At Miletti Law®, the authoritative force in Employment and Labor Law, we endeavor to keep you, our unusually motivated® readers, informed about issues that affect you and your businesses. Occasionally, we also like sharing interesting, yet insightful and enlightening content, as a way of breaking the monotony and keeping you informed. In this and several other videos to come, we’ll be sharing and enlightening you with information about Non-Fungible Tokens (NFTs) and the passive income it could create. The video in the link below is just part 1 of the series and a must-watch!!

Before we delve in, what are Non-Fungible Tokens (NFTs) and why did we find it crucial and interesting to share with our unusually motivated® readers? For starters, this is quite a new concept, but one that’s worth knowing about. We bet that some of you have never heard about it and that is why we are here, as always, to keep you in the know!

Many of you are probably familiar with a meme that began circulating online in the year 2011 with what is popularly known as the “Nyan Cat.” Yes, now you remember! The Nyan Cat is made up of a half cat and half Pop-Tart. At first, it was uploaded on YouTube as a video that merged an animated cartoon cat with a Pop-Tart for a torso with a Japanese pop song. In the video, the Nyan Cat flies through space and leaves the trail of a rainbow behind it. Pretty hilarious, right?

By way of backdrop, the Nyan Cat was originally an animated .gif (Graphics Interchange Format) file. However, what started as a jest on YouTube, particularly because of the Japanese pop song that goes like “Nyanyanyanyanyanyanya!,” turned out to be a sensation on the internet. In under 10 minutes, the video had received one million hits. Interestingly, it turns out these little gif files are actually traded on a kind of blockchain marketplace. The blockchain itself acts as a kind of a digital ledger. Thus, creating gifs and trading in them can be perceived as another way of making some form of passive income.

From a legal point of view, this is interesting to us since it’s a very new phenomenon and could raise the issue of copyright infringement. Away from that, let’s now dig into our subject – NFTs. Basically, an NFT is a token that is usually stored on a blockchain and is usually neither replaceable nor interchangeable. As mentioned, the blockchain is a kind of a digital ledger used for certifying the uniqueness of the item whose value is represented by the token. Thus, NFTs are tokens that can be viewed as a medium of transfer for value.

At this point, let’s answer some questions. Firstly, where do NFTs come from? Well, research with our reach indicates that NFTs are made through a process known as minting. Yes, from the term mint. However, in order to be accepted and stored on a blockchain, the token must have certain characteristics that are typically codified by the NFT Marketplace, and which will serve as the platform to transfer the NFT. For example, each NFT must have a unique identifier, unique metadata, and unique code. Each of these must strictly follow a particular NFT along the blockchain in order to preserve its value and integrity. Ultimately, this is why they are non-fungible. Secondly, how is an NFT valued? Certainly, the value is set forth by what someone would be willing to pay for it, but it goes a bit deeper since, to preserve that value, its integrity must be constantly kept in check. It must be kept true to the ledger, otherwise its value could be lost! Technically, all tokens must operate and function on a blockchain, such that anything that happens with the token is recorded on that digital ledger.

What about the blockchain marketplaces? Based on our research, blockchain marketplaces are very efficient. While they track and maintain the tokens, blockchain marketplaces are also operated on a relatively high level of integrity, as compared to marketplaces for things like crypto currencies. They also safeguard the integrity of data, which makes it easy to understand and identify what is an NFT and what is not. Technically, an NFT is not a security, an IP, or a stock exchange, but this is shrouded in controversy. In a way, it can be understood as symbolic of a given value. For instance, the gif doodle of the Nyan Cat is like a virtual representation or token of a value on the blockchain marketplace.

Those who operate in these marketplaces have unique blockchain accounts, which are only accessible through unique blockchain wallets. As an accounting technology, a blockchain is involved with the maintenance of an accurate financial information ledger and transferring the ownership of assets. For an individual, a blockchain account is used to hold the tokens that store a value for an asset. One notable attribute of these accounts is that they are very personalized. However, the wallet is totally decentralized and follows a particular code, such that a holder can transfer tokens in and out of the blockchain account.

Yes, it is much more complicated than that, but, nevertheless, one of the most interesting aspects of NFTs is the value attached to them. FYI, it has been reported that Chris Torres, the original creator of the Nyan Cat, had developed an updated version of the gif file and sold it for 300 Ethereum (or ether), a decentralized and open-source blockchain, as a non-fungible token. By the time of the sale, 300 ether was the equivalent of $587,000.

Assuming that some years ago, the Nyan Cat was copyrighted and trademarked as an intellectual property. Indeed, it is intellectual property for Chris Torres, the original creator. However, the image is ‘freely’ available and easily downloadable from the internet. What is someone decided to use the Nyan Cat image on their website or start a Nyan Cat brand? Definitely, they would be infringing on someone’s intellectual property, based on the perspective that the gif file image was copyrighted and trademarked and, therefore, protected from infringement.

Let’s say that the Nyan Cat trades for a million dollars on the blockchain marketplace today. Then, someone else decides to purchase it from the original owner at a cost of four million dollars, simply as a store of value. Again, let’s assume that after sometime, the current owner decides to sell it to another person for 5 million dollars. In this process, the token is being traded and transferred in the blockchain marketplace. Remember that this is a copyrighted NFT and, hence, it’s protected from infringement. In this case, every new owner has technically infringed on copyrighted image. However, since the token is non-fungible, the new owner isn’t really infringing on intellectual property because at the end of the day, it is just a store of value.

However, the fact is that this is copyrighted and trademarked intellectual property and, therefore, the original owner might demand loyalties because others are using it to make passive income. The original owner might also feel that they deserve a certain percentage of the total amount traded on the blockchain marketplace annually. Probably, it might not be permissible for the original owner to take it down because someone else has stored value in it, but this might result in litigations for infringement on intellectual property.

Well, we believe that you’re now enlightened about NFTs and the passive income they could create. However, before you think of buying such a token, you ought to consider the possibility of infringing on someone’s intellectual property.

We, Miletti Law®, invite you to visit our YouTube Channel, watch this video through the link below, and be enlightened about Non-Fungible Tokens and the passive income they could create.

https://www.youtube.com/watch?v=6PYQSOXN2LY

Otherwise, stay tuned for more videos, training, and guidance!! In the interim, if you have any questions or comments, please let us know at the Contact Us page!