Non-Fungible Tokens (NFTs) are rapidly becoming a dominant – and legitimate – pathway to ownership and trading in the art world. A formerly marginal technology, they've become mainstream and made news headlines around the globe thanks to extraordinary, eight-figure sales of digital works.
In March, the digital artist known as Beeple, real name Mike Winkelmann, sold an NFT attached to a work of art, "Everyday: The First 5000 Days", for more than $69 million through international auction house Christie's.
This explosive sale cemented what arts and media commentators were already coming to realize; that NFTs represent a revolutionary new avenue for digital art marketing, trading, and ownership.
NFTs Representing Ownership
When you purchase an NFT, you have the right to claim ownership of the NFT and dispute any other claims of ownership. But your rights over the actual work the NFT is attached to – its reproduction and communication, for example – will vary depending on the terms of each NFT.
NFTs have in-built smart contracts that specify certain rights. An artist may transfer ownership of the work's copyright with the NFT, thus allowing the purchaser to exercise reproduction and communication rights – but this is currently the exception and not the rule.
1. Tokenized Property
The property is registered on the blockchain as an NFT, and all relevant information about the property, such as the address, square footage, and ownership history, is recorded on the blockchain.
2. Transferring Ownership
When the property is sold, the ownership of the NFT is transferred from the seller to the buyer, and the transaction is recorded on the blockchain. This can be done with smart contracts and replace intermediaries like lawyers and notaries.
3. Tracking Property
Anyone can view the property's ownership history and other relevant information by looking at the data recorded on the blockchain, providing transparency and immutability of the ownership.
4. Easier and Faster Transactions
By using NFTs, buying and selling real estate can be made faster and more efficient, as there is no need for intermediaries like lawyers or notaries.
What Exactly is Tokenization Infrastructure for Real Estate, and Why Does it Matter?
Imagine for a moment you own a property with a market value of 3 Billion USD. While this valuation certainly makes for eye-watering reading and a wealthy owner, it also presents a problem when you want to sell. A buyer with bottomless pockets would be required.
The problem of an illiquid market can be solved through tokenization. Blocksquare makes investing in real estate assets as simple, borderless, and programmable as the rest of the internet.
Emerging Issues on NFTs Ownership
Like any new technology, especially in unregulated cryptocurrency spaces, NFTs can raise novel legal issues. For example, artists have already reported having their work encoded into NFTs and sold without permission.
Some platforms require old-fashioned, manual artist verification before an NFT can be traded to circumvent this risk. At the same time, others have accompanying warning notices encouraging potential buyers to do their research into artists and collections.
Additionally, the variable rights and privileges associated with different NFTs risk misleading purchasers, leading to regrets and potential misrepresentation claims. Given the vast sums of money transacted, this is no minor issue and may lead to high-profile legal battles in the near future. The purchase of an NFT should only be undertaken when all the rights conferred with the token are fully understood.
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