A non-fungible token (NFT) is a unique crypto asset that raises a variety of novel legal questions
Recently, a blockchain company bought a print from a known British street artist named Banksy, for $95,000. The company then burned the print during a livestream video and sold its digital copy as a non-fungible token (NFT) for $380,000! This undoubtedly gave rise to a flurry of news highlighting what could potentially be one of the biggest crypto trends of this year.
But how did they sell it for such a high price? Especially considering they burned the original copy. Well, the group elaborated that by eliminating the existence of the original piece and launching it as a digital asset or an (NFT) automatically propelled its value onto the NFT.
You’d be surprised to know that the NFT trend isn’t just causing massive shifts in the art industry — but several musicians and renowned footwear companies are also jumping on the NFT bandwagon.
What is a Non-Fungible Token?
An NFT is essentially an exclusive, oftentimes (one-of-a-kind) digital asset. But what truly makes it unique is the fact that it isn’t mutually interchangeable. It’s not like traditional cryptocurrency.
For an easy comparison, let’s say you have one Bitcoin. You can only replace your BTC with another BTC — which means, you’d still have the same asset. It’s like trading a $100 bill with another $100 bill, the value of your asset will be the same.
However, NFTs are more like rare diamonds — like the Pink Legacy or the Graff Venus. While they are all diamonds, each one is a unique and genuine creation with a different colour, shape, and size. So, they will never have the same interchangeable value. At the very core, this is the true essence of a non-fungible token.
By contrast, there are no limitations on who can produce an NFT, anybody can. Moreover, there aren’t a set number of NFTs an entity can create nor is there a cap on circulation. The main thing is that NFTs are unique and that’s why they fetch such a high value as digital assets. In addition, because they are exclusive, NFTs have a comparably simple way to trace who owns what asset.
How Do They Work?
To know how artists, musicians, and other creative entities get linked to NFTs, it is important to understand just how NFTs work. Like any other digital currency, NFTs too run on blockchain. The blockchain network is a decentralized ledger that monitors each NFT transaction and ownership, which is coded to have individual IDs as well as several metadata that no other type of crypto asset can replicate.
What this process does is make NFTs more legitimate strictly in terms of originality. Moreover, the fact that they are scarce, makes them equally more valuable. NFTs use software codes known as smart contracts. This code regulates different facets of NFTs such as ownership verification and transferability processes.
NFTs can be managed via a variety of blockchain, which includes Ethereum as it was the first blockchain to establish ERC-1155 and ERC-721 smart contract standards. Apart from Ethereum, NFTs can also be managed on Wax and Flowchain. However, it’s important to keep in mind that specific NFT marketplaces only align with particular blockchains, and this means the type of blockchain you use to trade, buy, or sell your NFTs will have significant commercial implications.
Hoard gives NFTs so much more power through our marketplace. The market comes with multiple functions, including loans and equity reserves, with the use of NFT as collateral for the loan.
NFTs used for trading, lending or leasing may include in-game items, real-estate, digital art, and many more.
Hoard is growing and so will the capabilities and features around NFT and NFT trading and leasing. The Hoard team’s focus is launching of the trading and building feature. After this, Hoard will release the Rent feature and enable the ability of governance.
As the NFT trend has become increasingly fast-paced, they are being used as collateral and new standards are being invented for licensing and loyalty payments. New financial strategies are surfacing that go well beyond the initial development and purchasing of NFTs. These financialization developments are starting a flurry of novel legal parameters, which are yet to be realized.