After the spectacular NFT breakthrough in 2021, it’s time to ask questions as this market is having a hard time in the wake of the cryptocurrency crash. While many stars (Jimmy Fallon, Stephen Curry, Shaquille O’Neal, Neymar, Omar Sy, Snoop Dogg, etc.) have not hesitated to get their hands in their wallets to buy NFT, the craze for these digital assets has given way. to great doubts. One in particular assails buyers: are they the real owners of their NFTs?
According to a study by Galaxy, an investment company specializing in blockchain technologies, the answer is rather negative. In reality, buyers would not hold up very much, victims of a still very vague regulatory framework, which authorizes not to grant property rights. “Many broadcasters, including the largest, Yuga Labs, appear to have misled NFT buyers regarding the intellectual property rights of the content they sell.”, the study reveals. Therefore, “the vast majority of NFTs do not convey any intellectual property rights over their underlying content”says Galaxy.
NFT issuers are the real owners
This worrying finding seriously damages the image of a sector in which companies that want to profit from it rely on the fact that NFTs are unique and non-falsifiable digital objects. But if the person doesn’t really have a digital artwork, he or she has no interest in spending thousands of dollars to afford it. Who can imagine paying for a Van Gogh painting that can be brought back to the living room at any time by the seller? Nobody…
Yet this is what is currently happening in the NFT market. “Most people talk about buying NFTs like buying jpegs, the image files you see online in avatars and in markets like OpenSea. But the reality is that the issuers of the NFT collections retain full ownership of these imagessummarizes the Galaxy study. The mere fact that an NFT points to a certain image does not give the owner of that NFT any rights to the image, just as the creation of a Mona Lisa NFT gives its creator the rights to the work. “
Opaque contracts to mislead buyers
Galaxy thus remembers the actual conditions of holding an NFT. Beyond an NFT that points to a specific image, “Something more is needed, and that something is a legal agreement between the owner of the image – known as the copyright holder – and the owner of the NFT specifying the rights of the latter in relation to the image. To the extent that an NFT buyer has rights to the image associated with his NFT, these do not derive from his ownership of the token, but from the terms and conditions contained in the license issued by the NFT project that governs the purchase and sale of the token. ‘use of the image by the owner of the NFT’explains the study.
In the case of Yuga Labs, the industry giant behind the famous collection Bored Ape Yacht Club worth more than $ 4 billion, the company and the buyer are bound by a simple license agreement, while the contracts ensure that the NFT holder “owns completely” the image. A lie that makes it impossible for the buyer to use their NFT as they see fit, for example to create derivative products.
The picture is even more complex in the case of a purchase on markets such as OpenSea. The buyer, in fact, is no longer just bound to a contract with the issuer of the NFT; he also enters into a contract with the platform that sold him the virtual object, which has its own conditions of use. Enough to mislead NFT owners a little more… To regain their trust, NFT players will therefore have to respect an exercise in transparency and get out of this artistic vagueness, under penalty of being considered scammers.