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Non-fungible tokens (NFT): copyright issues

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Nonfungible tokens have excelled in the cryptocurrency sector and share part of their narrative on a democratized system without legislative control. So do NFTs have copyright issues? Yes, and they affect both NFT buyers and the artists who create them.

Copyright issues

The first problem is ownership. The transfer of the NFT does not – in itself – guarantee any ownership rights to the digital file linked in the NFT or any rights associated with the work of art. Just as ownership of an image does not give the owner the right to make copies of the image, the owner of the NFT does not share any of the exclusive rights that belong to the copyright owner of the related work.

In many cases, ownership of the NFT does not guarantee ownership of the digital file to which the NFT applies, which is not normally included in the NFT. Instead, the NFT contains a link to the location where the digital file is located on the Internet server. If the hosting service closes, the NFT will point to a dead link.

Second, the process of creating an NFT usually involves saving a copy of the digital file to a server, but only the copyright owner of the underlying work can make a copy of the work.

Larger auction halls, such as Christie’s and Sotheby’s, will offer assurances about the origins of the NFT, based on their history and expertise. However, most people do not buy their NFTs from established auction houses. Online NFT marketplaces, such as Rarible and OpenSea, cannot verify that every NFT offered for sale has been created with proper permission.

Potential solutions

The solution to these problems lies in combining non-crypto expertise with the development of the NFT.

One solution is to limit NFT sales to specialized auctions. Companies that operate this model restrict NFT sales. These NFTs are prepared in advance and tested by experts. This solution solves the problem of provenance with specialized expertise, but at the cost of availability for artists and buyers.

Verification of copyright ownership must be part of the NFT creation process – for example, by involving people in the process to gather evidence that the person creating the NFT has rights.

NFTs were conceived as digital assets, unique pieces of code that could have value due to their scarcity. As the use of the NFT spread to the world of art and creativity, the ambitions of the NFT were preceded by legal consequences. Without proper consideration of how to verify copyright, NFTs become problematic for both creators and consumers and cannot reach their full potential.

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All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.

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