| A non-fungible token (NFT) is an original, autochthonous asset of value that cannot be replaced with an identical asset. An NFT has a unique, traceable print that has the capability to take on disparate forms and fluctuating values based on market or other forces for trade in a monetary or financial transaction. NFT’s are specific units of data stored in a digitized blockchain, usually for the purpose of covert exchange between parties. Because an NFT has a unique digitized signature, it is nigh impossible to replicate but easy to assign value as agreed upon between parties (buyer and seller) using a “smart contract” as the agreement vehicle. For example, an artist may digitally create an image authenticating it using blockchain. However, when purchase of an NFT does not necessarily convey the bundle of legal rights generally associated with ownership of a physical or digital item – it instead conveys ownership of a unique token identifier associated with that NFT. The token identifier is unique but traceable and stored in a public database that serves as a ledger. Anyone can verify data regarding the image: who created it and when, ownership, tracing ownership, etc. This is a secure transaction because the authentication marker as part of the blockchain cannot be copied. It is digitally secure and digitally traceable to the source. Digital art, a cartoon, a memory collage-like tokenized collectibles, a pair of gym shoes, an important tweet can be sold as NFT’s through the blockchain. The ability to use NFT’s as a method of payment and smart contracts as a contracting vehicle allows anyone who understands the technology or at least understands this digital process to buy and sell worldwide in a secure, traceable environment. The first NTF transaction happened in 2014 with a tradable blockchain marker affixed to the digital artwork. In the first quarter of 2021, over 200M was spent on NFT’s using online platforms. Smart contracts, blockchain technology, and NFT’s are the trading blocks to be used in place of traditional contractual vehicles and hard currency. Understanding how this technology works will help clients avoid being taken advantage of by an unscrupulous contracting partner or running afoul of tax, ethics, and other regulatory compliance requirements. Blockchain and NFT’s are here to stay. |
 Dan has practiced law in Silicon Valley since 1977. The Firm’s practice is limited to regulatory law, government contract law, and international trade law matters. Dan has received the prestigious “Silicon Valley Service Provider of the Year” award as voted by influential attorneys in Silicon Valley. He has represented many very large global companies and he has worked on the massive US Government SETI (Search for Extra Terrestrial Intelligence) project as well as FOEKE (worldwide nuclear plant design certification), the Olympic Games, the first Obama town hall worldwide webinar, among other leading worldwide projects. Dan has lectured to the World Trade Association, has taught law for UCLA, Santa Clara University Law School and their MBA program, lectured to the NPMA at Stanford University, and for the University of Texas School of Law. Dan has lectured to various National and regional attorney associations about Government contract and international trade law matters. He has provided input to the US Government regarding the structure of regulations relating to encryption (cybersecurity). He has been interviewed about international law by the Washington Post, Reuters and other newspapers. He is the author of four books unrelated to law, one of which was a best seller for the publisher, and of dozens of legal articles published in periodicals, technical and university journals distributed throughout the world. He serves as an expert witness in United States Federal Court regarding his area of expertise. MINUTILLO’s e-newsletter and all of its content is provided for information and very general purposes only. It is not intended to provide or offer any specific or general legal advice, or to create an attorney-client relationship. Before acting or relying on any information provided in this e-newsletter, consult an attorney who is an expert in the appropriate field of law. |
