I logged into my Instagram account and was prompted to connect my digital wallet to start sharing my Non-Fungible Tokens (NFTs) with followers and fans. That was the sign I needed to finally delve into the NFT world where it became clear that to understand Non-Fungible Tokens, we must first be familiar with blockchain technology.
Blockchain technology is a verified ledger system that shows and keeps a record of transactions and data, maintained over a peer-to-peer network. This tech comes in different forms such as The Ethereum Blockchain, Solana Blockchain and Polygon Blockchain, The main difference is brought about through the use of different validation mechanisms that allow reactions to be added to each block. Blocks, which are located in data centers (called nodes), are where the data is stored before validation, with such storage being decentralized. Communication moves from one node, where information is stored and shared, to another via a secure network.
What is a Token?
A token is a representation of data on the blockchain. The data can be images, code or videos.
A fungible token can be exchanged for another token that is identical in use and nature. An illustration is the fiat currency we use every day where you can only exchange $1 for another $1 or something else equivalent in value. Cryptocurrency, such as Bitcoin, is also an example of a fungible token.
Non-fungible is a term that refers to something that is unique and cannot be substituted. Non-fungible tokens on the blockchain are singular, one-of-one representations of data or information. They include art pieces, collectibles, game wearables, memories captured (e.g., highlights in sports), photography, tickets and more upcoming items.
Every Kenyan citizen is free to express themselves artistically. Article 33 (1) (b) of the Constitution guarantees all citizens the Freedom of Expression and states that every person has the right to freedom of expression, which includes freedom to seek, receive or impart information or ideas, freedom of artistic creativity, and, in the exercise of this right to freedom of expression, every person shall respect the rights and reputation of others.
A Non-Fungible Token is therefore a representation of data, such data being the result of the expression of artistic creativity by an individual or group, on a digital ledger system with unique identifiers embedded in its metadata. This metadata, which can be accessed and viewed on a Blockchain Explorer such as Etherscan, contains details about the original owner (crypto wallet) and any new owners since, transaction number, transaction value and fee, and a timestamp.
Therefore, the metadata embedded in a Non-Fungible Token can be used to authenticate the ownership of the token, such ownership being protected by Article 40 (1) of the Constitution which states that every person has the right, either individually or in association with others, to acquire and own property to any description in any part of Kenya.
Does Kenyan Copyright Law Apply to NFTs?
Whereas ownership is the state of having complete legal control over the status of something, Copyright refers to the legal right to select who may publish, copy, and distribute an author’s work.
The question now becomes whether the metadata used to authenticate the ownership of a Non-Fungible Token suffices as proof of copyright ownership as well.
The Copyright Act describes an “author” as the person who first makes or creates literary, musical or artistic work, the person responsible for the composition of a photograph, the person who made arrangements for the making of a sound recording, the person who made arrangements for the making of audio-visual works, the first broadcaster of any broadcast, the publisher of any published edition, the person who made arrangements necessary for the creation of a literary, dramatic, musical or artistic work or computer program which is computer generated, and a person who exercised control over the working of a program (computer programmer).
Following this definition, the authenticated owner of a Non-Fungible Token on any Blockchain is not automatically the copyright owner of the art pieces, collectibles, game wearables, memories captured, photography or tickets as represented by the token.
An individual may take a screen recording of a memorable dunk from a live airing of a basketball game on one of the television channels (broadcaster), upload the same on a Blockchain as his Non-Fungible Token, and make a lot of money from the resale of the same to new owners. This individual may claim and prove ownership of the token on the Blockchain, courtesy of the metadata embedded.
However, the individual would have infringed on the copyright ownership of the broadcaster who had originally aired the game.
The continuous digital advancements create gaps in our existing laws and Kenyan law is still playing catch-up with the NFT world. Non-Fungible Tokens have many applications and use such as gaming applications, utility tokens, loyalty points or rewards, decentralized marketplaces, as well as representation of ownership of carbon credits and digital and physical assets.
Our legislators should consider making haste to effect amendments that cater to these emerging fields to prevent bad actors such as those who currently misuse Non-Fungible Tokens to launder money from having free reign for too long.