Most NFT Projects ‘Convey No Actual Ownership’: Galaxy Digital Research

NFTs giving token holders total ownership rights is an ambitious idea, one that's “a long way off,” Alex Thorn, head of research at Galaxy Digital, said on CoinDesk TV’s “First Mover.”

AccessTimeIconAug 24, 2022 at 10:00 p.m. UTC
Updated May 11, 2023 at 4:17 p.m. UTC
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Non-fungible token (NFT) holders may not own the intellectual property (IP) rights of the assets they’ve purchased, says Alex Thorn, Galaxy Digital’s head of research.

Thorn, who specializes in development research for the cryptocurrency ecosystem, told CoinDesk TV on Wednesday that “the vast majority of NFT art projects … convey no actual ownership for the underlying content.”

Thorn’s comments reflect a new report from Galaxy Digital, which highlights concerns over NFTs and intellectual property (IP) rights. The report outlines that one of the major problems with NFTs today is that issuers administer them.

“When you buy one of these tokens … you’re not buying the media that the metadata points to, you’re actually buying a license from an issuer,” Thorn said on CoinDesk TV’s “First Mover.”

Of the estimated top 25 NFT projects Galaxy Digital considered, the company found that there was only one project, World of Women (WoW), that “even attempts to give true ownership for the underlying artwork,” to token holders. But, according to the report, it is still unclear if the original issuer of a WoW NFT would need to transfer the IP address to a secondary buyer if they were to sell on another marketplace, such as OpenSea.

Even so, because a majority of NFTs “come with a license from the issuer,” the issuer oversees how the license is governed, and ultimately, how token holders can use the content within the license.

Thorn points out this is evident in the Bored Ape Yacht Club (BAYC) licensing agreement, which says that when a person purchases an NFT they “own the underlying Board Ape, the Art, completely.”

“That is objectively false,” he said. “The holder of the token does not own the art completely. If they did, Yuga Labs would not need to provide a license to them.”

Thorn argues that token issuers, including Yuga Labs, which is one the largest NFT issuers, may have actually “misled NFT purchasers as to the intellectual property rights for the content they are selling.”

"The vast majority of these NFTs come with a license from the issuer, right, and a license governs how the token holder can use the content under various circumstances," Thorn said. "Those licenses range from extremely permissive – Yuga Labs is definitely on the forefront of the permissive commercial use license – to highly restrictive, personal use only, you can't even display it in public."

Thorn suggested one possible solution would be to update what users have rights to when they purchase an NFT.

More broadly, Thorn notes that this can be a problem for users who are looking to “build something very durable.” He adds that “to be clear, these licenses can be changed, revoked or amended anytime, for no reason at all,” he said. And because issuers still hold IP rights, they can make changes “without even notifying the holders of the token.”

In the last year, the NFT artwork ecosystem has risen meteorically, and is now worth upward of $118 billion in value.

Thorn added that NFTs’ value is less than it was months ago, and issuers could determine whether the industry grows further.

“If you think NFTs are this revolution in digital property rights, which many do, we’re a long way off,” Thorn said.

Responding to a CoinDesk request for comment, a Yuga Labs representative said the company didn't "have anything to add on this subject at this time."

CORRECTION (August 29, 2022, 23:03 UTC): Corrects Thorn quote on the range of NFT licenses and where Yuga Labs fits on this scale.


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Fran Velasquez

Fran is CoinDesk's TV writer and reporter.