I. Introduction

In 2021, the acronym NFT, short for Non-Fungible Token, attracted particular attention. This is mainly due to the NFT with the token ID 40913, called “EVERYDAYS: THE FIRST 5000 DAYS”, which was “sold” on March 11, 2021 by the artist Beeple at Christie’s auction house.^[1]

Contrary to popular belief, an NFT is not a “computer-generated image”^[2], not a “digital artwork”^[3], not a “work of art stored in the blockchain”^[4], not a .jpeg and not a .mp3,^[5] but also not a file of (5,000 digital) images^[6]. Equally widespread is the assumption that it is a unique, digital representation of corporeal or incorporeal objects^[7] or property-like rights.^[8]

These “understandings” have in common that they assume an expectation of NFT as fact, but do not examine what was offered and actually acquired in the case of “EVERYDAYS: THE FIRST 5000 DAYS.”^[9] The following article intends to clarify this. It first explains the NFT using the example of “EVERYDAYS: THE FIRST 5000 DAYS” and shows through further examples that the design is basically the same. Finally, the most important legal issues are discussed on the basis of the contract concluded between Beeple and Metakovan.

II. NFT

In order to be able to correctly classify and legally evaluate NFT issues, a basic understanding of the technical interrelationships is required. We will therefore first explain the technical basics.

1. What is an NFT?

An NFT is a token. A token is a character or a character string.^[10] In the context of programming, a “token” refers to the smallest element of a computer program.^[11] Each of its components is a “token”.^[12] Essentially, five types are named to describe their respective function in the context of a programming language: Keywords, Identifiers, Operators, Separators and Literals/Constants.^[13] Without needing to know in more detail what these types actually do, it is sufficient to understand that the availability of a “token” is quite obviously not limited, but they can rather be created indefinitely.^[14] Thus, an original economic value cannot be created at all. Blockchain tokens are always characters or character strings to which an economic value is attributed.^[15]

The NFT discussed here is a so-called ERC-721 token. ERC-721^[16] is a technical standard, casually formulated as a kind of manual for Ethereum^[17]-based NFTs. Its application makes it possible to create distinguishable tokens in a very specific framework using only one computer program called Smart Contract.^[18] The alleged uniqueness results from the combination (of the blockchain address) of the smart contract and the variable^[19] uint256 called tokenId^[20]. The tokenId is used to distinguish ERC-721 tokens vis-à-vis the smart contract. In conjunction with a smart contract, the tokenId can in turn be used for recombination, i.e., a change such as assigning the token to a user address. However, the tokenId always remains the same. In the present case, the tokenId is the token ID 40913 mentioned at the beginning.

The foregoing can be traced to the transaction of the NFT with token ID 40913 on March 13, 2021 (2:58 AM):

The sender Beeple may be concluded twice from fig. 1. The wallet address (field: From) matches the information on the Christie’s^[21] website. From the metadata of the transaction^[22] (field: Input Data) it is also clear that the tokenId was transferred from address to address^[23], ergo reassigned. The token ID 40913 is also “hidden” in the field Input Data: It is specified in line [2] in hex^[24] format. In the logs (fig. 2) within the field Data the token ID 40913 is shown decoded (Dec[ode]). When changing to hex (fig. 3) the string named in fig. 1 in line [2] under Input Data is shown. Always linked is the smart contract MakersTokenV2 (fig. 1) used to create and reassign the token. Its connection with the token ID leads to the so-called uniqueness of the NFT with the token ID 40913. fig. 4 shows that the MakersTokenV2-token is one of a total of 60,940 uint256, i.e. “unique” tokenIds and thus NFT.

As fig. 5 shows, only another transaction^[25] about two hours later led to the so-called buyer Metakovan. Thus, the token ID 40319 has been assigned to him in connection with the smart contract MakersTokenV2.

2. Creation of an NFT (minting)

Thus, to create an NFT, all that is needed is a smart contract that helps create tokens using the ERC-721 standard. Beeple^[26] did not create the smart contract itself according to a freely available tinkering manual,^[27] but used one of the marketplace platform MakersPlace.^[28] OpenSea^[29] also offers comparable services.

Christie’s designates February 16, 2021 as the creation date.^[30] The term “minted”^[31] refers to the creation process of a blockchain token, in this case NFT. “Minted on” accordingly means “created on”. The specification can be verified using the address of Beeple and transactions filtered by token of the smart contract MakersTokenV2 (fig. 6). The second transaction, the so-called minting transaction, falls exactly on February 16, 2021 (fig. 7).

That this is a creation process can first be seen from the address^[32] of the “sender” of the transaction^[33], which is full of zeros (field: Tokens Transferred, there: From). The Input Data field shows that the oboCreateDigitalMediaAndReleases function of the MakersTokenV2^[34] smart contract was triggered with the transaction. The details can be found, again less cryptically, in the logs of the transaction^[35](fig. 8).

In this case, DigitalMediaCreateEvent was used to create a so-called digital medium with the digitalMediaId 35661 (see fig. 8, item 45). This refers to a metadataPath. The digital medium is printed by means of the DigitalMediaReleaseCreateEvent^[36] and becomes the NFT known here with the token ID 40913 (compare fig. 8, number 46). Under tokenURI there is another reference, a link.

Why are there no image files in the NFT creation process, but only references? The collage “EVERYDAYS: THE FIRST 5000 DAYS” in question here has a size of 21,069 x 21,069 pixels (319,168,313 bytes)^[37]. This is equivalent to about 319 megabytes (MB). For comparison, the Bitcoin blockchain currently holds about 340,000 MB (340 gigabytes, GB)^[38], the Ethereum blockchain about 809,000 MB (809 GB)^[39]. The numerous storage of images such as the Beeple collage in a blockchain pushes a network based on it to its limits by leaps and bounds.^[40] Each network node^[41] must shoulder the data volume individually, and the load is not distributed.^[42] The fees^[43] would be unaffordable after all.

The image file, according to Christie’s in .jpg format,^[44] must therefore be stored elsewhere, as indicated by the tokenURI at number 46 in fig. 8.

3. Where is the picture?

As just noted, the minting transaction includes two links in the logs. It is noticeable that the metadataPath at number 45 in fig. 8 is part of the link at number 46. The link leads to the IPFS.

a)  What is the IPFS?

IPFS, short for InterPlanetary File System^[45], is a protocol and peer-to-peer network in which files are stored in a distributed manner.

Each file here is given a unique fingerprint, a cryptographic hash.^[46] In contrast to blockchain network nodes, here network nodes^[47] only store content that they actually want to store themselves and index information about the rest of the content stored in the network.^[48] IPFS is therefore particularly useful for storing large files. This is because, in contrast to the required storage of the complete blockchain copy^[49], decisions can be made here according to (storage) economic considerations. If a file is requested, the network is asked for help in finding the network node storing the file.^[50]

IPFS is not the widely used HTTP(S)^[51] protocol-based World Wide Web. It is counted as part of the darknet^[52]. A darknet is a network within the internet^[53] that can be accessed only with special software, configuration, or authorization, and often uses its own communication protocol.^[54] IPFS has or is such a communication protocol.

If you enter the IPFS link^[55] from fig. 8 (number 46) into the browser, you will fail. The Beeple image is not accessible using it. Why? One reason: Because the IPFS network speaks a different language due to its own IPFS communication protocol. To call files in the IPFS network from outside, you need a so-called gateway.

b)  The hash in the transaction metadata

The named references (fig. 8, numbers 45 and 46) both contain the string:

QmPAg1mjxcEQPPtqsLoEcauVedaeMH81WXDPvPx3VC5zUz.

This is the aforementioned cryptographic (multi)^[56]hash, which is a hash stored in the IPFS (cf. the link in fig. 8, digit 46) and uniquely identifies the stored file. Hashing is not used for encryption, but for compressing information (output value) according to a fixed rule, a hash function.^[57] It is essential that the hash value does not represent two different output values.^[58]

However, with an IPFS gateway, here from MakersPlace,^[59] one does not get to the 319 MB image file of the artist Beeple, but to the hashed file with information about the work written by him (image metadata, fig. 9). This metadata file (cf. metadataPath, fig. 8, digit 45) contains a lot of information about the Beeple collage “EVERYDAYS: THE FIRST 5000 DAYS”, comparable to an “exhibition sign” next to the artwork in a physical exhibition. Hash information can also be found here: digital_media_signature_type refers to the hash algorithm SHA-256 (hash function) and the hash of the digital medium (cf. fig. 8, the digitalMediaId), the digital_media_signature, in hex format:

6314b55cc6ff34f67a18e1ccc977234b803f7a5497b94f1f994ac9d1b896a017.

This signature, the hex fingerprint, allows the image file to be verified as unaltered.

c)  How to get to the image

This digital “exhibition sign” (fig. 9) contains two links: one to a (smaller than 319 MB) preview file (preview_media_file) and another to the 319 MB image file (raw_media_file) in the IPFS. Again, both links contain their own IPFS MultiHash of the respective image file. The respective link^[60] leads via the IPFS gateway to the Beeple collage which may finally be downloaded in the desired size.

After downloading, one can check whether the file available at this address corresponds to the hex hash value mentioned in the metadata file. This illustration of the chain-like connection of transaction metadata in the Ethereum blockchain via a text file with image metadata and the link to the image file in the IPFS should suffice.

4. Other NFTs

a)  CryptoKitties

The NFT game CryptoKitties shows many similarities to the Beeple case: This is also an NFT in the form of a token ID in conjunction with an ERC-721 token smart contract (fig. 10).

As in the case of the Beeple NFT, the token ID is created using a smart contract and always remains associated with it. The NFT can be changed using the CryptoKitties smart contract according to certain rules, in particular the tokenId may be reassigned. Fig. 11 shows the token ID 211746, which is unique in relation to the token smart contract 0x06012c…266d and due to the creation process (marked transaction, cf. fig. 12).

The image of the CryptoKitty belonging to the respective token ID appears in fig. 12 to have been generated and stored in the Ethereum blockchain. However, the impression is – again – deceptive. The images are stored on servers of the provider of the CryptoKitties game. 

Similar to the case of the Beeple collage, there exists a metadata document (fig. 13), the CryptoKitty image accompanying “exhibition sign”. Also in it are links to storage locations of the image file to the CryptoKitty with token ID 211746. If one looks in the Cryptokitties smart contract^[61], one finds under number 3, tokenMetadata, the reference to an infoUrl. ^[62]This function, similar to Beeple using tokenURI, allows externally stored information to be “pinned” to the tokenId. This explains how CryptoKitty images can be included in the minting transaction shown on Etherscan.io (fig. 12).

b)  OpenSea-NFT

OpenSea is an NFT marketplace. The platform offers the creation of ERC-721 NFTs and their auctioning. The connection of token ID, metadata and digital medium is similar too.^[63] However, there is a difference with CryptoKitties: the text and image files are not stored on OpenSea’s servers. OpenSea itself obtains the required information from the metadata as supplied by the provider.^[64] It is up to the provider to decide whether to store its files on its own server or in the IPFS.

The metadata and digital medium for an OpenSea NFT are not as easy to find as those for the Beeple collage “EVERYDAYS: THE FIRST 5000 DAYS”. The download and seemingly the disclosure of the minting transaction along with its metadata too are restricted only to authorized users at OpenSea.^[65] MakersPlace works in a similar way. Here, however, anyone is enabled to verify the authenticity of a listed digital medium using the data in the Ethereum blockchain.^[66] Via the linked “exhibition sign” in the metadata of the minting transaction, the respective digital medium can be called up as described above. You only need to know how to read the transaction details.^[67]

5. Interim conclusion: an NFT is not a digital work of art

In short, an NFT is a datum, meaning a string with a link in the metadata of the minting transaction creating the NFT. An NFT, which is supposed to “represent” a work of art, merely links to (at least) one file stored outside the transaction medium, which in turn links to the digital “work of art”. An NFT is therefore not a unique, digital “representation” of objects. A fortiori, an NFT is not the artwork itself.

The so-called uniqueness of the NFT results solely from the combination of smart contract and tokenId. The tokenId is unique only in relation to the smart contract. In the case of the Beeple NFT with token ID 40319, the tokenId was transferred. It was assigned to another Ethereum address using the smart contract MakersTokenV2 (via an intermediary address). Thus, the token ID 40319 cannot be extracted from the connection to this smart contract, at least not without disadvantages. If, for example, one enters the string 40319 into a classic search engine, one finds various designations of items such as bathroom waste garbage cans, but not the Beeple collage. 40319 is also a postal code in Croatia. Thus, the uniqueness of the NFT is relative, dependent on the relationship to the smart contract and, of course, the Ethereum blockchain with its transaction (meta)data related to the NFT. Last but not least, the indirectly linked digital art piece is not unique either: the creator will always keep the original on his computer.^[68] Even Beeple has only uploaded one copy to the IPFS.

The NFT itself does not provide protection against alteration or loss, nor against reproduction, distribution, or exhibition of a digital work of art by others. It does not establish a sufficient link between the digital “artwork” and the (alleged) rights holder:

Whoever receives the IPFS direct link to the image file of the Beeple collage “EVERYDAYS: THE FIRST 5000 DAYS” or the image file itself, does not thereby receive the information on the associated “exhibition sign”, via which the image is to be accessed in principle. The metadata of the image file contains only the IPFS link through which the image was downloaded. The “exhibition sign” does not contain any reference to the so-called buyer Metakovan. According to the will of Beeple, the “exhibition sign” should not be changed either. A change would therefore lead to a different MultiHash of the “exhibition sign” and thus to a break in the chain of reference starting from the minting transaction. This does not provide any protection against changes.

In the case of CryptoKitties, it is possible to change the “exhibition sign” by replacing the file while preserving the link, e.g., to be able to identify a new “owner” of a CryptoKitty on the CryptoKitties website. This means that, given other circumstances, the chain of reference starting from the minting transaction does not even need to be broken in order to change the digital medium supposedly permanently attached to a tokenId, be it artwork or other content.

OpenSea needs, among other things, an integrated social media platform to establish a direct link between “artwork” and rights holder(s). However, even this link is fragile because the chain of references starting from the minting transaction does not even need to be broken to remove the link between “artwork” and rights holder(s). OpenSea draws its information from the modifiable metadata file provided by the NFT creator or provider upstream of the “artwork”.

The weak point of an NFT is and always will be the reference chain. Each media break makes it possible once more to break the reference chain or to make changes without breaking the chain.

III.  On the legal issues

1. It’s all about the will

These findings lead to the conclusion that the answer to the question of what has been sold or actually acquired in the aforementioned cases must be sought in the declarations of intent of the parties. Unless the law provides otherwise, the freedom of contract allows to conclude contracts on objects of any kind and this in a freely chosen form.

The high-profile case of the “sale” of the NFT with reference to the work “EVERYDAYS: THE FIRST 5000 DAYS” by the artist Beeple helps to put the factual findings in the right context in terms of (contractual) law. It is essential to note that the content of the contract is not derived from the data in the Ethereum blockchain or the IPFS. Rather, the contract document must be sought elsewhere.

a) Contracting parties in the case of the Christie’s auction

In the case of the Beeple collage “EVERYDAYS: THE FIRST 5000 DAYS”, Christie’s identifies itself as the provider^[69]. It can be assumed that Christie’s acted here as “agent”^[70] (representative) for the artist Beeple. Christie’s thus made its own declaration of intent in the name of and with effect for and against the “seller” ^[71] Beeple, who was the “owner” ^[72] at the time of the acceptance of the bid. Because of this particular personal constellation, it can be assumed that the intermediary address identified above, through which the Token ID 40319 was transferred, is to be assigned to Christie’s. However, the contracting parties are Beeple and Metakovan.^[73]

b)  Subject matter of the contract in the case of Christie’ auction

The main question is what Christie’s made the subject matter of the contract for Beeple and Metakovan. Christie’s initially takes the easy way out through their Conditions of Sale by describing the subject matter of the contract, called “lot”, as “an NFT to be offered for sale at an online auction”^[74]. In the description of the offer^[75] on the website, Christie’s lists the following details:

“Beeple (b. 1981)
EVERYDAYS: THE FIRST 5000 DAYStoken
ID: 40913wallet
address: 0xc6b0562605D35eE710138402B878ffe6F2E23807smart
contract address: 0x2a46f2ffd99e19a89476e2f62270e0a35bbf0756non-fungible
token (jpg)
21,069 x 21,069 pixels (319,168,313 bytes)
Minted on 16 February 2021. This work is unique.“

The “Lot Essay” below describes the history of the picture. As a casual, uninformed reader, one gets the impression that Christie’s has offered a digital image for sale. Thus, the press should be forgiven for reporting on a picture sale. Equally hardly any consumer reads the general terms and conditions.

The transaction in the sense of the disposal transaction is considered to be executed and the contract fulfilled.^[76] However, it has now been established above that only the token ID 40913 has been transferred, i.e. assigned to Metakovan in relation to the smart contract MakersTokenV2. Neither the metadata document “exhibition token” nor the image file have been transferred in the sense of property law. Both continue to rest in their respective locations in the IPFS – available to anyone. So what was agreed?

The parties apparently agreed that only the NFT, the token ID in conjunction with the smart contract MakersTokenV2, should become the subject of the contract:

“You acknowledge that the NFT is being sold ‘as is’ and neither we nor the seller provide any guarantee in relation to the NFT other than what is expressly set forth herein.“ ^[77]

Metakovan has thus “acquired” the NFT according to the parties’ understanding^[78]. Furthermore, he has only acquired rights to the “underlying digital asset” limited to personal use, which are here contractually linked to the NFT:

“You acknowledge that your purchase of the lot means you have full ownership rights in the NFT itself, including the right to store, sell and transfer your NFT. Your purchase of the lot does not provide any rights, express or implied, in (including, without limitation, any copyrights or other intellectual property rights in and to) the digital asset underlying the NFT other than the right to use, copy, and display the digital asset for your own personal, non-commercial use or in connection with a proposed sale or transfer of the NFT and any other right expressly contained in these Conditions of Sale. For the avoidance of doubt, you do not have the right to distribute, or otherwise commercialize the digital asset, or to represent or imply any sort of sponsorship, endorsement, affiliation, or other relationship with the seller and/or the creator of the digital asset without the prior authorization of the seller or the party(ies) that holds such rights. Your rights and interest in the digital asset or NFT provided by these Conditions of Sale will immediately terminate upon any subsequent sale, transfer, dispossession, burning, or other relinquishment of the NFT.“^[79]

The “underlying digital asset” appears to mean the “exhibition sign” that is directly associated with the token ID alone. In the glossary to the Conditions of Sale, “digital asset” is defined as what the NFT identifies and what the NFT is associated with:

“the digital work which the NFT identifies, and with which the NFT is associated.“^[80]

Because the NFT has no direct connection to the image file with the size of 319 MB, Metakovan could therefore only have acquired limited rights of use to the metadata file, the “exhibition sign” (fig. 9). The definition to the term “mint” confirms that thought:

“to generate an NFT for a digital asset on a blockchain.“^[81]

The NFT was created exclusively for the metadata file, according to its minting transaction, cf. fig. 8, numbers 45 and 46. Only the definition of the NFT itself suggests that Metakovan may have acquired usage rights to the image file with the size of 319 MB:

“a unique digital certificate that identifies (including through a pointer to, or hash of, the digital asset(s)) and is associated with one or more digital assets, which is held and transferred on a blockchain and provides the owner with certain rights to the digital asset(s).“^[82]

Here, an identification of the “digital asset” is said to be established “through a pointer to the digital asset”, hence a reference. A direct link between the image file and the NFT could have been established here by a contractual agreement, although or precisely because this is not actually the case.

The contract between Beeple and Metakovan defines the document referred to here as the “exhibition sign” with the image metadata, somewhat irritatingly because not as a definition of “pointer” but as “NFT metadata”:

“information included within the NFT that includes at least: the name of the digital asset; a description of the digital asset; and the location of where the digital asset is stored or a hash of the digital asset itself (such as a content identifier).“^[83]

Christie’s was aware that the description is sometimes not perfect. Therefore, the Conditions of Sale explicitly state that the description of the subject matter of the contract is an opinion and not a fact:

“Our description (…) and any other statement (…) are our opinion and not to be relied on as a statement of fact. We do not carry out any in-depth technical analysis of any digital asset and neither we nor the seller warrant its accuracy or completeness.“^[84]

The contract must therefore be interpreted in accordance with the applicable principles. With reference to the description of the auction offer^[85] it can probably be assumed that the 319 MB image file has become the subject matter of the contract as an “underlying digital asset”. Christie’s thinks this is associated with the “sold” NFT. Metakovan thinks the same.^[86]

However, the smaller preview image file also linked in the “exhibition sign” (fig. 9) is not covered by the offer referring to a specific image size of 319 MB. However, the parties are likely to have included the preview image file in the contract as a “less” in relation to the 319 MB image file. This means that the rights of use acquired by Metakovan under the contract relate to both image files. Metakovan can therefore not claim any rights of use to the preview file beyond those described above.

2. Bad deal, Metakovan, bad deal

Compared to art auctions and sales, in which ownership of a physical work of art is transferred, one can only wonder in the case of the Beeple-NFT.

This is because Metakovan did not acquire a right to the picture, the Beeple collage “EVERYDAYS: THE FIRST 5000 DAYS”, comparable to ownership for the stated $69 million. An owner may do what he wants with his proprty and may exclude others from influencing it, see § 903 sentence 1 BGB^[87]. Metakovan may, within the framework of his very limited, contractually granted right of use, look at the picture on his private screen – like many others. He has therefore not even acquired a right comparable to possession (cf. Sec. 854 (1) BGB). Rather, the contract makes it clear that Beeple and third parties can make copies and offer them elsewhere. Last but not least, Metakovan cannot assert any secondary claims, for example due to unusability as a result of deletion of the file(s) in the IPFS:

“Neither we nor the seller are responsible if the digital asset becomes inaccessible to you for any reason, or for any modifications or changes to the digital asset, including the digital asset being deleted. You acknowledge that the artist or any third party could make additional copies of, and distribute, the digital asset, and could sell or otherwise assign the copyright or other intellectual property rights or economic rights in the digital asset.“^[88]

The comprehensive disclaimers^[89] in favor of the “seller” Beeple and the “agent” Christie’s contained in the Conditions of Sale are also worthwile reading.

It will be interesting to see how Metakovan justifies his plan of a commercial exhibition for the public^[90] through his company Metapurse. Because the contract does not allow Metakovan this particular use. A fortiori, the contract does not allow Metapurse this use. It remains possible, of course, that Metapurse acquires its own commercial rights of use to the Beeple collage or makes other agreements with Beeple that permit the intended use of the image.

IV. Contract or no (effective) contract, that is the question.

No matter how providers sell artworks or comparable media using an NFT: A contract is always concluded. The rights and obligations of the parties arise from this very contract.

It should be noted here: Even though no formal contract is usually required, the contractual details are not derived from the Ethereum blockchain itself. A right to a physical or incorporeal object cannot be inferred from an NFT. This is because there is no direct, indestructible connection. At most, the direct connection is conceivable if the NFT and the object are in the same medium, e.g., the blockchain database. Any media break makes any right supposedly represented by the NFT more prone to error as well as attack. And the “owner” may thus be deprived of rights more quickly than he can imagine.

The NFT thought construct, which is flawed at its core, is comparable to a digital copy of an essay in a (physically or electronically available) professional journal: No rights of use to the content follow from the digital copy alone. Here too, a right of use arises from a contract with the information service provider permitting the copy to be made. A fortiori, the copy does not give rise to any rights of use to works referred to in the footnotes of the illustrated article, let alone to the works in their footnotes. No one would think of deriving such rights from a copy of an article in a professional journal.

In the case of an NFT, this assumption can only follow from lack of knowledge, i.e. ignorance. This ignorance is also used unduly, as shown for example by Captain Kirk actor William Shatner’s call for help with regard to NFT including screenshots of his Twitter posts:^[91]

If the “seller” knows that the “sale” of an NFT does not involve the granting of rights and does not inform the “buyer” who is convinced of this, then the contract may be null and void due to a breach of morality pursuant to Sec. 138 (1) BGB. If the contract provides for a price for an NFT that is conspicuously disproportionate to the performance, then the contract may be void for usury under Sec. 138 (2) BGB. An NFT is only a datum, a string of characters, which in itself has no value. The borderline to criminal fraud is quickly crossed, especially if the “seller” is deceptive about the subject matter of the contract and its properties. If the other party is made to believe that he is acquiring a work of art solely by means of the NFT transfer, this constitutes deception within the meaning of Sec. 263 (1) of the German Criminal Code (StGB). The boundaries to fraud are in any case fluid.

V. Conclusion: Offering NFT is just a new means of distribution with an expiration date

Unique in the case of the NFT offered by Christie’s for Beeple and acquired by Metakovan is at best the chasm between performance and consideration. Not even the token ID 40319 is unique. For their uniqueness is, as already described, only relative. Offering NFT is only a new distribution channel that may be fruitful as long as there is a widespread ignorance about the properties of NFT. Especially in the case of visual digital works it has long been possible for artists to offer them via stock photo platforms such as Adobe Stock^[92]. Comparable platforms also exist for musicians, e.g. Bandcamp^[93]. There is no need for a blockchain and breakable referral chains. Platforms like MakersPlace and OpenSea even need to elaborately establish the missing direct link between digital (art) work and blockchain NFT. And even then, it still needs a proper license agreement to define the rights and obligations related to the digital (art) work. Because they do not follow from the NFT itself.

The appearance of an artificial scarcity not only deceives uninformed NFT-interested parties, but also the artists. Because an NFT protects neither against infringement nor artist poverty. While an NFT allows an infinite number of downloads, but the artist only receives a one-off payment in return, with Adobe Stock, for example, every download brings in money. From a sober and forward-looking point of view, the benefits of NFT are not obvious. High prices can only be achieved in times of prevailing ignorance and are often disproportionate to the contractually granted rights, as the Beeple/Metakovan case shows. It remains to be seen when the first “purchase prices” will be reclaimed. NFT providers must expect this.

VI. Tl;dr

What does an NFT have to do with art? An NFT has little to do with works of art and a lot to do with the art of seduction.

What does an NFT have to do with the darknet? The file supposedly acquired with an NFT usually has to be picked up on the darknet.

What does an NFT have to do with law? Not much. Whether rights and obligations are associated with it is determined by the respective contract. Under certain circumstances, offering NFT may be subject to prosecution.

V

V

*Images (fig. 1-14) are unfortunately only available in the PDF-file you may download here.

^[1]   https://onlineonly.christies.com/s/first-open-beeple/beeple-b-1981-1/112924 (last accessed June 3, 2021).

^[2]  Kobel, Blockchain in Art: Sensational Prize at Christie’s: Immense Sums Flow for a Digital Work of Art, Handelsblatt, March 11, 2021, available at https://www.handelsblatt.com/arts_und_style/kunstmarkt/blockchain-in-der-kunst-sensationspreis-bei-christies-unsummen-fliessen-fuer-ein-digitales-kunstwerk/26995246.html?ticket=ST-7766850-MnjEKncYN32PJJta9Y2q-ap6 (last accessed June 3, 2021).

^[3]  Kobel, Blockchain in Art: Sensational Prize at Christie’s: Unsummen Flows for a Digital Work of Art, Handelsblatt, March 11, 2021, available at https://www.handelsblatt.com/arts_und_style/kunstmarkt/blockchain-in-der-kunst-sensationspreis-bei-christies-unsummen-fliessen-fuer-ein-digitales-kunstwerk/26995246.html?ticket=ST-7766850-MnjEKncYN32PJJta9Y2q-ap6 (last accessed June 3, 2021).

^[4]  Scheer, Crypto Art at Christie’s: A Museum for the Most Expensive Digital Artwork, FAZ, March 15, 2021, available at https://www.faz.net/aktuell/feuilleton/kunstmarkt/anonymer-kaeufer-von-beeples-nft-kunstwerk-everydays-plant-ein-eigenes-museum-17246266.html (last accessed June 2, 2021).

^[5]  See Scheider, Scooter-NFT: How Useful Artificial Scarcity Really Is, BTC Echo, April 8, 2021, https://www.btc-echo.de/news/scooter-nft-wie-sinnvoll-kuenstliche-knappheit-wirklich-ist-115998/ (last accessed June 3, 2021).

^[6]  Kreye, Eye Candy, Süddeutsche Zeitung, March 29, 2021, available at https://www.sueddeutsche.de/kultur/nft-beeple-kunstmarkt-digitale-kunst-1.5250201 (last accessed June 3, 2021).

^[7]  Breinich-Schily, “NFTs will enable numerous new asset classes,” SpringerProfessional, May 25, 2021, available at https://www.springerprofessional.de/blockchain/kryptowaehrungen/-nfts-werden-zahlreiche-neue-assetklassen-ermoeglichen-/19171290 (last accessed June 3, 2021).

^[8] Breinich-Schily, “NFTs will enable numerous new asset classes,” SpringerProfessional, May 25, 2021, available at https://www.springerprofessional.de/blockchain/kryptowaehrungen/-nfts-werden-zahlreiche-neue-assetklassen-ermoeglichen-/19171290 (last accessed June 3, 2021).

^[9]  For an example of the myths and the facts surrounding “the blockchain”, see Otto, Ri 2019, 45 (64 et seq.).

^[10]  Otto, Ri 2018, 143 (145).

^[11]  Otto, Ri 2018, 143 (145).

^[12]  Otto, Ri 2018, 143 (145).

^[13]  Otto, Ri 2018, 143 (145).

^[14]  Otto, Ri 2018, 143 (145).

^[15]  Otto, Ri 2018, 143 (145).

^[16]  Ethereum Request for Comments 721, for more see https://ethereum.org/en/developers/docs/standards/tokens/erc-721/ (last accessed June 3, 2021).

^[17]  A platform not only for monetary transactions, but primarily for the development of decentrally operated computer programs, so-called dApps.

^[18]  On the distinction between smart contract and contract: Otto, Ri 2017, 86 (87 et seq.).

^[19]  Meaning a placeholder that can be filled arbitrarily with a (unique) name.

^[20]  When tokenId and other identifiers are lowercase and written together, this always refers to code content.

^[21]  https://onlineonly.christies.com/s/first-open-beeple/beeple-b-1981-1/112924 (last accessed June 3, 2021).

^[22]  https://etherscan.io/tx/0xa342e9de61c34900883218fe52bc9931daa1a10b6f48c506f2253c279b15e5bf (last accessed June 3, 2021).

^[23]  Recall that a transaction is always (only) a change to the (blockchain) database, see e.g. Otto, Ri 2017, 86 (91) and Otto, Ri 2018, 16 (19).

^[24]  Hexadecimal system, cf. https://de.wikipedia.org/wiki/Hexadezimalsystem#:~:text=%C3%9Cbusually%20hexadecimal%20numbers%20are%20used%20with,and%20technical%20informatics%20. (last accessed June 3, 2021).

^[25]  https://etherscan.io/tx/0x01d0967faaaf95f3e19164803a1cf1a2f96644ebfababb2b810d41a72f502d49 (last accessed June 3, 2021).

^[26]  See his account at MakersPlace: https://makersplace.com/beeple/ (last accessed June 3, 2021).

^[27]  Cf. https://ethereum.org/en/developers/docs/standards/tokens/erc-721/ (last accessed June 3, 2021).

^[28]  https://makersplace.com/ (last accessed June 3, 2021).

^[29]  https://opensea.io (last accessed June 3, 2021).

^[30]  “Minted on 16 February 2021,” https://onlineonly.christies.com/s/first-open-beeple/beeple-b-1981-1/112924 (last accessed June 3, 2021).

^[31]  Inspired by the minting of a real coin.

^[32]  On the importance of address zero in the creation of and around Ethereum smart contracts: Otto, Ri 2017, 24 (31).

^[33]  Recall again that a transaction is always (only) a change to the (blockchain) database, see e.g. Otto, Ri 2017, 86 (91) and Otto, Ri 2018, 16 (19).

^[34]  Smart contract details: https://etherscan.io/token/0x2a46f2ffd99e19a89476e2f62270e0a35bbf0756#readContract (last accessed June 3, 2021).

^[35]  https://etherscan.io/tx/0x84760768c527794ede901f97973385bfc1bf2e297f7ed16f523f75412ae772b3 (last accessed June 3, 2021).

^[36]  ”Print” is used here as a synonym for “mint”.

^[37]  https://onlineonly.christies.com/s/first-open-beeple/beeple-b-1981-1/112924 (last accessed June 3, 2021).

^[38] https://www.statista.com/statistics/647523/worldwide-bitcoin-blockchain-size/ (last accessed June 3, 2021).

^[39]  https://ycharts.com/indicators/ethereum_chain_full_sync_data_size (last accessed June 3, 2021).

^[40] Also Otto, Ri 2018, 16 (19).

^[41]  Full (Archive) Node.

^[42]  Finally, the special advantage of the blockchain should result from the numerous identical copies.

^[43]  Gas Fees are used to protect the network. By charging for each computation performed on the network, actors are prevented from spamming the network. In addition, accidental or hostile infinite loops or other computational waste should be prevented. Therefore, a limit must be set for each transaction in terms of how many computational steps of code execution it is expected to require. The basic unit of computation is “gas”. Cf. in detail https://ethereum.org/en/developers/docs/gas/ (last accessed June 3, 2021).

^[44]  https://onlineonly.christies.com/s/first-open-beeple/beeple-b-1981-1/112924 (last accessed June 3, 2021).

^[45]  https://de.wikipedia.org/wiki/InterPlanetary_File_System (last accessed June 3, 2021).

^[46]  https://ipfs.io/ (last accessed June 3, 2021).

^[47]  In the sense of Full (Archive) Nodes.

^[48]  https://ipfs.io/ (last accessed June 3, 2021).

^[49]  In the case of a Full (Archive) Node.

^[50]  https://ipfs.io/ (last accessed June 3, 2021).

^[51]  Hypertext Transfer Protocol (Secure).

^[52]  https://en.wikipedia.org/wiki/Darknet (last accessed June 3, 2021).

^[53]  For a distinction between the Internet and the World Wide Web, see, for example: https://www.uni-giessen.de/fbz/svc/hrz/org/mitarb/abt/3/zms/schulung/webtechniken/internet (last accessed June 3, 2021).

^[54]  https://en.wikipedia.org/wiki/Darknet (last accessed June 3, 2021).

^[55]  URI stands for Uniform Resource Identifier. The difference to the URL is explained very convincingly by T3N, URL or URI? We show you the difference, December 13, 2013: https://t3n.de/news/url-uri-unterschiede-516483/ (last accessed June 3, 2021).

^[56]  “All hashes in IPFS are encoded as MultiHashes,” https://richardschneider.github.io/net-ipfs-core/articles/multihash.html (last accessed June 3, 2021).

^[57]  See Otto, Ri 2018, 16 (28).

^[58]  I.e. is resistant to collision, cf. Otto, Ri 2018, 16 (29).

^[59]  https://ipfsgateway.makersplace.com/ipfs/QmPAg1mjxcEQPPtqsLoEcauVedaeMH81WXDPvPx3VC5zUz (last accessed June 3, 2021).

^[60] https://ipfsgateway.makersplace.com/ipfs/QmPAg1mjxcEQPPtqsLoEcauVedaeMH81WXDPvPx3VC5zUz (last accessed June 3, 2021).

^[61]  https://etherscan.io/address/0x06012c8cf97bead5deae237070f9587f8e7a266d#readContract (last accessed June 3, 2021).

^[62]  This requires a deeper dive into the interaction of blockchain, Etherscan and CryptoKitties servers. However, one can start with the source code of the CryptoKitties smart contract, https://etherscan.io/address/0x06012c8cf97bead5deae237070f9587f8e7a266d#code, there at 721 et seq. More details also at: https://github.com/ethereum/EIPs/issues/721 (last accessed June 3, 2021).

^[63]  https://docs.opensea.io/docs/2-adding-metadata (last accessed June 3, 2021).

^[64]  https://docs.opensea.io/docs/metadata-standards (last accessed June 3, 2021).

^[65]  Cf. twlvxtwlv, SCOOTER H.P. BAXXTER PORTRAIT 2/12, https://opensea.io/assets/0x495f947276749ce646f68ac8c248420045cb7b5e/37048694102398718635223357597309673842838812735596754739432559414258184486913 (last accessed June 3, 2021).

^[66]  Cf. “TRILL KILL” by Beeple, https://makersplace.com/authenticity/0x23cd7da31501aa54f61384a3756fb4a1329dbb2c/107/ (last accessed June 3, 2021).

^[67] https://etherscan.io/tx/0xc255e9fc1ca12bd55abb37c2280d796c6e1d13df59796007be4fe298918b07cb#eventlog (last accessed June 3, 2021).

^[68] An artist like Beeple cannot be expected to delete the work from his computer and backup copies.

^[69]  https://onlineonly.christies.com/s/first-open-beeple/beeple-b-1981-1/112924 (last accessed June 3, 2021).

^[70]  Conditions of Sale for Christie’s Inc, https://www.christies.com/pdf/onlineonly/ECOMMERCE%20CONDITIONS%20OF%20SALE%20-%20NEW%20YORK-20May21.pdf, document page 33 (last accessed June 3, 2021).

^[71]  Conditions of Sale for Christie’s Inc, https://www.christies.com/pdf/onlineonly/ECOMMERCE%20CONDITIONS%20OF%20SALE%20-%20NEW%20YORK-20May21.pdf, document page 33 (last accessed June 3, 2021).

^[72]  Conditions of Sale for Christie’s Inc, https://www.christies.com/pdf/onlineonly/ECOMMERCE%20CONDITIONS%20OF%20SALE%20-%20NEW%20YORK-20May21.pdf, document page 33 (last accessed June 3, 2021).

^[73]  Because Christie’s is very likely to know the identities of both contracting parties, the possibility of concluding a contract using pseudonyms will not be addressed here.

^[74]  Conditions of Sale for Christie’s Inc, https://www.christies.com/pdf/onlineonly/ECOMMERCE%20CONDITIONS%20OF%20SALE%20-%20NEW%20YORK-20May21.pdf, document page 53 (last accessed June 3, 2021).

^[75]  https://onlineonly.christies.com/s/first-open-beeple/beeple-b-1981-1/112924 (last accessed June 3, 2021).

^[76]  See interview with Metakovan, Meet Metakovan – The buyer who purchased Beeple’s $69 million NFT artwork, March 30, 2021, CNBC, available at https://www.youtube.com/watch?v=ayN_flJTItE (last accessed June 3, 2021).

^[77]  Conditions of Sale for Christie’s Inc, https://www.christies.com/pdf/onlineonly/ECOMMERCE%20CONDITIONS%20OF%20SALE%20-%20NEW%20YORK-20May21.pdf, p. 44 (last accessed June 3, 2021).

^[78]  It is irrelevant for this contribution whether a date, a character string, can be the object of purchase. It is sufficient here to state that the parties here agree in their will.

^[79]  Conditions of Sale for Christie’s Inc, https://www.christies.com/pdf/onlineonly/ECOMMERCE%20CONDITIONS%20OF%20SALE%20-%20NEW%20YORK-20May21.pdf, p. 44 (last accessed June 3, 2021).

^[80]  Conditions of Sale for Christie’s Inc, https://www.christies.com/pdf/onlineonly/ECOMMERCE%20CONDITIONS%20OF%20SALE%20-%20NEW%20YORK-20May21.pdf, document page 52 (last accessed June 3, 2021).

^[81]  Conditions of Sale for Christie’s Inc, https://www.christies.com/pdf/onlineonly/ECOMMERCE%20CONDITIONS%20OF%20SALE%20-%20NEW%20YORK-20May21.pdf, document page 53 (last accessed June 3, 2021).

^[82]  Conditions of Sale for Christie’s Inc, https://www.christies.com/pdf/onlineonly/ECOMMERCE%20CONDITIONS%20OF%20SALE%20-%20NEW%20YORK-20May21.pdf, document page 53 (last accessed June 3, 2021).

^[83]  Conditions of Sale for Christie’s Inc, https://www.christies.com/pdf/onlineonly/ECOMMERCE%20CONDITIONS%20OF%20SALE%20-%20NEW%20YORK-20May21.pdf, document page 53 (last accessed June 3, 2021).

^[84]  Conditions of Sale for Christie’s Inc, https://www.christies.com/pdf/onlineonly/ECOMMERCE%20CONDITIONS%20OF%20SALE%20-%20NEW%20YORK-20May21.pdf, document p. 34 (last accessed June 3, 2021).

^[85]  Conditions of Sale for Christie’s Inc, https://onlineonly.christies.com/s/first-open-beeple/beeple-b-1981-1/112924 (last accessed June 3, 2021).

^[86]  See interview with Metakovan, Meet Metakovan – The buyer who purchased Beeple’s $69 million NFT artwork, March 30, 2021, CNBC, available at https://www.youtube.com/watch?v=ayN_flJTItE (last accessed June 3, 2021).

^[87]  German Civil Code

^[88]  Conditions of Sale for Christie’s Inc, https://www.christies.com/pdf/onlineonly/ECOMMERCE%20CONDITIONS%20OF%20SALE%20-%20NEW%20YORK-20May21.pdf, document page 44 (last accessed June 3, 2021).

^[89]  Conditions of Sale for Christie’s Inc, https://www.christies.com/pdf/onlineonly/ECOMMERCE%20CONDITIONS%20OF%20SALE%20-%20NEW%20YORK-20May21.pdf, document pages 41 et seq. (last accessed June 3, 2021).

^[90]  Stoilas, Virtual museum to be built to house Beeple’s record-breaking digital work, The Art Newspaper, March 13, 2021, https://www.theartnewspaper.com/news/virtual-museum-to-be-built-to-house-beeple-s-record-breaking-digital-work (last accessed June 3, 2021).

^[91] https://twitter.com/WilliamShatner/status/1368645203045720064 (last accessed June 3, 2021).

^[92]  https://contributor.stock.adobe.com/de/ (last accessed June 3, 2021).

^[93]  https://bandcamp.com/artists (last accessed June 3, 2021).