Writing for CoinGeek, Jordan Atkins writes that the hype around the non fungible token (NFT) has reached cacophony.

You might recall it was just last week that a non fungible token (NFT) based on art by digital artist Beeple sold just sold at auction for US$69.3 million.

He describes the difference between fungible and non-fungible assets this way:

Something is fungible if it is mutually interchangeable with other identical copies of itself of the same value. For example, a fiat note is fungible: you don’t care which particular dollar bill you have, just the amount it represents. Where the asset is unique, however, it is said to be non-fungible—for example, a car is a non-fungible asset.

A non-fungible token is (in theory) a non-duplicable certificate of ownership for a given digital asset, which could be anything from a picture file to a social media post.

The token is minted from a set of inputs—details as to the owner and the metadata associated with the asset—to create a token that is uniquely tied to the original asset. That is written to whatever blockchain ledger is being used by the relevant NFT authority and remains as ‘proof’—supposedly of ownership.

While Atkins suggests that NFTs will be a revolution for content creators, democratize art and usher in a new regime of digital ownership from which there will be no return, it has become obvious the market misunderstands what an NFT is....and what it is not. 

Everybody stands to pay the price for this ignorance, from content creators, to NFT purchasers, all the way up to those negligently creating and pumping up digital currency’s latest craze.

The recently sold art offers an excellent example of the NFT vs. non-NFT comparisons. When you look at a piece of art in a museum or gallery, there is nothing that stands out and says "This is Jagajeet Chiba's Painting".  There is nothing intrinsic to identify the owner.  Unless the actual artist is present, the painting might require an expert to authenticate that the piece is genuine.

Digital assets—such as digital art—pose different problems; files can be copied infinitely, almost erasing the line between the original file and the subsequent copies, Atkins writes.

Generally, the copyright in a piece of art rests with the artist, even if the original piece (for example, the painting) is sold on as a result of the copyright process.  But with the purchase of an NFT of digital art, there are no rights granted over the work itself.

Yet its value is even more susceptible to the whims of the original copyright holder than a person purchasing a painting might be: copies entirely distinct from the ‘original’ can be made and sold with very little effort from the artist, potentially rendering the value of the NFT useless as more NFTs can be tied to identical yet legitimate copies of the art made by the copyright holder. 

Atkins digs deeper to discuss the security risks of NFTs.

Jordan Atkins is a graduate of the University of Auckland law school, Jordan Atkins has experience in the legal, publishing and consulting sectors. He has served as editor and contributed to a variety of publications in the business, legal and sporting spheres, and currently provides legal coverage and analysis on the digital currency ecosystem.

- Aaron Goldstein, Gambling911.com