buying an NFT is buying wind

What do you own when you buy an NFT? This is the question posed by a study by Galaxy, an investment, mining, financial consulting and trading company active in the blockchain sector, published on August 19. It proves that neither the creators nor the buyers really know where they are setting foot and that the markets voluntarily maintain artistic vagueness.

No, buying an NFT is not the same as buying a JPeG

Based on an analysis of the main NFT collections on the market, Galaxy Digital concludes that “the vast majority of NFTs confer zero intellectual property rights on their underlying content”compared to NFT transmitters “seem to mislead buyers”, and that markets like OpenSea do nothing to clarify the situation. The company summarizes the situation as a “labyrinth of opaque, misleading, complex and restrictive licensing agreements”.

“Most people think that buying NFTs means buying jpegs, the image files we see for example on OpenSea. But in reality, the NFT collection broadcasters retain full ownership of these images.”says Galaxy, who has examined in detail the licenses attached to these collections. Almost all of them have only one right of use, with varying commercial rights of use.

Zero intellectual property rights

Galaxy explains the root of the problem. “The mere fact that an NFT points to an image does not, in itself, give the owner of the NFT any rights to that image, any more than the creation of a Mona Lisa NFT gives its creator any rights to the Mona Lisa.” . The law is clear: in the United States, copyright (which differs from French copyright law) is the only recognized form of ownership of digital content. Without copyright, the owner of the NFT is not the owner of the content, but a simple owner of a license under which the author grants him certain rights. “What you own is the token that indicates a rarity. In this sense, an NFT buyer is renting the rarity to the true holder of that rarity.”for example at Yuga Labs, translated Galaxy.

However, copyright holders have the right to change or revoke this license when and how they want. “which is a serious flaw in the NFT architecture”, consider Galaxy. The proof, Moonbirds (pixelated owls, 8And global collection of NFT in market value) has gone from rhetoric “you own the intellectual property rights” to a Creative Commons CC0 license, which is equivalent to making the works in the public domain. No more copyrights, but no interest in buying the NFT!

“Big flaw” in NFT architecture

Yuga Labs (BAYC, Crypto Punks…), which would represent 63% of the capitalization of the 100 largest NFT collections, has also changed its license for Bored Ape Yacht Club. This provides that the buyer of a BAYC NFT “owns the underlying work, completely”. For Galaxy, it’s very contradictory: the mere existence of the license proves that Yuga Labs owns the rights. The company is the only one that can grant a license. If you really own a work, why do you need a license?

Galaxy deals a severe blow to the NFT building, believing that while the rights to use the content associated with an NFT are entirely dependent on the permission of the true copyright holder, “it’s not even sure if a blockchain is needed”. The interest of the blockchain for the secondary market remains.

In France, the CSPLA decides: an NFT is a title to a token

A CSPLA (Higher Council for Literary and Artistic Property) report on NFTs, published July 12, sheds further light on the Galaxy study’s reflections. Despite the differences between American and French copyright, the CSPLA comes to the same conclusions.

The president of the mission and the rapporteur, respectively defender of the Court and master of the instances of the Council of State, conclude that the NFT cannot be similar, except in exceptional cases, nor “to a work of art under the intellectual property code, his smart contract not being able, in the state of observable technical capabilities, to contain the file underlying in the blockchain (…), nor to a certificate of authenticity, in the absence of any third party verifier of the authenticity of the associated file or its authorship “.

The mission proposes to consider an NFT “as an act of ownership of the token registered in the blockchain, which can be associated with other rights on the digital file to which it points, whose purpose, nature and entity vary according to the will of its sender.” In other words, what the buyer of an NFT owns is the NFT. Point.

No economic rights on the associated digital work

Consistent with the meaning of the American study, the CSPLA adds that the buyer of an NFT “is not necessarily the owner of the economic rights attached to the digital file associated with it, except for the contractual transfer or license of the rights”.

Therefore, even if the Council believes that the NFT “raise complex legal issues”writes that them “They are not part of a legal vacuum: by default, the protected files they point to remain subject to copyright and related rights. Except for explicit contractualization or general conditions provided by the platform, the NFTs are therefore not automatically transferred with all the rights connected with these files. “

Enough to make speculators who bought their NFTs at the top in early 2022 sweat, the market has since literally collapsed in volume and value, in the wake of falling cryptocurrency prices.

Leave a Comment