Christie's has announced the launch of 'Christie's 3.0'; an "on-chain auction platform dedicated to exceptional NFT art". Basically, NFT sales at Christie's will now take place directly on the Ethereum blockchain.
Users will need to have a digital wallet before setting up a Christie's 3.0 account, which will be used to bid on the NFTs. This marks the first time a major auction house has moved to sales taking place directly on the blockchain and gives an exciting nod to the future of Web 3.0 in the art world.
But what actually is an NFT?
Despite the word 'NFT' becoming ever more widely used, it is still useful to take a step back and take stock of what an NFT, in itself, actually is. Contrary to what many people think - an NFT is not simply a digital artwork. It is a chain of code, that exists on the blockchain, which usually links to a digital (or physical) asset, to prove ownership of that digital (or physical) asset. An analogy can be drawn between NFTs and a (for example) Chanel handbag authenticity card. The authenticity card verifies that the handbag is authentic. So using this analogy the NFT would be the 'card', it would not be the Chanel handbag.
The most commonly thought of asset which is linked to an NFT is a digital artwork (such as, for example, the Bored Ape Yacht Club apes). However an NFT can be linked to a huge array of things. For example, it could certify ownership of a piece of music, membership to a club, or a ticket to an event (Ticketmaster recently announced a new initiative where event organisers can link NFTs to each attendees ticket).
An exciting aspect of NFTs is therefore how, in the future, they may be integrated into our everyday life. So while initiatives such as 'Christie's 3.0' open up exciting opportunities for artists and collectors, the continued evolution of the technology behind NFTs means we will likely see a huge number of different 'use cases' and innovative applications of NFTs in the future. The utility, community and ownership that NFTs can offer are exciting aspects which will be interesting to follow.
What do you own when you buy an NFT?
Since there still appears to be some confusion about what an NFT actually is, it is unsurprising that disputes are appearing and working their way through the Courts. When someone purchases an NFT, all that can be presumed is that they own the NFT itself, i.e. the chain of code. As a starting point, without more, ownership of an NFT does not convey any additional legal rights other than owning the chain of code. When you acquire an NFT that represents a digital (or physical) asset, this can attract additional legal rights, such as rights under a contractual licence to use or intellectual property rights such as copyright. However there is no general implication that the NFT owner has a license or rights to the asset.
In the context of an NFT of a digital artwork, the NFT is not the digital artwork itself. It is the record that is stored on the blockchain certifying ownership of the digital artwork (or whatever asset the NFT is linked to). When you buy an NFT linked to a digital artwork, this does not automatically mean you will own the intellectual property rights in that artwork. Indeed, under English law, by default, the original artist retains copyright in their artwork, even after it is sold. The same principle applies to digital artwork. In addition, it is not possible for an artist to sell / transfer their 'moral rights' in an artwork to a purchaser.
Interesting questions also arise when NFT creators include elements in their artworks which relate back to other brands. There are some high profile cases which are working their way through the US Courts which deal with these questions, and you can keep track of them by following our NFT litigation tracker here.
The rights you are acquiring will ultimately depend on the underlying legal position and the wording in the NFT's smart contract. If you are buying an NFT it is therefore really important to seek advice to ensure you understand, exactly, what you are buying.