Published in September 2021, this article examines the role of non-fungible tokens (NFTs) in digital art, addressing fundamental questions about what they are, how they are purchased, and the legal implications they raise.
What is an NFT?
An NFT, or non-fungible token, is a special type of encrypted token representing a unique and irreplaceable digital resource that cannot be exchanged for another. Unlike traditional art purchases, buying an NFT does not grant ownership of the artwork itself, but rather the ability to prove a right to the work through a smart contract—an automated protocol that facilitates the negotiation and execution of the agreement.
The creation of an NFT involves two fundamental steps. First, a digital photograph or video is compressed into a sequence called a “hash”—a much shorter numerical sequence derived from the original file. This process, known as hashing, is the same technology underlying cryptocurrencies and blockchain systems, providing significant levels of data integrity and security. The hash is then stored on a blockchain with an associated timestamp. A blockchain is a chain of blocks—a data structure with a genesis block from which subsequent blocks originate in chronological order, with integrity guaranteed through cryptography. This ensures the structure remains unchanged over time while growing in length.
The impact on the art market
NFTs have been applied to crypto art, digital collectibles, and online games, particularly addressing the risk of mass reproduction and unauthorized distribution of digital art online. While digital artists have created and distributed works for at least 20 years, there was previously no secure way to establish ownership and provenance.
The breakthrough came with artist Beeple’s “Everydays. The First 5000 Days,” a collage of 5,000 of his works, which sold at Christie’s in February 2021 for 69 million dollars—despite an initial valuation of 100 dollars. This demonstrated how NFTs enable artists to receive direct compensation for digital works that previously could be freely copied. The technology has even extended to digital real estate, with Mars House, designed by Krista Kim, selling for 512,000 dollars on the Ethereum-based platform SuperRare.
How to purchase an NFT
Purchasing an NFT requires access to a blockchain, typically Ethereum, though TRON, EOS, and Flow Blockchain have become relevant alternatives. These blockchains are maintained by networks of independent computers that communicate decentrally and may be compensated for their contribution. When Ethereum hosts an NFT, it certifies that the token remains unchanged and records all ownership transfers on an immutable ledger.
Copyright and legal complications
From a legal perspective, NFT ownership is complex. Purchasing an NFT does not automatically grant copyright rights or prevent the artwork from circulating freely online. The unregulated, global nature of the NFT market makes copyright violations commonplace, yet obtaining legal protection for victims remains difficult due to varying international copyright laws.
The case of Emily Ratajkowski illustrates these complications. Her NFT, titled “Buying Myself Back: A Model for Redistribution,” presented at Christie’s on May 14, 2021, comprised a photograph by Sports Illustrated depicting her before a painting of her Instagram post—itself a photograph by the same photographer. This layered authorship created unclear ownership boundaries, demonstrating how NFTs can obscure rather than clarify intellectual property rights. While innovative, the NFT technology remains subject to significant regulatory uncertainties.
Frequently asked questions
What rights does an NFT owner actually possess?
Purchasing an NFT does not grant the owner copyright or intellectual property rights to the artwork. The buyer owns the token itself, which points to the work, but this does not prevent the creator or others from reproducing or modifying the work, nor does it restrict the artwork’s circulation on the internet.
How are copyright violations handled in the NFT market?
Copyright violations are commonplace in the unregulated NFT market, but obtaining legal protection is difficult because transactions often occur across international borders, making it hard to enforce remedies under varying national copyright laws.
Why did Beeple’s artwork sell for such a high price?
NFTs enabled digital artists to receive direct compensation for works that previously could be freely copied online; Beeple’s “Everydays. The First 5000 Days” sold for 69 million dollars because it represented the first recognized NFT artwork to establish both provenance and exclusive ownership through blockchain technology.