' Irene Sun | MTTLR

Legal Uncertainties Surrounding the Realm of NFTs

Introduction to NFTs Throughout 2021, non-fungible token (NFT) artwork has sold for record breaking prices and is rapidly increasing in popularity. In the second quarter of 2021, NFT sales surged to $2.5 billion, which is a tremendous increase from the $13.7 million in sales during the first half of 2020. In March 2021, the artist Beeple sold his NFT through Christie’s for $69.3 million. In June 2021, one of 10,000 CryptoPunks NFTs created by the artist duo Larva Labs resold for $11.8 million through Sotheby’s. An NFT is a digital asset or unit of data that stores information on blockchains. Blockchains are digital ledgers that record information chronologically in “blocks”, which are then chained together to form an irreversible timeline of data. Whereas databases store data in tables, blockchains store data in chains of blocks. Blockchains function similarly to a bank ledger in that they reveal the entire transaction history of digital assets, allowing for easy verification of asset ownership and authenticity. Most NFTs are part of the Ethereum blockchain, which is a decentralized, open-source blockchain where no single group or person has control over the blockchain. Rather, all users retain control over this blockchain. As a result, the data entered into the blockchain is irreversible and permanent—it cannot be modified, deleted, or pirated as all transactions are permanently recorded and viewable by the public.  Digital assets created on blockchains can be transferred between parties. These transferable assets are called tokens. An NFT is a non-fungible token, which means it is a one-of-a-kind asset. This is unlike Bitcoin, which is fungible and replicable. One Bitcoin can be traded for...