If you’ve been to any social media sites over the last month, chances are that you have come across the term NFT (or non-fungible tokens to give them their full name). From Twitter founder Jack Dorsey selling his very first tweet to Elon Musk selling a song about NFTs through NFT – it is safe to say that NFT is set to become a mainstay in the modern digital zeitgeist. And with promises of ensuring that artists, musicians and other creators can use it to be properly compensated for their work, it’s easy to see why NFT has become such an appealing prospect online.
Despite this sudden boom, however, India might miss out on the NFT revolution. With the government set to pass legislation that would ban private cryptocurrencies, it is unclear whether technology such as NFT would be legal in the near future – leading to the question, should NFTs be banned?
What is NFT?
One of the defining features of the digital content economy is that, due to the reproducibility of digital content and media, it is close to impossible to identify the original owner of a piece of content or media. This replication also results in devaluation of the original piece of content. Furthermore, even if you were able to identify the owner, oftentimes the proof of such ownership would be dependent on a centralised institution that maintains records of purchases and ownership. NFTs seek to solve these problems – that is of ownership tracking, value storage and decentralisation.
In the simplest of terms, an NFT acts as proof of ownership over a piece of digital content or a digital asset.
NFT’s are unique (aka non-fungible) digital tokens that represent specific digital assets that can be bought, sold and traded between individuals. These tokens can represent a range of digital assets ranging from digital art to music files to books. The aim of the technology is to ensure that should that piece of digital content be duplicated or shared, the claim of the legal owner over the original remains clear and transparent – thereby also working to secure the value of the original asset. The technology does this by maintaining the records of all owners and transactions related to the NFT in a distributed ledger known as the blockchain; in most cases, this is the Ethereum blockchain.
The technology has been proposed as a means whereby digital artists can ensure that the value of the art that they produce is maintained during its sale, while also ensuring that they are able to track future sales and collect any royalties that they may be owed.
What is the government’s stance on NFTs?
While the government has not expressly stated its desire to ban NFTs, uncertainty over the details of the upcoming private cryptocurrency Bill have cast doubt on its potential legality. In the absence of these details, one can examine the draft of the ‘Banning of Cryptocurrency & Regulation of Official Digital Currency Bill’ of 2019 to determine the strategy that the…