history follows the token wherever it goes indefinitely.
Some people argue that the fact that you can see who previously held a token adds additional value. Imagine if you purchased an NFT from your favorite artist, sports player, or someone you truly admire and had proof that they actually possessed the asset at one point in time. Now that is cool.
Before NFTs and blockchain technology, proving that someone previously owned something was near impossible without personally witnessing the transaction yourself. Now with this amazing technology, you can guarantee what you are buying is true and authentic.
Perhaps one of the most magnificent features of owning a non-fungible asset is the ability to re-sell your token on a secondary marketplace. Selling your NFT usually means you are also selling any perks that go along with the NFT.
So, if your NFT contains certain assets such as utility or IP, you may also forge over those rights to the new owner upon purchase, depending on the original sale terms. If this is the case, this bestows more value for the buyer and a greater likelihood that your digital asset will sell if that is what you choose to do with it.
Ultimately, owning a non-fungible token allows you to prove ownership of your assets and provides transparency for everyone who is involved in the agreement. NFTs may also carry extra perks and benefits aside from the token itself, granting the consumer even more usefulness and exclusivity than ever before.
This post originally appeared on Voice in association with CyberScrilla.com.
This article is provided for general informational purposes only, and does not, and is not intended to, constitute legal advice.