GC Bishwarup Chakrabarti says that NFTs have seen their popularity soar of late, which could reignite a centuries-old debate that artists should profit from the resale of their works
For corporate lawyers there’s nothing like an explosion of blockchain news to leave you with that uneasy and all-consuming fear of missing out. Add to that a heady mix of tech jargon, and you are left scratching your head for endless hours. .
Non-fungible tokens (NFTs) have become the rage these days, a rage attributed in no small part to Twitter’s founder and CEO, Jack Dorsey, who auctioned his first ever tweet as an NFT. It was originally uploaded on 21 March 2006, and simply read: “Just setting up my twttr.”
In spite of Dorsey’s fierce loyalty to Bitcoins, the tweet was bought for about USD2.9 million using the Ethereum cryptocurrency. The world woke up to start speaking of NFTs, cryptocurrencies and blockchain in the same breath. And the uninitiated started slinking away in a corner trying their best to catch up with what had hit them.
First things first – are NFTs, cryptocurrencies and blockchain synonymous? Not quite. On the contrary, the fact that NFTs and cryptocurrencies are mentioned in the same breath defeats the very distinction they seek to achieve. While both NFTs and cryptocurrencies are based on blockchain, there lies a basic difference, centreing around the concept of fungibility. Fungibility refers to the inherent capability of a commodity to be substituted.
In other words, fungibility is the property of a good or a commodity with individual units that are indistinguishable from each other, and essentially interchangeable. Some examples of fungible commodities are precious metals, currencies, shares and bonds, where each unit of such commodity is treated as equivalent to the same amount of the commodity, irrespective of its form. Gold, whether in the form of coins, bars or ingots is the same as gold, in any other form.
Cryptocurrencies, based on blockchain, are usually considered to be fungible assets, where one cryptocurrency coin is supposed to be the equivalent of another of the same type. NFTs, while being based on the same blockchain technology, are the exact opposite. They are unique and non-interchangeable, and hence “non-fungible”.
NFTs are units of data stored on a digital ledger based on blockchain, which certifies a digital asset to be unique and therefore not interchangeable. They can be used to represent anything ranging from photos, videos and audio to all types of digital files.
BISHWARUP CHAKRABARTI is the general counsel at Eros Digital.