contract-law property blockchain smart-contracts non-fungible-token
What do you own when you buy an NFT?
<p>A <a href="https://en.wikipedia.org/wiki/Non-fungible_token" rel="noreferrer">non-fungible token</a> (NFT) is a unique <a href="https://en.wikipedia.org/wiki/Smart_contract" rel="noreferrer">smart contract</a> stored on a <a href="https://en.wikipedia.org/wiki/Blockchain" rel="noreferrer">blockchain</a> that can be created by anyone and then transferred to others with a record of the transfer being recorded on the blockchain.</p>
<p>Legally, what does owning an NFT get you?</p>

<h2>The NFT</h2>
<p>You buy a token, you become the owner of it (and hence any current dollar equivalent attached to it i.e. whatever the market is ready to pay for it). This is no different from buying/owning an amount of cryptocurrency — you own the token(s), no more no less.</p>

<h2>What is a token?</h2>
<p>A token is simply a representation of something else. Lawful possession of a token may or may not confer rights over the object it represents. Tokens are extremely common.</p>
<p>For example, you might be familiar with this one:</p>
<p><a href="https://i.stack.imgur.com/wQ2sJ.jpg" rel="nofollow noreferrer"><img src="https://i.stack.imgur.com/wQ2sJ.jpg" alt="US $1 bill" /></a></p>
<p>Lawful possession of this gives you the lawful right to discharge $1 worth of debt by handing it over to the person you owe - providing that debt is domiciled in the United States of America. Other people may accept this in return for the supply of goods or services or as a gift - while this is extremely common, the token itself does not (without a specific law) have this right inherently. Technically, this is a &quot;non-fungible token&quot; because each dollar bill is identified by a unique serial number, however, they are generally treated as fungible, not only with other dollar bills but with US currency generally: whether in coin, note or electronic form.</p>
<p>To give another example:</p>
<p><a href="https://i.stack.imgur.com/kmNBd.jpg" rel="nofollow noreferrer"><img src="https://i.stack.imgur.com/kmNBd.jpg" alt="Monopoly $1 bill" /></a></p>
<p>Possession of this token allows you, within the game of Monopoly, to buy a property, a house, or pay debts by transferring it to the bank or another player. Outside the domain of a particular Monopoly game, the token is worthless. Technically, this is a fungible token because Monopoly dollar bills are indistinguishable from one another - we can turn it into a non-fungible token by marking it or ripping a corner off.</p>
<p>Other tokens include:</p>
<ul>
<li><strong>land title deeds</strong> - which are a token of ownership and other legal rights over a piece of real property</li>
<li><strong>car registration papers</strong> - which are a token that a vehicle is permitted on public roads (and may be a token of ownership in some jurisdictions)</li>
<li><strong>driver's licences</strong> - which are a token that a person is permitted to drive a motor vehicle</li>
<li><strong>a signature</strong> - which is a token that the person consents to the thing signed</li>
<li><strong>a receipt</strong> - which is a token that money was paid for the things on the receipt.</li>
</ul>
<h2>What gives a token a market value</h2>
<p>The willingness of a buyer to pay the seller's price.</p>
<p>Like anything else, this can have a strong or weak connection to other values - intrinsic, utility, sentimental, rarity, legal. For example:</p>
<ul>
<li>The market value of a US penny might be 1c or it might be <a href="https://www.ebayinc.com/stories/news/putting-the-true-value-of-a-penny-in-perspective/" rel="nofollow noreferrer">Something else</a>.</li>
<li>A glass of water has a higher market value if it comes from a bottle than if it comes from a tap.</li>
<li>The market value of a company is usually higher than its liquidation value (if it isn't you should appoint a liquidator).</li>
</ul>
<h2>Blockchain tokens</h2>
<p>A blockchain token (fungible or not) is legally no different from any other token.</p>
<p>Within the domain of the particular blockchain, ownership of the token (or, more accurately, the ability to access the account that the token is linked to) will confer certain rights - usually, the right to transfer it to another account.</p>
<p>Whether the token represents anything outside the particular blockchain and what rights that gives the possessor is a matter of the contract agreed to between the minter and the first buyer which is usually not documented within the blockchain.</p>
<p>For example, the NFTs for the <a href="https://en.wikipedia.org/wiki/Bored_Ape" rel="nofollow noreferrer">Board Ape Yacht Club</a> come with <a href="https://boredapeyachtclub.com/#/terms" rel="nofollow noreferrer">these</a> not very long rights and obligations. Now, these terms are, to use a legal term, <a href="https://news.bloomberglaw.com/ip-law/seth-greens-stolen-bored-ape-muddles-nft-legal-ownership" rel="nofollow noreferrer">shit</a> - they're ambiguous and vague which are things contracts are, ideally, not. For example, if I sublicence my bored ape to a T-shirt manufacturer (which I can do) and then sell the token - what happens to the sublicence? Further, this is a contract between BAYC and the first purchaser - if that person (or someone else) breaks the licence and sells it outside an approved marketplace under different terms - who owns it? Given that these apes are computer generated, is there even a <a href="https://law.stackexchange.com/a/80738/344">copyright</a> to licence? If the original artwork is irrevocably lost in a computer crash, does anyone have a liability to the owner of the NFT?</p>
<p>Notwithstanding, in the case of a BAYC NFT, in addition to the on-chain rights ownership gives, the contract gives some ill-defined off-chain rights that are set out in the contract.</p>
