Non-fungible Tokens in Commercial Transactions

Abstract

The auction of Bored Ape #8817 for $3.4 million in October 2021 marked a watershed moment in the escalating trend of non-fungible tokens (NFTs). This chapter ventures into the core of the tokenization phenomenon, scrutinizing the legal implications of creating digital representations (tokens) of diverse assets. Amid the burgeoning NFT market, a pivotal question emerges: What precisely are the property rights conferred upon those acquiring these tokens? Beyond the staggering sales figures, the chapter dissects the tokenization process, emphasizing the NFT minting process and blockchain technology. It explores claims that NFTs herald the future of digital property, challenging traditional governmental powers. Anticipating legal challenges, the chapter navigates critical inquiries about token holders’ rights, the tethering (or not) of tokens to underlying assets, and the impact of the 2022 Uniform Commercial Code revisions. This chapter seeks to provide a nuanced perspective, unraveling legal realities from the fervor surrounding tokenization’s transformative potential in the digital era.