New forms of ownership brought about by NFT【Part 2】
NFT's Ownership Revolution in the Digital Age
Good morning.
I am mitsui, a web3 researcher.
Every Saturday and Sunday at noon, we update the web3 Basics Report. This week we will be discussing the "Right of Use of Ownership".
What is NFT? Technical Structure
Misunderstanding of NFT and copyright (proof of ownership, not rights to the work itself)
NFT issues (copyability, immaturity of legal arrangement)
Hybrid model of usage rights (license) and NFT
Future Outlook: Shift from "owning" to "being involved
What is NFT? Technical Structure
In the first part of this report, we confirmed that while ownership of physical "objects" has been the foundation of social stability and economic development, clear ownership of digital "data" has not been established, and "usage rights" provided by platforms have become the mainstream.
NFT has emerged as a new solution to this challenge. In the second part, we will first explain in detail the basic concept of NFT and the technical mechanism that supports it.
NFTs are "non-substitutional tokens". This refers to the property that each individual token has unique value and information, and is unique and distinguishable from others. For example, the 1 bitcoin I have (a substitutable token) and the 1 bitcoin you have have have exactly the same value and are interchangeable, but the NFTs we have are irreplaceable because each has a unique value.
So how exactly does the NFT achieve uniqueness?
The key lies in the "token ID" assigned to each individual NFT and the "smart contract" that governs the issuance and management of the NFT.
In the case of NFTs, the smart contract defines information about the name of its NFT collection, the total number of tokens issued, and the token ID, a unique number to identify each individual token.
This token ID is the source of the uniqueness of the NFT: when an NFT is traded, the information "Owner of token ID #1 was changed from Mr. A to Mr. B" is recorded on the blockchain. This record cannot be tampered with by anyone and can be viewed by anyone due to the nature of the blockchain. This enables the following important functions
Proof of Authenticity: You can prove that the NFT is authentic and issued by a specific creator.
Proof of ownership: It provides clear proof of who currently owns the NFT. The record on the blockchain acts like a real estate registry.
Traceability of transaction history: The history of transfers from whom to whom from the time the NFT was issued to the present can be fully tracked.
In addition, NFTs also have an important feature called "Interoperability. Many NFTs can be handled by various wallets and marketplaces without being tied to a specific platform. This is a definite departure from the way digital content has traditionally been handled.
Thus, NFT is a revolutionary mechanism that combines blockchain technology and smart contracts to provide digital data with uniqueness, authenticity, possibilities of ownership, and interoperability that were previously impossible.
NFT and copyright misunderstandings (proof of ownership, not rights in the work itself)
One of the most common misconceptions that has emerged in the rapid proliferation of NFTs is that "if you buy an NFT, you also get the copyright to its digital content. However, this is wrong in principle: the ownership of an NFT and the copyright of the content associated with that NFT should be treated as completely separate rights.
Copyright is an intellectual property right that protects creative expressions (works) such as literature, music, art, and programs. Copyright automatically accrues to the creator of a work when it is created.
NFT ownership, on the other hand, refers to exclusive control over a specific "token ID" recorded on the blockchain; NFTs serve as a kind of "digital certificate" to prove the authenticity and ownership history of digital content.
This relationship is easier to understand when compared to the transaction of a physical work of art.
When a purchaser buys a painting (an original painting) created by an artist, the purchaser acquires ownership of the tangible object, the painting, but the copyright in the painting remains with the artist in principle. The purchaser may not copy and sell the painting or publish it on the Internet without permission.
NFT transactions are structured essentially the same way.
When NFT art is purchased, what the buyer gains is ownership of the NFT tied to that artwork. This means that he/she is the owner of that authentic digital art, as evidenced on the blockchain. However, unless otherwise agreed, the copyright to that digital artwork continues to be held by the artist who created it. Therefore, any commercial use of the artwork by the owner of the NFT, such as printing it on a T-shirt for sale or using it in an advertisement, is likely to constitute copyright infringement.
This is the source of much confusion and trouble regarding NFTs: how exactly can NFT owners use the content they have purchased? This depends on the "terms of use" (license) set forth by the individual NFT project or marketplace.
Many NFT projects allow "personal and non-commercial use" for their owners. On the other hand, projects vary widely in their approach to commercial use: some, such as Bored Ape Yacht Club (BAYC), give owners relatively broad permission for commercial use, while others adopt Creative Commons Zero (CC0) and allow anyone to freely use the material. Some projects allow anyone to use them freely.
While NFT is a powerful tool to prove ownership of digital content, it alone cannot dictate how the content is used. Only by appropriately combining ownership (NFT) and usage rights (license) can the value of digital content be maximized.
NFT issues (copyability, immaturity of legal arrangement)
NFT is a revolutionary technology, but its rapid development has also highlighted various challenges and risks.
Copyability (right-click save issue)
The question, "How can digital data be said to be possessable when it can be so easily copied?" is one of the most frequent criticisms of NFT. The answer to this question is that NFTs do not prove "ownership of data," but rather "ownership of tokens associated with genuine data.
Copied data is clearly distinguished from the original because it is not tied to a proof on this blockchain; the value of an NFT lies in the authenticity, rarity, and ownership status of the data.
Immaturity of legal arrangement
Another major challenge facing NFTs is that the relevant legal system has not kept pace: the legal nature of NFTs (e.g., whether they are subject to ownership rights, whether they are financial instruments, etc.) is unclear, and it is unclear what legal protection owners will receive in the event of a dispute. In addition, there is a lack of clarity regarding copyright infringement and money laundering. In addition, there is a need to ensure consistency with existing laws in terms of anti-piracy and anti-money laundering measures.
These legal challenges can be a hindrance to the healthy development of the NFT market. As technology evolves, countries are rushing to develop legal systems and guidelines.
Hybrid model of usage rights (license) and NFT
The "digital ownership" that NFTs bring is revolutionary, but it alone cannot maximize the value of digital content, as NFT ownership only proves ownership of the token, and does not dictate how the tied content can be used.
It is the copyright and the "usage rights (license)" based on the copyright that govern how content is used. Therefore, in order to maximize the potential of NFT, it is important to build a "hybrid model" that appropriately combines ownership (NFT) and usage rights (license).
NFTs allow creators to set various terms of use for their works and grant them directly and transparently to their owners. For example, the same work of art can be issued under multiple NFTs with different licenses.
The combination of NFTs and smart contracts is also expected to lead to "smart licenses" that automatically enforce the terms of license agreements.
For example, a mechanism can be established whereby each time a derivative NFT is bought or sold, a portion of the proceeds are automatically paid as royalties to the original creator's wallet. This will make rights handling transparent and automated, leading to the development of a creator economy.
Looking ahead: the shift from "owning" to "engaging"
The future that NFT will bring is not limited to the mere ownership and transaction of digital assets. Beyond that, we will see a new socio-economic system in which the concept of "ownership" itself will be further expanded, and the emphasis will shift from "owning" to "being involved.
In DAOs, NFTs and tokens serve not only as assets but also as "memberships" and "governance tokens" (voting rights). Holding a particular NFT qualifies one to participate in the DAO, and depending on the amount held, one is granted the right to participate in proposals and votes on the direction of the project.
This is a new model in which "ownership" is directly linked to "involvement.
In the web3 world, the "owner" becomes more than just a consumer or investor, but a "participant" who contributes to the growth of the project. Ownership provides not only increased property value, but also a more multifaceted value: a sense of belonging to the community, the right to participate in decision-making, and a contribution to the growth of the project.
At the heart of web3's vision of a decentralized society is this major trend of redefining "ownership. Beginning with the ownership of physical objects, evolving through intellectual property rights and the right to use digital data, to the ownership of digital assets, ownership is now being extended beyond mere exclusive control to have a more social meaning, such as the right to participate in the community and to prove one's contribution. In this sense, ownership has evolved beyond mere exclusive control.
This is an explanation of ownership and copyright, and an explanation to the misunderstanding of NFT.
Disclaimer：I carefully examine and write the information that I research, but since it is personally operated and there are many parts with English sources, there may be some paraphrasing or incorrect information. Please understand. Also, there may be introductions of Dapps, NFTs, and tokens in the articles, but there is absolutely no solicitation purpose. Please purchase and use them at your own risk.
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mitsui
A web3 researcher. Operating the newsletter "web3 Research" delivered in five languages around the world.
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The author is a web3 researcher based in Japan. If you have a project that is interested in expanding to Japan, please contact the following:
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*Please note that this newsletter translates articles that are originally in Japanese. There may be translation mistakes such as mistranslations or paraphrasing, so please understand in advance.