NFTs and Smart Contracts

Abstract

NFTs are intrinsically dependent on blockchain technologies. Their main function is to represent underlying tangible or intangible assets and their value. NFTs have also been designed and developed to create new tradable items and to generate a new market. Trading NFTs is therefore one of the major objectives within this new market, mainly in marketplaces connected to the relevant blockchains. On blockchains, the usual tools to perform transactions are the so-called smart contracts. NFTs are programmed using smart contracts, and transactions on NFTs are generally performed through smart contracts. This electronic process confirms the authenticity of the NFT, timestamps the transaction, and keeps track of the NFT’s successive owners. NFTs’ eco-environment is therefore the world of digital technologies, first and foremost blockchain technologies (including their cryptocurrencies) and smart contracts. This chapter will provide a legal analysis of blockchain technologies, smart contracts and NFTs and how these different technologies relate to each other from a technical and a legal perspective. It will show how the growing importance of virtual environments and marketplaces makes it crucial to address the legal issues raised by transactions on NFTs. Indeed, while there can be many interesting economic opportunities and legal innovations around NFTs, there is still confusion about how the law should frame this new business. There are also certainly risks lying ahead.