ShapeShift’s NFT Report, Enter the Metaverse: Challenges and Opportunities in NFTs, details what’s next in the industry after the 2021 Boom. NFTs exploded in popularity and have the transactions to show for it. NFT Sales reached $2 billion in the first quarter of 2021 alone. This represents 20 times the volume of the previous quarter. NFTs are not slowing down any time soon because there are twice as many buyers as sellers in the market.
Weighing in on the Legal Implications
While we see regulators starting to recognize crypto as a legitimate financial asset, NFTs are at the risk of becoming the next ‘gray area’. Legitimacy aside, ShapeShift’s NFT Report cites that the bigger concern is the issue of Copyright.
An NFT represents authenticity and ownership. Authenticity is easy to prove because it is in the blockchain. However, ownership is separate from copyright. Copyright refers to the legal right of the owner of the intellectual property. From the word itself, it is the right to copy or reproduce the work. So, NFT ownership do not include commercial rights. Collectors can either keep the NFTs or transfer ownership for a higher price.
Such Copyright limitations predictably put artists at odds with Copyright Owners. For example, DC Comics issued a strong warning that artists can’t sell art that features their intellectual property. This is after 87-year-old comic book artist, José Delbo, sold NFTs featuring Wonder Woman for $1.85 million. Neal Adams, the iconic artist behind Batman, Fantastic Four and X-Men also launched NFTs based on his past work.
This is not a dead-end though. The NFT market is still evolving so there’s a lot of room to address limitations. For example, copyright issues can possibly be resolved by tokenizing the copyright itself.
Fractional ownership of NFTs
ShapeShift’s NFT Report also covered the possibility of fractional ownership for NFTs. It is the innovation credited for boosting the real estate industry by lowering the barrier to entry. Applying it to NFTs, collectors will be able to share the investment both intellectually and financially.
This is a good idea on paper but it might take a while for us to see it in action. The report cites that fractional ownership isn’t possible with the current EIP-721 or NFT standard. However, it is possible with a recently adopted standard, ERC-1633 or re-fungible token. RFTs represent the shared ownership of an NFT.
ShapeShift’s NFT Report introduces Co-Investing in NFTs
When NFTs are mentioned in the news, it’s usually side by side an eye-watering price. Co-Investing presents an opportunity for collectors to buy NFTs for high-ticket items like real estate, intellectual property and even works of prominent artists like Beeple.
ShapeShift’s NFT Report asserts that co-investing can also enable crowdfunding for songs and movies. That is, collectors can buy NFTs representing shares and future revenues for a song and movie. This can challenge the traditional way of creating mass-market content which usually starts with a mass media conglomerate.
ShapeShift’s NFT Report closes with a reminder to remember that all market cycles will boom and inevitably bust over time. A bear market for NFT prices, when it happens, will not mean that the concept is somehow invalidated.
It is also worth noting that NFTs showed resiliency against the recent crypto marketwide crash. Despite prices plummeting, NFT transactions continued to grow. The crypto marketwide crash eroded the dollar-based value of NFTs and raised the cost of buying and selling them. Despite this, NFT holders did not raise a red flag. This can be an indication that many see certain NFTs as a store of value. Particularly, the collectibles and 1/1 offerings.