What is an NFT?
Non-Fungible Token (“NFT”) is a digital token created using blockchain technology attached to a piece of art. These tokens are nothing, but cryptographic assets cemented with unique identification codes and metadata – a digital signature that certifies the owner of the NFT and verifies this ownership.
What does NFT give to a person?
It is a token linked to the author/creator of the work, who can retain their copyrights in a particular work. This includes any kind of art piece, video clip, audio file, or a plot of virtual land. Being one of a kind it is a high-value virtual creation representing a tangible or non-tangible asset. A person buying an NFT receives tokens authenticating its purchase along with unique code. Thus it does not pass on the ownership title attached to it but grants you a digital ownership.
Example: a person may purchase a famous painting but does not receive the painting in hand.
Jesse Schwarz invested $208k on a video clip of Lebron James dunking via a platform called NBA Top Shot. Here, he does not get the broadcast rights or physical copies but entitles him to be the owner of a uniquely programmed digital code. How does he get money?
“Anyone can watch it. But there’s only one original verified by the blockchain, and that scarcity is what makes it valuable in the long-term” says Jesse Schwarz.
Where can one trade in NFT?
Just like cryptocurrency, NFTs can be bought or sold worldwide on platforms specially designed for such transactions. Blockparty, NFT STARS, NFT-X, Crypto.com and many such platforms increase the demand for NFTs.
How are Traditional currencies different from Non-fungible tokens?
Traditional currencies are fungible i.e., they can be divided into smaller units to form the same value and are interchangeable, unlike NFTs. The code and metadata on a NFT cannot be changed, thus making it unique and distinct from other cryptocurrencies in the market. They can be valued depending upon the demand and supply forces in the market. With a variety of potential buyers, they can be sold generating revenue or exchanged for physical assets.
How is it convenient?
Physical collection of artifacts can be time consuming, space consuming and also hard to track the ownership history of a particular object. An original work can be forged or replicated.
Here, NFT with its blockchain technology solves these issues wherein, the artist creates authenticated public record of his/her own work. Any transaction in relation to this artwork can be easily tracked and verified. A public ledger keeps a track of all such transactions of NFTs making it trustworthy.
Indian laws and crypto currency:
NFT buyers and sellers are worldwide making cross-border transfer.
The Supreme Court in the case of Internet and Mobile Association of India v. Reserve Bank of India[i] (“RBI”) in March 2020, overturned the RBI’s 2018 circular which was released to caution customers regarding the trade in cryptocurrency.
Conclusion:
It is to be noted that in the absence of any legislative ban on the buying or selling of cryptocurrencies, the RBI cannot impose any disproportionate restrictions on trading of NFTs or cryptocurrencies. As there are no such regulations or laws regulating the transactions of the cryptocurrencies, it surely creates a scope for NFT transactions in the near future.
The content of this article is intended to provide general guidance on the subject matter. Specialist advice should be sought about your specific circumstances.
Key words: Cryptocurrency, Blockchain Technology, Ethereum.
References:
[i]https://indiankanoon.org/doc/12397485/ accessed on 14th December 2021.
https://www.mondaq.com/india/fin-tech/1120302/non-fungible-tokens-a-copyright-prospective accessed on 14th December 2021.
[i] (2020 SCC online SC 275)
