How To Capitalize On and Protect NFTs

In the past year, NFTs (non-fungible tokens) have become a hot topic of discussion in the cryptocurrency space.  To dumb it down a little, NFTs are like virtual trademarks.  An NFT allows a creator of a virtual image or other digital creation to possess a token stored on a blockchain (an online ledger for cryptocurrencies).  The owner of the NFT can make money by selling, licensing or renting the NFT to others for virtual use in the metaverse.[1]

[1] The term “metaverse” is subject to varying definitions and has yet to be definitively developed in a singular sense.  It can best be described, for the purposes of this piece, as a virtual world where each user/participant has its own avatar or medium through which it interacts with others on a virtual platform.

Online gaming is now becoming an earning platform for those that possess NFTs.  Play-to-earn games are becoming popular sources of income for players around the globe.  Specifically, players purchase or otherwise earn valuable tokens supported by a blockchain. Those owners are then able to use their assets to earn more tokens or rent their assets to other players in exchange for conventional currency or cryptocurrency.  A new player without any existing assets can rent tokens from other players to earn its own tokens and eventually begin profiting from those tokens.  What is developing out of this formula is a virtual landscape where players exchange assets just like they would if trading Pokemon cards or playing Magic the Gathering.

Another way gamers are being pulled into the NFT and cryptocurrency universe is by purchasing NFTs with conventional currency to use in interactive gaming platforms.  For example, Fortnite players spend conventional currency to buy “skins” with which they furnish their respective gaming avatars.  This type of NFT exchange is expected to become what is akin to the apparel or art markets in the developing metaverse.  NFTs will be used like exclusive apparel or art in the metaverse.  Exclusive retailers such as Supreme New York and Jordan will be able to have a presence in the metaverse just like they do in the real world.

These opportunities all beg the question of what protections NFT owners have under the law?  Many doubters and critics of the true value of NFTs point to the ease in which an NFT can be pirated online by simply recreating or taking a screenshot of someone else’s NFT.  This criticism ignores the protections afforded by storing an NFT on a blockchain.  Think of a blockchain like a bank in this sense.  If someone pirates your NFT, you can rely on your recorded entry on a blockchain (essentially your receipt) to assert your ownership rights.

How does one assert such ownership rights?  There are various ways to do this under existing law.  Copyright and trademark infringement, breach of smart contracts, licensing violations, conversion, tortious interference with prospective economic advantage are just a few examples of affirmative legal causes of action to protect NFT ownership.  The key to maintaining these protections is to memorialize your NFT in every possible manner – blockchain receipts, licensing and rental agreements, smart contracts, etc.

In summary, NFTs are an emerging market in the virtual world that can be protected by conventional legal means.  Just be careful because NFTs can easily be pirated and infringed upon.  The key is to secure your ownership in writing and properly memorialize all exchanges.  In other words, treat your NFT like you would any other valuable asset.

[1] The term “metaverse” is subject to varying definitions and has yet to be definitively developed in a singular sense.  It can best be described, for the purposes of this piece, as a virtual world where each user/participant has its own avatar or medium through which it interacts with others on a virtual platform.