Non-fungible token (NFT) – legal aspects and application in the art trade

What is NTF?

NFT is a blockchain technology gradually entering our lives, more increasingly related to contemporary state-of-the-art artwork that can be purchased at international art auctions. Non-fungible token (NFT) is a key part of the blockchain economy. This is a type of cryptographic token that is stored on a blockchain architecture. It is a unique, digital certificate that provides certain ownership rights in an asset and it is not possible to copy it. Each of the tokens is individual, of different value and has no equivalent for itself. The most common standard for creating and issuing tokens is ERC-20, but there are other standards in operation (e.g., ERC-223, ERC-721, ERC-777, and ERC-1155). Each successive standard is created with increased security and speed in mind. NFTs can be used to represent items such as photos, videos, audio, and other types of digital files.

Blockchain is a decentralized database used to store and transmit information about transactions made on the Internet. One of the features of NFTs is that it can only be bought, sold and traded as individual assets and this is one of their differentiators in the market.

The Cryptocurrency market is growing at an accelerated rate and NFT trading is definitely following it. NFTs differ from cryptocurrencies such as Bitcoin, Ethereum or DDKoin in that they are both not interchangeable and not identical. In addition, owning a given token does not entitle us to the rights reflected by the token. NFTs can’t be divided into parts as the elementary unit here is the token itself, whereas fungible tokens can be because all the units have the same value. It does not matter which unit you get.

How to mint NFT?

Creating and saving NFT for the first time on a block chain involves minting. This is how the digital art becomes a part of Ethereum blockchain. Thanks to this process artists can purchase, trade and track in the market the art works.  Minters may be the creator of the work associated with the NFT, such as the artist. It can also be someone who has the appropriate rights to mint NFT digital assets. NFT contains unique identifier (called also ‘TokenID’), the blockchain wallet address of current owner and an identifier of where the digital work may be found. Transactions are fully transparent, so anyone can view an NFT and its underlying information, including the blockchain address of the current owner and the blockchain address of any previous owner. In addition, since transactions on a blockchain are publicly viewable, buyers can see the address from which the NFT was first minted.

NFT and cats?

Early forms of NFTs have been around since the mid-2010s. The NFT technology gained popularity in 2017 with the virtual cat-trading game called CryptoKitties. Namely, this is a game on Ethereum developed by Canadian studio Dapper Labs  which allows players to adopt and trade virtual cats. Each cat is one-of-a-kind and 100% owned by the owner and it cannot be replicated, taken away, or destroyed. Then NFT gained momentum. Many people have used the game as a way to earn big amounts of money quick. According to the TechCrunch website research from 2017, about $1.3M has been transacted, with multiple kittens selling for ~50 ETH (around $23,000) and the “genesis” kitten being sold for a record ~246 ETH (around $113,000).

The first 5000 days

Today there are a number of digital artists selling NFTs through dedicated NFT platforms that are third-party platforms used by the seller to mint the NFT. At this point it is necessary to mention a certain work of art, the sale of which has obliterated for a long time the market of trading digital tokens. Namely the collection of “Everydays – The First 5000 Days” graphics by Mike Winklemann (also known as Beeple). The sale of this work on March 2021 was the most famous example of a transaction that was conducted by Christie’s auction house for a bagatelle of $69.3 million. From the official Christie’s website we can learn that in May 2007 Beeple set out to create and post new work of art online day by day for 5,000 days straight  – 13-and-a-half year. Then those individual pieces have been brought together in a unique work in the history of digital art. He has stitched together recurring themes and colour schemes into an aesthetic whole.  There is a noticeable difference between his first artworks and the further ones that he was integrating in 3D. It was minted on Ethereum blockchain. The artist has attracted 1.8 million followers on Instagram and high-profile collaborations with global brands ranging from Louis Vuitton to Nike, as well as performing artists from Katy Perry to Childish Gambino. It has been the most high-profile case thus far.

Legal implications of NFTs

The Non-Fungible Token (NFT) is a purely digital work – it is not tangible asset in any form within the meaning of conventional civil law. Also under Polish civil law, it is obvious that the provisions on property should not apply to a non-fungible token, because the subject of property law is, in principle, only tangible objects (Article 45 of the Polish Civil Code).

Covering such a work with civil protection requires, in principle, taking into account the original character of the work that is to be created virtually and is a manifestation of the author’s creative activity within the meaning of Art. 1 of the Polish Act on Copyright and Related Rights. The subject of Polish copyright law are works expressed with graphic signs, including cartographic signs, and computer programs. It should be noted, however, that only the way of expressing such a work may be protected by copyright and civil law. Hence, the question arises whether only a virtually expressed manner of presenting an artistic work is sufficient to be the subject of protection of this right. It should be noted that such an artistic token, i.e. when transferring the problem of legal protection to the Polish language of the Copyright Act, the artistic manifestation of the author of the work itself, may be stored in a decentralized (distributed) technology in the interplanetary file system, i.e. in a distributed data storage network, which additionally complicates the classification of such digital art work under civil regulations protecting movables.

In practice, creators unknowingly ignore the significant legal problems indicated above and try not to incur additional costs resulting from the necessity, for example, to obtain additional licenses or implement procedures.

The practice of trade in virtual works seeks to materialize an artistic work in the very issue of minting.

What is understood by ‘minting’?

When one decides to create an NFT, one must first “mint” the digital version of the artwork. Minting an artwork refers to the act of tokenizing the artwork, i.e. uploading it to a given marketplace platform and issuing a token to guarantee its authenticity. Similar to the way that metal coins are minted and added into circulation, NFTs are also tokens that get “minted” once they are created. A digital artwork is represented as an NFT so it can then be purchased and traded in the market and digitally tracked as it is resold or collected again in the future. The artist  will then have to pay specific fees to initiate the transaction on the blockchain and publish the artwork as an NFT on a marketplace. Once a piece of artwork has been minted on a marketplace as an NFT, the artist should not mint it on another platform.

Christie’s Auction Rules

One of the world’s largest auction houses, Christie’s, has no doubt taken care to include the necessary disclaimers, precise rules for buying and selling, terms and conditions, and guidelines for the goods being sold so as to limit its liability in the event of illegal transactions as much as possible and protect itself from possible lawsuits. It includes information about the authenticity warranty, responsibility for bidding services, payments, or transferring rights and responsibilities. It adapts its conditions to the laws of each continent. As for non-fungible tokens, Christie’s includes in the conditions of sale the required way of description of the art work. The description of any digital asset, and any other statement made by them (whether orally or in writing) about any digital asset including about its nature or condition, artist, provenance, technical details, security or integrity are considered to be an opinion and not to be relied on as a statement of fact.


Many experts believe that non-exchangeable tokens (NFTs) are the real future of the blockchain economy. This topic is developing very fast and surprises us at every step. The transaction surrounding the sale of the famous digital work “Everydays – The First 5000 Days” showed that nothing is impossible in the world of NFTs and the sky is the limit. Over time, there will probably be more exact legal conditions and safeguards in NFT trade.


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