Understanding the Tech and the Risks Behind NFT Ownership

When it comes to NFTs, they have been in the news worldwide as these blockchain tokens are unique, scarce but most importantly, valuable.

Before we dive too deep into the risks associated with the NFT ownership, let us take a closer look at the technology behind the non-fungible tokens to understand better how they work.

A non-fungible token essentially contains information that is recorded in their smart contract, and this is the unique aspect of each and every NFT, which makes each token non-replaceable by any other token.

In other words, fungibility refers to a currency’s ability to maintain a standard value, as well as a uniform acceptance. Its history cannot affect its value, and this is because each part of that currency is equal in value.

What someone is essentially doing when they mint (create) an NFT token they are writing the smart contract code that governs the qualities of the NFT and adds those qualities to the blockchain on which the NFT is managed.

What you should be aware of right off the bat is the fact that ownership of an NFT itself, and the ownership of the content that an NFT is associated with, are completely different.

When you purchase an NFT tied to a piece of content, you do not actually purchase the underlying intellectual property rights in the piece of content.

When you purchase a piece of art, you do not get the copyright associated with it. Imagine buying an expensive painting that is not in the public domain and free to be exploited and displayed in your home. You do own the painting, but not the underlying rights to reproduce, do derivative works of, or distribute copies of it.

The underlying copyright can only transfer if the owner evidence in writing that they intend to transfer it alongside their work. Unless the NFT owner specifically allowed permission to the seller, the NFT owner does not acquire the legal right to take pictures of the creative work, for example, and make T-shirts out of it to sell. It is for personal use only.

NFTs can authenticate ownership of the token and the unique history of how it was developed and linked to the creative work. On public blockchains, anyone can see an owner’s wallet address and the linked data, and the information is available as a public record.

An NFT, on the other hand, cannot really help with matching the creator or the owner of an NFT to a real person in our non-digital world. It also cannot validate that the creator of the NFT has the underlying rights to tie that NFT to any other specific work. This means that counterfeiting is a big issue with NFT artworks, and collectors could potentially be at risk buying digital art that is a knockoff.

Some platforms, however, try to solve this by verifying the identities of the creators manually. Others use disclaimers, such as the fact that if a user attempts to buy a listing through a marketplace, they encounter a notice, which the user has to accept to move forward with the purchase.

Regardless of all of the technology and the risks associated with its ownership, NFTs have opened a universally accessible marketplace that allowed artists to have an innovative new path through which they can engage with their fans and monetize their creativity. Only time will tell how these creative minds will shape the world and how far the value of NFTs will actually go in the future.

Did you like the article? Clap & Subscribe for more stories from open-source Blockchain software engineers at Openware!

Related posts:

When doubts crowd round And a friendly “hi” suffices To threaten crisis and panic, With pen to page Reeking of childish presumption Melete’s pitiless whispers Bring no relief.

How to build a fully remote team during a pandemic?

Growing is part of every living thing whether it’s a flower, a vegetable plant, an animal, or a person. It’s a complex process of development, its origin the source of producing an increase in size…