What does the popularity of the NFT market show?
The current NFT market is very hot. On the one hand, it shows that NFT technology does have the ability to solve problems including confirmation of rights, item specificization, and intelligent digital item transactions. On the other hand, it also shows that through the application of NFT technology, artists can directly face the market. It allows consumers to trade conveniently and releases trading potential. The huge market potential and good industry prospects have made many people in related industries see the hope of solving their business difficulties and industrial difficulties. This is also the real reason for “out of the circle” .
How to treat the legal risks that may exist in the NFT market?
The development of the digital economy includes industrial digitization, digital industrialization, and governance digitization. The core is transaction digitization and ecological digitization, which inevitably include the digitization of goods and services and their transaction methods. Many people have seen this trend in NFT applications.
However, in actual operation, due to the different understanding and realization of the technical characteristics of NFT and the legal nature of NFT, the different degree of resolution of business pain points in NFT applications, and the different interest demands in the NFT industry application scenarios, the NFT market This field may contain and accumulate some legal risks. Therefore, many people have a certain basis for worrying about the legal risks implied in the current NFT industry.
How to view NFT from a legal perspective?
NFT is a technical protocol that numbers tokens or Tokens. The purpose of numbering is to distinguish the specific metadata content associated with each token. These specific data content may contain unique information. These unique information If combined with the main body’s knowledge structure and specific application scenarios, it will produce innovative solutions to problems or even intelligent solutions.
The token represents authority and rights, and the content of the data represents the real or virtual material conditions associated with its rights and rights. So in this sense, each token combined with the metadata to form such a combination, we call it a digital item, has a similar legal status and legal nature to the specific items that exist in reality.
Why use NFT?
Because of the technical characteristics of NFT, it can realize the specificization of data content and the corresponding confirmation and traceability functions, and in some applications and transaction scenarios, it can effectively reduce costs and improve efficiency, and realize applications and transactions that cannot be achieved under traditional technical conditions. This is the starting point and foothold that we should have when engaging in related operations in the NFT industry.
However, in the application scenario, we may not need to overemphasize the NFT technology, because this can lead to neglect of its actual utility. Of course, the market has just emerged, and many people emphasize that NFT is to attract attention, but we should pay more attention to what we have achieved with NFT. NFT is only a technical tool. In the application scenario, we may only need to clarify whether it is a digital collection or a digital artwork, game props, domain name, etc. For example, NBA TOP SHOT realizes the digital transaction of cards, and Crypto Kitty realizes digital self-reproduction Pet trading, based on SuperRare, can realize convenient application and trading of works of art.
Is the Token number the NFT?
Numbering tokens or tokens is not necessarily NFT. If the metadata content, the unique information contained in the number, and the resulting solution are not unique, then this does not belong to the true meaning of NFT, and naturally does not have the legal attributes of digital goods, or its primary importance Attributes are not item attributes. The more important feature of NFT is to combine with the program to realize the application of its data content. For example, we number 10 million shares of a listed company from 10 million to 10 million. This is not what we understand as NFT, because the NFT corresponding to each share, its data content, and the rights and obligations it bears The risks are basically the same.
Is NFT a digital currency?
When someone asks this, in fact, his implicit question is, should NFT be subject to the same supervision as other digital currencies, especially FT? So this is a legal issue, not primarily a technical issue. It is of little significance to answer this question purely technically, because it cannot solve the problem of legal nature, legal risk and legal liability. Based on the previous analysis, if technically speaking, NFT is undoubtedly a kind of digital currency, but from a legal perspective, I think it is different from FT in terms of legal attributes and legal risks.
How to treat the sky-high price of NFT transactions?
Any real transaction should be protected by law. However, some NFT items, especially the art market, frequently show sky-high prices, which not only reflects the market enthusiasm, but may also cause some hidden concerns. Because sky-high transactions cannot reflect the advantages of NFT technology in application scenarios, on the other hand, if false and fraudulent situations are involved, they may contain greater legal and regulatory risks. It is generally believed that the current sky-high transactions may be more out of propaganda and momentum, but if the future is related to money laundering and terrorist financing, the legal and regulatory risks involved are still very large.
We believe that the application value and industrial value of NFT comes from its reduction in transaction costs and release of potential transaction needs, especially in the realization of some small high-frequency transactions. Its advantages are not in promoting large-value low-frequency transactions. .
What is the biggest problem in the application of NFT technology?
The current NFT agreement is still at a relatively early stage. Many of our ideal digital commodity application scenarios, including the complete realization of the license transfer of copyrights and other rights, cannot be fully realized, but the industry seems to have not shifted the focus to this aspect. This may lead to separation from the application, leading to “involution” of the industry, resulting in a series of legal issues, and may embark on a path that conflicts with public interests or other interests. This may be the biggest problem.
We believe that NFT is a primitive element belonging to the digital world. Its real essence lies in its effective integration with applications and the ability to more effectively protect user data rights. If digital items are more effectively combined with other scenarios through programs, it will open up a broader prospect for the application of NFT technology.
How to treat NFT financial operations?
Many people want to carry out NFT securitization or other forms of financialization, but if we carefully analyze the risk characteristics of participants in these scenarios, we will find that regulated financial activities are involved in many cases.
Logically speaking, NFT is to specialize digital items, and the purpose of specialization is actually to trade. Therefore, an active trading market must be included in the NFT health ecology. We have already seen some platforms conduct call auction transactions on NFT items, and there are also some operations that securitize NFT items into many FTs, and some people are very concerned about the auction of NFT items based on smart contracts. From a legal perspective, we are concerned about the legal constraints that involve human operations, how to protect the interests of users or participants, and how to maintain a fair, open, transparent, and healthy market order. Therefore, in this process, we may need to pass Technology and law are closely integrated to accomplish this goal. Which scenarios and links need to be strictly based on license management, including financial licenses and other specific business model license operations, and which scenarios and links can control market participation risks through smart contracts and other technical devices. This requires us research seriously.
As for other financing projects packaged into NFT projects, this situation hopes that friends will keep their eyes open. If someone publicizes that NFTs are all digital currencies, it’s just that the government regulators have not made clear the attitude of NFTs. They can do NFTs for projects that could not be done, financing and operations that could not be done. Such behavior is undoubtedly the black sheep of the industry. We are all responsible for making these behaviors turn into street rats and everyone shouts and beats.
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.