SSRN Id3814087

EARLY DRAFT-COMMENTS WELCOME- 4/11/2021 5:50 PM
VIRTUAL ART AND NON-FUNGIBLE TOKENS

[Pre-Publication Draft]
Lawrence J. Trautman*
* BA, The American University; MBA, The George Washington

University; J.D., Oklahoma City University School of Law. Mr. Trautman
is Associate Professor of Business Law and Ethics at Prairie View A&M
University. He may be contacted at [email protected].
ABSTRACT
During early 2021 reports emerge of newfound excitement in the art world as a
landmark sale of digital art for $ 69 million takes place. Fueled in part by the wealth
recently created from digital currencies, major art dealers such as Christie’s and
Sotheby’s embrace this new development. What then are non-fungible tokens, how is this
related to the blockchain and what do we know about this ancient market for digital art?
It now appears that digital art can be added to the growing list of uses for blockchain
technology now becoming a part of modern life.
This article proceeds in seven parts. First, we discuss the new and explosive
market for digital art. Second, we explore the evolution of the digital world and virtual
property. Third, is an explanation and historical account of the blockchain and virtual
currencies. Fourth, we explore non-fungible tokens. Fifth, we look briefly at unresolved
issues impacting the law of NFTs and provide potential solutions. Sixth, we present a few
thoughts about the future of digital property. And last, we conclude.
This dramatic extention of blockchain and other digital technology to the world of
art and music represents a new and exciting platform for creative expression. We believe
this paper is a valuable addition to the literature by providing a readable introduction and
overview of what is now known about the likely impact of blockchain technology and
non-fungible tokens to music and art. This important development should have
significant impact on the future of innovation and property law.
Keywords: art, Beeple, bitcoin, blockchain, Christie’s, collectibles, copyright, crypto

asset, cryptocurrency, crypto-theft, digital art, ethereum, intellectual property, law, music
business and publishing, non-fungible tokens (NFTs), online payment systems, property
law, Second Life, smart contract, Sotheby’s, synthetic worlds, token, virtual property,
virtual real estate,
JEL Classifications: G14, G12, K11, K12

Word Count including footnotes= 12,152
© 2017-2021 Lawrence J. Trautman Page 1 All rights reserved
Electronic copy available at: https://ssrn.com/abstract=3814087

CONTENTS
OVERVIEW .................................................................................................................................... 3
I. MARKET FOR DIGITAL ART EMERGES ..................................................................... 6
Metakovan Purchase of Beeple CryptoArt ......................................................................... 6
History of Digital Art ....................................................................................................... 10
Global Internet Use .......................................................................................................... 12
Evolution of Digital Art ................................................................................................... 12
II. EVOLUTION OF THE VIRTUAL WORLD................................................................... 13
Genesis of Virtual Worlds ................................................................................................ 14
Virtual World Characteristics ........................................................................................... 16
How Large the Virtual World? ......................................................................................... 18
Stickiness; The Virtual World is Addictive...................................................................... 21
III. THE BLOCKCHAIN AND VIRTUAL CURRENCIES .................................................. 22
The Blockchain................................................................................................................. 22
The Mechanics of Blockchain .......................................................................................... 23
Virtual Currencies ............................................................................................................ 25
Bitcoin .............................................................................................................................. 26
Threat of Data Breach ...................................................................................................... 28
IV. HOW NON-FUNGIBLE TOKENS MAY SOLVE ART WORLD PROBLEMS ........... 29
Mechanism of Action ....................................................................................................... 29
NFT Revenue Source for Musicians ................................................................................ 31
The Business of NFTs ...................................................................................................... 32
V. LAW OF DIGITAL PROPERTY ..................................................................................... 34
Virtual Property and “Bundle of Rights” ......................................................................... 34
Problems With Existing Legal Framework ...................................................................... 34
License vs. Ownership ..................................................................................................... 34
What About Smart Contracts ........................................................................................... 35
Proposed Framework for Digital Property ....................................................................... 35
VI. THE FUTURE OF DIGITAL PROPERTY ...................................................................... 35
Artificial Intelligence (AI) ................................................................................................ 35
Payments for Artistic Endeavors ...................................................................................... 36
Future Regulatory Compliance Issues .............................................................................. 36
The Future of Digital Property ......................................................................................... 37
VII. CONCLUSION ................................................................................................................ 38

VIRTUAL ART AND NON-FUNGIBLE TOKENS
OVERVIEW
During early 2021 reports emerge of newfound excitement in the art world as a
landmark sale of digital art for $ 69 million takes place. Fueled in part by the wealth
recently created from digital currencies, major art dealers such as Christie’s and
Sotheby’s embrace this new development. What then are non-fungible tokens, how is this
related to the blockchain and what do we know about this ancient market for digital art?
It now appears that digital art can be added to the growing list of uses for blockchain
technology now becoming a part of modern life, such as: accounting and auditing;1
agriculture;2 artificial intelligence (AI);3 business supply chains;4 carbon markets;5
1
See Lawrence J. Trautman & Mason J. Molesky, A Primer for Blockchain, 88 UMKC L. REV.
239, 267 (2019), https://ssrn.com/abstract=3324660, citing Volodymyr Babich & Gilles Hilary,
Blockchain and Other Distributed Ledger Technologies in Operations, (unpublished ms.),
https://ssrn.com/abstract=3232977; Sean S. Cao, Lin William Cong & Baozhong Yang, Auditing
and Blockchains: Pricing, Misstatements, and Regulation, (unpublished ms.),
https://ssrn.com/abstract=3248002; Maria Karajovic, Henry Kim & Marek Laskowski, Thinking
Outside the Block: Projected Phases of Blockchain Integration in the Accounting Industry (2017),
https://ssrn.com/abstract=2984126; Chandra Shekar Mylaavaram, R. Kumaran & R. K. Mishra,
Blockchain Technology - An Exploratory Study on Its Applications, THE MGMT. ACCT. (June
2018), https://ssrn.com/abstract=3194522; Daniel E. O'Leary, Configuring Blockchain
Architectures for Transaction Information in Blockchain Consortiums: The Case of Accounting
and Supply Chain Systems (unpublished ms.), https://ssrn.com/abstract=3102671; Reinhard
Schrank, Audit Quality, Legal Liability, and the Audit Market Under Risk Aversion (unpublished
ms.), https://ssrn.com/abstract=3258555; Ting Yu, Zhiwei Lin & Qingliang Tang, Blockchain:
Introduction and Application in Financial Accounting (unpublished
ms.), https://ssrn.com/abstract=3258504.
2
Id. citing See Emily R. Lyons, David A. Crass, Cheryl I. Aaron & Sarah C. Helton, What
Blockchain Means for the Agriculture and Food Industries, Michael Best & Friedrich LLP (Dec.
26, 2018), https://www.michaelbest.com/Newsroom/192905/What-Blockchain-Means-for-the-
Agriculture-and-Food-Industries.
3
Id. at 268, citing Bo Xing, & Tshilidzi Marwala, The Synergy of Blockchain and Artificial
Intelligence (2018), https://ssrn.com/abstract=3225357. See also William Magnuson, Artificial
Financial Intelligence, 10 HARV. BUS. REV. 337 (2020).
4
Id. at 269, citing See Volodymyr Babich & Gilles Hilary, Distributed Ledgers and Operations:
What Operations Management Researchers Should Know About Blockchain Technology (2018).
Forthcoming in Manufacturing & Service Operations Management; Georgetown McDonough
School of Business Research Paper No. 3131250. https://ssrn.com/abstract=3131250; Chris Berg,
Sinclair Davidson & Jason Potts, Outsourcing Vertical Integration: Distributed Ledgers and the V-
Form Organisation (2018), https://ssrn.com/abstract=3300506; Bhavya Bhandari, Supply Chain
Management, Blockchains and Smart Contracts (2018), https://ssrn.com/abstract=3204297; Jiri
Chod, Nikolaos Trichakis, Gerry Tsoukalas, Henry Aspegren & Mark Weber, Blockchain and the

commercial real estate;6 commodity platforms;7 copyrights;8 creative and artistic
endeavors;9 economic planning;10 elections;11 fiat money;12 financial services and capital
markets;13 and the Internet of Things (IoT);14 just to name a few.
Value of Operational Transparency for Supply Chain Finance 2018). Mack Institute for Innovation
Management, Working Paper Series, https://ssrn.com/abstract=3078945 (providing signals
enhancing finance); Henry Kim & Marek Laskowski, Towards an Ontology-Driven Blockchain
Design for Supply Chain Provenance (2016), https://ssrn.com/abstract=2828369; Adam J.
Sulkowski, Blockchain, Law, and Business Supply Chains: The Need for Governance and Legal
Frameworks to Achieve Sustainability (2018), https://ssrn.com/abstract=3205452.
5
Id. citing See Adrian Jackson, Ashley Lloyd, Justin Macinante & Markus Hüwener, Networked
Carbon Markets: Permissionless Innovation with Distributed Ledgers?, (2018). Edinburgh Sch. L.
Res. Paper No. 2018/07, https://ssrn.com/abstract=3138478; Robert Leonhard, Developing the
Crypto Carbon Credit on Ethereum's Blockchain (2017), https://ssrn.com/abstract=3000472;
Robert Leonhard, Forget Paris: Building a Carbon Market in the U.S. Using Blockchain-Based
Smart Contracts (2017), https://ssrn.com/abstract=3082450; Justin Macinante, A Conceptual
Model for Networking of Carbon Markets on Distributed Ledger Technology Architecture.
Edinburgh Sch. L. Res. Paper No. 09/2017, https://ssrn.com/abstract=2948580.
6
Id. citing Hitesh Malviya, Blockchain for Commercial Real Estate (2017),
https://ssrn.com/abstract=2922695; Sergio Nasarre-Aznar, Collaborative Housing and Blockchain,
66(2) ADMINISTRATION 59 (2018), https://ssrn.com/abstract=3189050.
7
Id at 270, citing Jianfu Wang, Commodity Trade Finance Platform Using Distributed Ledger
Technology: Token Economics in a Closed Ecosystem Using Agent-Based Modeling (2018),
https://ssrn.com/abstract=3152093.
8
Id. citing Annabel Tresise, Jake Goldenfein & Dan Hunter, What Blockchain Can and Can't Do
for Copyright, 28 AUSTL. INTELL. PROP. J. 144 (2018), https://ssrn.com/abstract=3227381; Jake
Goldenfein & Dan Hunter, Blockchains, Orphan Works, and the Public Domain, 41 COLUM. J.L.
& ARTS (2017), https://ssrn.com/abstract=3083153; Nick Vogel, The Great Decentralization: How
Web 3.0 Will Weaken Copyrights, 15 J. MARSHALL REV. INTELL. PROP. L. 136 (2015).
9
Id. citing Jason Potts & Ellie Rennie, Blockchains and Creative Industries (2017),
https://ssrn.com/abstract=3072129; Stan Sater, Tokenize the Musician, 21 TULANE J. TECH. &
INTELL. PROP. (2018), https://ssrn.com/abstract=3160798 (music recording and performance
economics and observing that Blockchain tokens enable established musicians to remain
independent longer, thus enabling the negotiating of better terms with record companies); Bo
Xing, Creativity and Artificial Intelligence: A Digital Art Perspective (2018),
https://ssrn.com/abstract=3225323 (digital art, creativity, and AI).
10
Id. at 271, citing Kartik Hegadekatti & Yatish S. G., The Programmable Economy: Envisaging
an Entire Planned Economic System as a Single Computer Through Blockchain Networks, (2017),
11
Id. citing Usman W. Chohan, Blockchain Enhancing Political Accountability? Sierra Leone
2018 Case (2018), https://ssrn.com/abstract=3147006; Kartik Hegadekatti, Analysis of Present
Day Election Processes vis-à-vis Elections Through Blockchain Technology (2017),
https://ssrn.com/abstract=2904868; Samuel Martin, Blockchain as a Solution to the United States’
Voter Turnout Issue (2018), https://ssrn.com/abstract=3177523.
12
Id. at 272, citing Richard Senner & Didier Sornette, The Holy Grail of Crypto Currencies:
Ready to Replace Fiat Money?, 53 J. ECON. ISSUES, __ (20__), https://ssrn.com/abstract=3192924.
See also Jeanna Smialek, Virtual Money and cash Must Coexist, Fed Says, WALL ST. J., March 19,
2021 at B2.
13
Id. citing Lawrence J. Trautman, Is Disruptive Blockchain Technology the Future of Financial
Services?, CONSUMER FIN. L.Q. REP. 232, 234 (2016). See also Jun Aoyagi, Daisuke Adachi,
Economic Implications of Blockchain Platforms (2018), https://ssrn.com/abstract=3132235;
Catherine Martin Christopher, The Bridging Model: Exploring the Roles of Trust and

This article proceeds in seven parts. First, we discuss the new and explosive
market for digital art. Second, we explore the evolution of the digital world and virtual
property. Third, is an explanation and historical account of the blockchain and virtual
currencies. Fourth, we explore non-fungible tokens. Fifth, we look briefly at unresolved
issues impacting the law of NFTs and provide potential solutions. Sixth, we present a few
thoughts about the future of digital property. And last, we conclude.
Enforcement in Banking, Bitcoin, and the Blockchain, 17 NEVADA L.J. 1 (2016),

https://ssrn.com/abstract=2851492; David Lee Kuo Chuen, Decentralization and Distributed
Innovation: Fintech, Bitcoin and ICO's (2017), https://ssrn.com/abstract=3107659; Shaen Corbet,
Charles James Larkin, Brian M. Lucey, Andrew Meegan Larisa Yarovaya, Cryptocurrency
Reaction to FOMC Announcements: Evidence of Heterogeneity Based on Blockchain Stack
Position (2017), https://ssrn.com/abstract=3073727; Giuseppe Giudici, Legal Problems of the
Blockchain: A Capital Markets Perspective (2018), https://ssrn.com/abstract=3240273; Peter
Gomber, Robert J. Kauffman, Chris Parker & Bruce Weber, On the Fintech Revolution:
Interpreting the Forces of Innovation, Disruption and Transformation in Financial Services, 35 J.
MGMT. INFO. SYS. 220 (2018), https://ssrn.com/abstract=3190052; Gur Huberman, Jacob Leshno
& Ciamac C. Moallemi, An Economic Analysis of the Bitcoin Payment System (2018),
https://ssrn.com/abstract=3025604; William J. Magnuson, Regulating Fintech, 71 VAND. L. REV.
1167 (2018), https://ssrn.com/abstract=3027525; William J. Magnuson, Financial Regulation in
the Bitcoin Era, 23 STAN. J.L. BUS. & FIN. 159 (2018), https://ssrn.com/abstract=3148036; José
Parra-Moyano, Tryggvi Thoroddsen & Omri Ross, Optimized and Dynamic KYC System Based
on Blockchain Technology (March 14, 2018), https://ssrn.com/abstract=3248913; Max Raskin &
David Yermack, Digital Currencies, Decentralized Ledgers, and the Future of Central Banking
(2016), https://ssrn.com/abstract=2777326; Margaret Ryznar, The Future of Bitcoin Futures, __
HOUSTON L. REV. (Forthcoming), https://ssrn.com/abstract=3127327; Anne M. Tucker & Holly
van den Toorn, Will Swing Pricing Save Sedentary Shareholders?, 2018 COLUM. BUS. L. REV. __
(2018), https://ssrn.com/abstract=3173736.
14
Id. At 275, citing Arushi Arora & Sumit Kumar Yadav, Block Chain Based Security
Mechanism for Internet of Vehicles (IoV), Proceedings of 3rd International Conference on
Internet of Things and Connected Technologies (ICIoTCT), 2018 held at Malaviya National
Institute of Technology, Jaipur (India) on March 26-27, 2018, https://ssrn.com/abstract=3166721;
Rejwan Bin Sulaiman, Applications of Block-Chain Technology and Related Security Threats
(2018), https://ssrn.com/abstract=3205732; Bjorn Lundqvist, Portability in Datasets under
Intellectual Property, Competition Law, and Blockchain (2018). Faculty of Law, Stockholm
University Research Paper No. 62, https://ssrn.com/abstract=3278580; Lee W. McKnight, Richie
Etwaru & Yihan Yu, Commodifying Trust: Trusted Commerce Policy Intersecting Blockchain and
Internet of Things (2017), https://ssrn.com/abstract=2944466; Scott J. Shackelford, Governing the
Internet of Everything: Applying the IAD and GKC Frameworks to Improve the Security and
Privacy of Things (2018). Kelley School of Business Research Paper No. 18-86.,
https://ssrn.com/abstract=3266188; Scott J. Shackelford, Smart Factories, Dumb Policy?:
Managing Cybersecurity and Data Privacy Risks in the Industrial Internet of Things (2018).
Kelley School of Business Research Paper No. 18-80, https://ssrn.com/abstract=3252498;
Lawrence J. Trautman, Mohammed T. Hussein, Louis Ngamassi & Mason Molesky Governance
of The Internet of Things (IoT), 60 JURIMETRICS 315 (2020), http://ssrn.com/abstract=3443973;
Lawrence J. Trautman & Peter C. Ormerod, Industrial Cyber Vulnerabilities: Lessons from
Stuxnet and the Internet of Things, 72 U. MIAMI L. REV. 761 (2018),
http://ssrn.com/abstract=2982629.

This dramatic extention of blockchain and other digital technology to the world of
art and music represents a new and exciting platform for creative expression. We believe
this paper is a valuable addition to the literature by providing a readable introduction and
overview of what is now known about the likely impact of blockchain technology and
non-fungible tokens to music and art. This important development should have
significant impact on the future of innovation and property law.
I. MARKET FOR DIGITAL ART EMERGES
On March 13, 2021, The Wall Street Journal reports a first sale of an entirely
digital work by auction house Christie’s, creating “a frenzy in crypto asset markets by
paying a record sum for… artwork that exists only digitally. Its authentically is verified
primarily because it carries an NFT, or digital proof of purchase that is recorded on a
digital ledger known as a blockchain.”15
Metakovan Purchase of Beeple CryptoArt
ccording to Christie’s, “a cryptocurrency investor based in Singapore called
Metakovan won Beeple’s million digital collage at auction a sale that smashed
records in markets for both art and non-fungible tokens, or NFTs.”16 As reported:
Metakovan is the founder of Metapurse, a crypto-based investment firm.

[A spokesman for Metkovan known as] Twobadour said that their fund
outbid dozens of rivals over the course of the 15-day online contest to win
Beeple’s pixilated amalgamation of irreverent drawings and fantastical
landscapes that the artist combined into a single collage called ‘Everydays:
The First 5000 Days’…
NFTs are all the rage now, but Twobadour, who spoke on
Metakovan’s behalf as the fund’s steward said he and his partner have
spent the past several years focused on amassing what might be the
world’s biggest collection of tokenized collectibles and art, worth nearly
15
Kelly Crow & Caitlin Ostroff, Crypto Investor Won record Auction of Beeple Digital Art, WALL
ST. J., Mar. 13-14, 2021 at B12.
16
Id.

$120 million combined, with Beeple serving as its star. Four months ago,
the fund paid $2.2 million for a different set of 20 Beeple works on the
online marketplace Nifty Gateway…
The artist [Beeple], whose real name is Mike Winkelmann, is
known for completing a new work each day for the past 13 years and
counting… Metapurse has been able to scoop up Beeple’s works at such
high prices because Metakovan was an early investor in cryptrcurrencies,
starting around 2013… fter buying that previous set of 20 Beeple works
in December [2020], they bought land in digital gaming spaces and built
museums to display the images before minting tokens off the virtual
experience they created. An initial 1.6 million tokens of B.20 were sold at
36 cents apiece. By [March 12, 2021] the cost of one token had risen to
$16.35, giving the tokens a collective worth of 163.5 million, according to
Coinmarketcap.com.17
Reports document that just a month before, digital art depicting “Donald J. Trump
facedown in the grass, covered in words like ‘loser,’ sold for . million, a record for a
non-fungible token, or NFT… Fittingly, the image was paid for in Ethereum, a form of
cryptocurrency that, among millennials, is almost as well known as Bitcoin.”18 Although
U.S.-centric, The New York Times provides a potential explanation for this phenomenon
by observing “Rather than elbowing past one another for reservations at the latest
restaurants… or getting into bidding wars for apartments at 740 Park Avenue, they are
one-upping one another in online auctions for jewelry, watches, furniture, sports cards,
vintage cars, limited-edition Nikes and crypto art.”19 A Christie’s spokesperson indicates
their shift in strategy “ahead of the NFT boom, but the sudden popularity of the digital
medium indicated that the art world was primed for an overhaul. ‘People are collecting
art differently now, and it’s time for some radical changes.”20 Exhibit 1 depicts an image
of Beeple’s EVERYD YS: THE FIRST 5000 D YS, 2021.21
17
Id.
18
Jacob Bernstein, Bored Rich People Spend Money, N.Y. TIMES, Mar. 21, 2021 at Styles 1-8.
19
Id. at 1.
20
Kelly Crow, NFT Works Spark Frenzy In Art World, WALL ST. J., Mar. 18, 2021 at A12.
21
EVERYDAYS: THE FIRST 5000 DAYS, 2021, Non-fungible token (jpg). 21,069 x 21,069
pixels (319,168,313 bytes). Minted on 16 February 2021, Christie’s,

Exhibit 1
EVERYDAYS: THE FIRST 5000 DAYS, 2021
Evident now, “The art market, coming off a pandemic year marked by sluggish
sales, also sees an opportunity to cozy up to a largely untapped audience of crypto-
millionaires.”22 The Wall Street Journal reports:
Christie’s is capitalizing on the momentum by reorganizing its sales in

May in part to appeal to millennials and cryptocurrency investors who
want more emerging art and NFTs, the house said. Instead of labeling its
https://www.christies.com/features/Monumental-collage-by-Beeple-is-first-purely-digital-artwork-
NFT-to-come-to-auction-11510-7.aspx.
22

two biggest sales by their artistic styles like impressionist-modern and

postwar-contemporary Christie’s will slot its offerings by time frame,
specifically the 20th century and 21st century.23
More recently, reports emerge of a New York Times journalist who crafted a NFT
from a digital reproduction of his printed story written on the topic of NFTs.24
ccordingly, Mr. Roose writes, “I listed it on Wednesday morning, and before I went to
bed that night, the top bid had risen to more than $30,000. When I woke up the next
morning, it was 43,000. I the final hour of the auction… a bidding war broke out.”25
Bids from more than 30 were received, resulting in a winning offer of “350 Ether, or
about $560,000. A few minutes later, after the auction platform had taken its cut, nearly
500,000 in cryptocurrency landed in my digital wallet.”26 Exhibit 2 is an image of Mr.
Roose’s winning art. Mr. Roose reflects:
Some NFT collectors believe that owning early, prominent crypto-tokens,

will eventually be like owning rare, first-edition books or priceless
paintings. [NFT collector] Mr. Ouyang admitted that the value of my NFT
was ‘still highly speculative and subjective.’ But he said he believed that
NFTs and other blockchain-based technologies would ultimately reshape
the entire media landscape, allowing creators to reimagine how they create
and monetize their works.
This particular NFT from The New York Times is one of the
answers and will become a historical landmark in this inevitable
movement,’ he said. ‘That’s why I think it is valuable.’27
23
24
Kevin Roose, $560,000 For a Picture Of My Word, N.Y. TIMES, Mar. 27, 2021, at B1, citing
Kevin Roose, Buy This Column on the Blockchain, N.Y. TIMES, Mar. 25, 2021, at B1.
25
Kevin Roose, $560,000 For a Picture Of My Word, N.Y. TIMES, Mar. 27, 2021, at B1.
26
Kevin Roose, $560,000 For a Picture Of My Word, N.Y. TIMES, Mar. 27, 2021, at B1-7.
27
Kevin Roose, $560,000 For a Picture Of My Word, N.Y. TIMES, Mar. 27, 2021, at B1-7.

Exhibit 2
A Picture of My Words Was Worth $560,000 in the NFT Market
History of Digital Art
Christie’s provides a history of digital art, “dating back to the 1 0s. But the ease
of duplication traditionally made it near-impossible to assign provenance and value to the
medium.”28 During November 2018, Christie’s first transaction of this type takes place,
“when it registered the entire 42-lot Barney A. Ebsworth Collection of 20th-century
American Art on the Artory blockchain. The collection totaled more than $322 and
28
Beeple: Visionary Digital rtist in the Forefront of NFTs, Christie’s,
NFT-to-come-to-auction-11510-7.aspx (last viewed Mar. 26, 2021).

marked the first time an art auction at this price level had been digitally recorded.”29
Robert lice’s Block 21 was offered by Christie’s during October, 2020, “as part of its
Post War & Contemporary rt Day sale… The first work of art with an embedded NFT
to be offered at a traditional auction house, the lot attracted non-traditional bidders and
crypto enthusiastic alike and sold for almost 11 times its low estimate.”30 Christie’s
states:
The recent introduction of Non-fungible tokens (NFTs) and blockchain

technology has enabled collectors and artists alike to verify the rightful
owner and authenticity of digital artworks. EVERYDAYS: THE FIRST
5000 DAYS will be delivered directly from Beeple to the buyer,
accompanied by a unique NFT encrypted with the artist’s unforgeable
signature and uniquely identified on the blockchain.31
dditional transactions taking place before the Christie’s million Beeple’s
sale are reported by financial journalist Jason Zweig who notes, “In February [2021], an
NFT representing the Nyan Cat video meme, which looks like a feline Pop-Tart dragging
a rainbow through outer space, sold for more than $500,000. A video NFT of LeBron
James dunking a basketball sold for 208,000.”32
29
30
31
32
Jason Zweig, The Method to the Madness Of a $69 Million Art Sale, WALL ST. J., Mar. 20-21,
2021 at B5.

Global Internet Use
As a point of reference, Exhibit 3 depicts global internet use estimates as of first
quarter, 2021. For readers in the United States, please note and reflect upon the
significance of population penetration in other parts of the world.
Exhibit 3
Evolution of Digital Art
Rapid technological changes brought about by significant product developments
such as the Guttenberg Press often help facilitate Renaissance-like artistic creativity. The
Guttenberg “formation of the printing press in the fifteenth century paves the way of
mass production of texts and images. With new communication capacity being enabled
by this technological advancement, the widespread of material and intellectual exchange
becomes possible.”33 Modernly, “many of the working approaches used by digital artists
33
Bo Xing, Creativity and Artificial Intelligence: A Digital Art Perspective 1 (2018),

can be traced back to the early days… of the computer development. Since the
emergence of the World Wide Web in the 1990s, a diverse variety of opportunities were
further opened for visual arts with seemingly infinite permutable dimensions.”34 Bo Xing
attributes the emergence of digital art to three primary factors:
Firstly, it is such a common practice for artists, in particular young

professionals, to use a wide range of media arts for creative purposes,
producing static/dynamic images, as well manipulating sound tracks and
text scripts;
[S]econdly, digital art is not an isolated practice, divided from
other forms of arts. It is essentially a methodology that incorporates all
types of interconnections with other art exercises together with other
manner of presentations and enquiries, illustrating that we are witnessing
and experiencing a new wave of creative revolution; [and]
[L]ast but not the least, it is worth noticing that an army of digital
artists are now working in numerous industries shoulder to shoulder with
hardware and software practitioners at the forefront of innovation.35
Just as in the physical world, the advent and growth of the electronic virtual world
(“VW”) has fostered a need for the creation of virtual currencies and payment systems.
Generally, less than a decade old, many of these synthetic worlds boast significant
worldwide populations and usage. While current laws and the scope of regulations
struggle to keep up with rapid technological change, policy makers and criminal
enforcement officials face significant new challenges.
II. EVOLUTION OF THE VIRTUAL WORLD
Synthetic worlds are described as “graphically-rich, three-dimensional (3D),
electronic environments where members assume an embodied persona (i.e., avatars) and
engage in socializing, competitive quests, and economic transactions with globally
34
Id.
35
Id. citing J. Sefton-Green & V. Reiss, Multimedia literacies: developing the creative uses of
new technology with young people. In: Sefton-Green J (ed) Young People, Creativity and New
Technologies: The Challenge of Digital Arts. (Routledge, 1999); A. Bentkowska-Kafel,T. Cashen
& H. Gardiner, Digital art history: a subject in Transition (2005).

distributed others.”36 Virtual worlds (used here synonymously with the term synthetic
worlds) have millions of users interacting 24 hours a day 365 days a year.37 These virtual
worlds consist of “immersive, simulated, persistent, and dynamic environments that
include rich graphical three dimensional spaces, high fidelity audio, motion, viewpoint,
and interactivity.”38 panel of information systems professionals observe, “The term
Virtual Worlds describes online immersive ‘game like’ environments where participants
engage in socialization, entertainment, education, and commerce. As a genre, these
environments are classified as massively multiplayer online (i.e, MMO) virtual
environments.”39
Genesis of Virtual Worlds
Debuting in 1985, Habitat is acknowledged as an early example of a virtual
environment, using:
Two-dimensional graphics to represent spaces such as home, hotel and

arcade, where cartoon-style characters controlled by users could talk and
interact. The landscape was scattered with vending machines from which
users could purchase virtual items ranging from weapons to furniture.
Purchases were paid with a currency called Tokens, which was distributed
to the users for free. The most desirable items were spare heads that could
be used to customize one’s character.40
36
Ulrike Schultze, Starr Roxanne Hiltz, Bonnie Nardi, Julie Rennecker & Susan Stucky, Using
Synthetic Worlds for Work and Learning, 22 Communications of the Association for Information
Systems 351 (2008).
37
Mark W. Bell, Edward Castronova & Gert G. Wagner, Surveying the Virtual World: A Large
Scale Survey in Second Life Using the Virtual Data Collection Interface (VDCI), 7 (June 12,
2009), http://ssrn.com/abstract=1418562.
38
Ulrike Schultze & Wanda J. Orlikowski, Virtual Worlds: A Performance Perspective on
Globally Distributed, Immersive Work, 21 Information Systems Research 810 (2010).
39
Brian Mennecke, Edward M. Roche, David A. Bray, Benn Konsynski, John Lester, Michael
Rowe & Anthony M. Townsend, Second Life and Other Virtual Worlds: A Roadmap for
Research, 28th International Conference on Information Systems (ICIS) (Dec. 11, 2007),
40
Vili Lehdonvirta, Terhi-Anna Wilska & Mikael Johnson, Virtual Consumerism: Case Habbo
Hotel, 12 Information, Communications & Society 1059, 1060 (2009), citing J. Dibbell, My Tiny
Life: Crime and Passion in a Virtual World, New York: Henry Holt (1998) 172.

Edward Castronova reports that while virtual worlds “can trace their history back
to on-line games on the ARPA-net in the 1980s, the game that started the recent
explosion of VWs was Meridian 59, or M59, begun in 1995 by Andrew and Chris
Kirmse, two Microsoft interns.”41 Making its debut during October 1996, M59 survived
almost four years, “when competitive pressure from much larger [virtual worlds] forced
its closure.”42 The first of these much larger [virtual worlds] was Ultima Online (owned
by Electronic Arts), and launched during Fall 1997; EverQuest launched in Spring 1999;
and The Sims Online (the first [virtual world] not based on killing and adventuring)
became a major title and available during 2002.43 Note that “In both Habitat and The
Sims, shopping is conceived of as simulation: ‘consumption play.’”44 Moreover:
In so-called massively-multiplayer online role-playing games

(“MMORPGs”) launched in the late 1 0s, consumption play began to be
mixed up with real money. In Ultima Online and EverQuest, hundreds of
thousands of players ‘traded’ with other players to exchange game assets
accumulated during months of play for other game assets. As with the
previous systems, the economy was intended to be like Monopoly: no real
money would change hands. But in 1999, some players put their game
assets on auction at eBay. Perhaps surprisingly, they received bids from
other players. When an auction was completed, payment was carried out
using ordinary means such as cheque or money order. The two players
then met up in the game and the seller handed the auctioned object to the
buyer. This way, an exchange value measured in US dollars could soon
be observed for virtual goods ranging from castles to gold nuggets. In
2002, a massively multiplayer online version was created of The Sims, and
real-money trading followed.45
41
Edward Castronova, Virtual Worlds: A First-Hand Account of Market and Society on the
Cyberian Frontier (December 2001). CESifo Working Paper Series No. 618. 6
42
Id.
43
Id. at 8.
44
Hotel, 12 Information, Communications & Society 1061 (2009).
45
Hotel, 12 Information, Communications & Society 1061 (2009),

Virtual World Characteristics
An excellent tour guide to a virtual world is provided by Edward Castronova in
his hugely influential seminal article titled Virtual Worlds: A First-Hand Account of
Market and Society on the Cyberian Frontier.46 Accordingly:
To enter a VW, the user is first connected to the server via the
Internet. Once the connection is established, the user enters a program
that allows them to choose an avatar for themselves. In all of the major
VWs, one can spend an extraordinarily long time at this first stage,
choosing the appearance of the avatar as well as its abilities. Always
wondered what it is like to be tall? Choose a tall avatar. Want to be one
of the smart people in society? Make your avatar a brilliant wizard. Need
to get out your aggressions? Give your avatar immense strength and a
high skill in wielding a mace. Think it would be fun to be a beautiful
dark-skinned woman? Go for it. These choices occur under a budget
constraint that ensures equality of opportunity in the world: Your mace-
wielding ogre will be dumb, and your brilliant wizard will have a glass
jaw. At the same time, the budget constraint ensures equality among
avitars along dimensions that most people think should not matter for
social achievement. In particular, male and female avatars have the same
initial budget of skills and attributes. Avatars whose physical
characteristics (i.e. skin tone, size) are associated with any benefit in the
game must accept some compensating disadvantage. Any inequality in
the VW can only be due to one of two things: (a) a person’s choices when
creating the avatar, or (b) their subsequent actions in the [virtual world].
Once the avatar is created, it is deposited some place in the virtual
world. Because most of the laws of Earth science apply, most of the time,
it is quite easy to ‘become’ the avatar as you perceive the world through
its eyes. You cannot run through walls; you can only see where you are
looking…. If you jump off a roof, you will fall and hurt yourself. When
the sun goes down, it gets darker and you will need a light. If you do
something over and over, you will get better at it. You can give things to
another avatar if you wish…. You can kill them if you wish. nd they can
kill you.
Of course the natural laws of Earth need not apply in a world that
exists entirely as software, and much of what defines an avatar’s
uniqueness is its ability to bend or break some of these laws and not
others. Depending on the skills chosen, an avatar might be able to fly, see
for miles, hypnotize, heal wounds, teleport themselves, or shoot great
flaming fireballs at other avatar’s heads. gain a budget constraint
46
Cyberian Frontier (December 2001). CESifo Working Paper Series No. 618,

applies: those who can heal or hypnotize often have difficulty summoning
a fireball worthy of mention. As a result, avatars come to view themselves
as specialized agents, much as workers in a developed economy do. The
avatar’s skills will determine whether the avatar will be a demander or
supplier of various goods and services in the VW. Each avatar develops a
social role.47
As an example of some of the ways in which the virtual world community is far
different from just an electronic extension of the real world, consider Piotr Czerski’s
‘We, the web kids’ manifesto, as it appears on You Tube:
The Internet to us is not something external to reality but a part of it: an

invisible yet consistently present layer intertwined with the physical
environment. We do not use the Internet, we live on the Internet and on
it…. [there is] a natural Internet aspect to every single experience that has
shaped us: we made friends and enemies online, we prepared cribs for
tests online, we planned parties and studying sessions online, we fell in
love and broke up online.48
Often thought of as “technologies of play, synthetic worlds range from
massively multiplayer online games (MMOGs) such as World of Warcraft, to
virtual reality environments such as Second Life.”49
[V]irtual worlds have gained legitimacy in business and educational

settings for their application to organizational endeavors such as
distributed collaboration, virtual teamwork, multimedia meetings and
training, as well as real-time simulation…. nd in organizations such as
hospitals, universities, and the military, virtual worlds are being used for
action learning and immersive training (through simulations and
rehearsals). Virtual worlds are also emerging as interesting sites of
innovation and experimentation among scientists, educators, and software
teams…. 50
47
Cyberian Frontier (December 2001). CESifo Working Paper Series No. 618. 11,
48
Ulrike Schultze, Performing Embodied Identity in Virtual Worlds, 23 EURO. J. INFO. SYS. 84
(2014).
49
Ulrike Schultze, Starr Roxanne Hiltz, Bonnie Nardi, Julie Rennecker & Susan Stucky, Using
Synthetic Worlds for Work and Learning, 22 Communications of the Association for Information
Systems 351 (2008).
50
Ulrike Schultze & Wanda J. Orlikowski, Virtual Worlds: A Performance Perspective on
Globally Distributed, Immersive Work, 21 INFORMATION SYSTEMS RESEARCH 810 (2010). See
also Ulrike Schultze & Jo Ann Brooks, An Interactional View of Social Presence: Making the

Professor Ulrike Schultze states, “Technological advancement is continuously
changing the issues and questions [Information Systems] researchers need and want to
explore.”51 s we see in our daily lives, “technological developments are fundamentally
changing the nature of work and institutions as the workforce is becoming more mobile,
virtual and global.”52 This trend was both accelerated and disrupted by the 2020-2021
global pandemic.53 Professor Schultze observes:
[T]echnology is becoming so entangled in individuals’ everyday lives, that

traditional dualisms of work-vs-play, actual-vs-virtual and human-vs-
machine are rendered less and less meaningful. Highly personal uses of
technology (e.g. wearables and ubiquitous computing), where issues of
multiple embodiments and the integration of technology with the user as
an embodied, sensory being, form part of the research agenda Yoo (2010)
outlines for experiential computing. Experiential computing is contrasted
with traditional computing that occurs as a separate activity in
organizations and that is driven by the goal of improving organizational
performance. Defined as ‘digitally mediated embodied experiences in
everyday activities through everyday artifacts that have embedded
computing capabilities (Yoo, 2010), experiential comnputing is moving
the field of IS beyond the organization.54
How Large the Virtual World?
The question of the size of the known universe of virtual worlds can be on several
different levels. From the standpoint of universes known and postulated, physicist Brian
Greene has written that the term universe “has given way to other terms that capture the
Virtual Other ‘Real,’ INFO. SYS. J. 1 (2028) (discussing how social presence is accomplished in
virtual environments) .
51
Ulrike Schultze, What Kind of World Do We Want to Help Make With Our Theories?, 27 INFO.
& ORGANIZATION 60, 65 (2017).
52
& ORGANIZATION 60, 65 (2017). See also Lawrence J. Trautman, Rapid Technological Change
and U.S. Entrepreneurial Risk in International Markets: Focus on Data Security, Information
Privacy, Bribery and Corruption, 49 CAPITAL U. L. REV. ___ (2021),
53
Eddie Bernice Johnson & Lawrence J. Trautman, The Demographics of Death: An Early Look
at Covid-19, Cultural and Racial Bias in America, 48 HASTINGS CON. L. Q. 357 (2021),
54
& ORGANIZATION 60, 65 (2017).

wider canvas on which the totality of reality may be painted… [many terms are] among
the words used to embrace not just our universe but a spectrum of others that may be out
there.”55 Among these possible realities, depicted by physicist Greene as his eighth
variety of possible multiverse (the Simulated Multiverse),56 asks the disturbing question,
“How do you know you are not hooked into the Matrix?”57 In his query about whether “a
distant descendant, or an army of such descendants possibly millennia down the road”58
are responsible for the universe in which you perceive yourself, your loved ones, pets,
everything? Pursuit of this inquiry much further is far beyond the scope of this article.
However, let me just plant the intellectual seed for those having additional interest. As
more fully demonstrated in the pages to follow, many of us by the millions are engaged
deeply in simulated computer worlds. Professor Greene discusses the curious work of
Oxford philosopher Nick Bostrom, and observes the likelihood that our descendants will
continue to create simulated universes in large numbers, “filled with a great many self-
aware, conscious inhabitants.”59 s Greene observes, “if someone can come home at
night, kick back, and fire up the create-a-universe software, its easy to envision that they
will not only do so, but do so often.”60 Taken to its logical conclusion, the Bostrom
reasons that, “if the ratio of simulated humans to real humans were colossal, then brute
statistics suggests we are not in a real universe. The odds would overwhelmingly favor
the conclusion that you and I and everyone else are living within a simulation…”61
Enough then for a few words about where all this might lead according to the math and
55
BRIAN GREENE, THE HIDDEN REALITY, ALFRED A. KNOPF 4 (2011).
56
57
58
59
60
61

conjecture from some of our leading physicists. Now, let us turn our attention to
contemporary virtual worlds, their markets, economies, and what we might conclude
about foundational property law for virtual worlds. Consider:
In a society marked by globalization, virtual work and the use of social

media, individuals are increasingly experiencing their lives in a luminal
space that combines virtual and actual reality. By posting blogs, images,
tweets, profiles and films that materialize them in multiple settings,
technology users create digital bodies that extend their physically
embodied senses and turn them into cyborgs, that is, a dialectic synthesis
between physical and digital bodies. In light of these multiple
embodiments the production of self-identity, that is, ‘the self as reflexively
understood by the person,’ becomes an increasingly complex project that
involves the ongoing negotiation of what identity performances count as
‘real.’62
It appears that growth of entertainment oriented virtual environments
continues to be explosive worldwide. By 2004, more South Koreans are reported
“to play in virtual worlds than watch television.”63 Castronova observes in 2001,
that:
[T]here is often very little public information about the subscriber base of
the different [virtual worlds]. EverQuest’s base was public information
until August 31, 2001, when Verant stopped publishing the data. The
official reasons for the decision were openly strategic: why help
competitors by releasing data on the customer base?64
62
Ulrike Schultze, Performing Cyborgian Identity: Enacting Agential Cuts in Second Life, in
‘Beyond Interpretivism? New Encounters With Technology and Organization, L. Introna L, D.
Kavanaugh, S. Kelly, W. Orlikowsky & S. Scott (eds, Ch 11, Springer 2016) (internal citations
omitted).
63
Joshua Fairfield, Virtual Property, 85 Boston U L.R. 1047, 1061 (2005),
http://ssrn:com/abstract=807966, citing Mimi Luse, More than a Game, E.Peak, July 19, 2004,
http://www.peak.sfu.ca/the-peak/2004-2/issue12/fe-online.html.
64
Cyberian Frontier (Dec. 2001). CESifo Working Paper Series No. 618. 8,
http://ssrn.com/abstract=294828 at n6.

Writing about virtual land NFTs in March of 2021, professor Michael M.
Downing remarks about how “early 2021 has seen these markets explode in
popularity.”65
Stickiness; The Virtual World is Addictive
Living in or visiting the virtual world for many seems to be a highly addictive and
“sticky” experience. Castronova observes as early as 2001 that “as it turns out, VWs
seem to be able to offer entertainment that is attractive enough to many people that they
sacrifice major portions of their time to it. A survey of EverQuest users…. Indicates that
the typical user spends about 22 hours per week in the game.”66 Another survey by
Castronova, conducted about the same time found that “the median user devotes 4 hours
per day and more than 20 hours per week….”67 During Nicholas Yee’s study, he found
that:
[M]any people used the term ‘addiction’ to describe their own behavior,
perceiving their time in the VW as a source of serious conflict with
various Earth activities and relationships. If we take the economist’s
view, however, and see their behavior as rational choice, we must
conclude that VWs offer something that is perhaps a bit more than a mere
entertainment to which the players have become addicted. Rather, they
offer an alternative reality, a different country in which one can live most
of one’s life if one so chooses. nd it so happens that life in a VW is
extremely attractive to many people. A competition has arisen between
Earth and the virtual worlds, and for many, Earth is the lesser option.68
65
Michael M. Dowling, Fertile LAND: Pricing non-fungible tokens (Mar. 18, 2021),
66
Cyberian Frontier (Dec. 2001). CESifo Working Paper Series No. 618. 6
http://ssrn.com/abstract=294828, citing Yee 2001…
67
68

As to virtual world “stickiness,” it is significant to note that “the tendency to network
monopoly is enhanced by the fact that most people seem to be willing to ‘live’ in at most
one fantasy world at a time, and switching is costly as it can take weeks to become
familiar with a new world.”69
Lehdonvirta and Virtanen ask the questions: “why are so many people suddenly
willing to spend money on such seemingly frivolous objects? Is it a fad that will die
away as suddenly as it started? Accordingly:
Lehdonvirta suggests that the value attached to virtual objects is a

reflection of how important digital spaces have become in our lives: how
many aspects of life from hobbies, friendships, and work are now played
out in part through mobile phones, social networking sites, console games,
and online communities. Virtual goods are built so as to have very
tangible functions in these digital spaces. Sociologists moreover note that
goods are valued not only for their functional and aesthetic attributes, but
also for their symbolic uses in demarcating identities and social
relationships. As a result, consumers are now buying virtual goods for
many of the same reasons they buy material goods. As long as we live in
a consumer society where digital spaces increasingly pervade into
everyday life, the present attraction to virtual goods is unlikely to die
away.70
III. THE BLOCKCHAIN AND VIRTUAL CURRENCIES
The Blockchain
Much has been written about the likely impact of blockchain technology during
its brief, approximate decade-long existence. As shown by the recent gain in popularity
of NFTs, “Rapid introduction and diffusion of technological changes throughout society,
such as the blockchain, continue to [challenge] the ability of law and regulation to keep
69
70
Vili Lehdonvirta & Perttu Virtanen, A New Frontier in Digital Content Policy: Case Studies in
the Regulation of Virtual Goods and Artificial Scarcity, 2 Policy & Internet 7, 12 (2010).

pace.”71 It appears that Blockchain is proving as disruptive to entrenched societal
institutions and business models as: electricity, radio, television, or the Internet.
According to aron Wright and Primavera De Filippi, “[t]he blockchain is a
distributed, shared, encrypted-database that serves as an irreversible and incorruptible
public repository of information. It enables, for the first time, unrelated people to reach
consensus on the occurrence of a particular transaction or event without the need for a
controlling authority.”72 In sum, “blockchain is simply a data structure that leverages
hash functions and encryption to provide the security of information like never seen
before.”73 Valentina Gatteschi explains the progression of blockchain technology:
Three different blockchain evolutions can be identified: Blockchain 1.0,

2.0, and 3.0. Blockchain…. Blockchain 2.0 is about registering,
confirming, and transferring contracts or properties. Application fields
range from the use of blockchain as a decentralized copy of local
databases (especially for public records and attestations) to more
sophisticated applications. The most relevant feature of Blockchain 2.0 is
the integration with smart contracts 1.0 is strongly related to Bitcoin and
cryptocurrencies…. In Blockchain 3.0, the application field is no longer
restricted to finance and goods transactions, but embraces sectors like
government, health, science, education, and more.”74
The Mechanics of Blockchain
For purposes of readability and our intended audience for this Article, we will
minimize the technical aspects and mechanics of blockchain creation. However,
Trautman and Molesky report elsewhere:
71
Trautman & Molesky, supra note 1 at 239.
72
See Trautman & Molesky, supra note 1 at 239, citing Aaron Wright & Primavera De Filippi,
Decentralized Blockchain Technology and The Rise of Lex Cryptographia 2 (Mar. 20, 2015,
revised July 25, 2017) (unpublished manuscript), https://ssrn.com/abstract=2580664. See also
John W. Bagby, David Reitter & Philip Chwistek, An Emerging Political Economy of the
BlockChain: Enhancing Regulatory Opportunities (2018), https://ssrn.com/abstract=3299598.
73
See Trautman & Molesky, supra note 1 at 239, citing Aaron Wright & Primavera De Filippi.
74
See Valentina Gatteschi, Fabrizio Lamberti, Claudio Demartini, Chiara Pranteda & Victor
Santamaria, To Blockchain or Not to Blockchain: That Is The Question, IT Professional 62
(March/April 2018), IEEE Computer Society.

Blockchain is a modification and conglomeration of existing

technology and concepts. Michael Scott explains, “The blockchain is a
testament to the power of a single cryptographic primitive – the hash
function. Really nothing else is required, so if you can get your head
around the hash function, you can understand the basics of the
blockchain.”75 Mr. Scott describes a hash by stating:
A cryptographic hash function takes one input and calculates one output.
For example, for the input ‘We hold these truths to be self-evident’, the
well known hash function SHA256 produces the output:
84ba74b2661c87470665a1a5f5ab526afcf266f8c5effb795bef2d2514a8afd3
For the slightly different input “we hold these truths to be self-evident”
(note the lower case w), the output is
246160c031a4ddd9d940e931721fdec7e72087c8eccf5ea5621bb15d22959c
1976
The above examples provide information about hash functions. Mr. Scott writes:
The output bears no obvious relationship to the input, indeed it looks

completely random. A tiny change to the input produces a completely
different output…. given just the output it’s impossible to determine the
input. For this reason the hash function is often called a “one way” hash
function. Also, it’s impossible to find two different inputs which give the
same output. For the function SHA256, the 256 refers to the fact that the
output is always the same length (actually 256 bits), independent of the
length of the input.77
Blockchain gets its names from the chaining of the hash. Mr. Scott provides us
with a diagram appearing here as Exhibit 4.78
75
See Michael Scott, The Essence of the Blockchain,1 (unpublished manuscript) (on file with
authors).
76
Id.
77
Id.
78
Id. at 2.

Exhibit 4
A Simple Hash Chain
Mr. Scott writes the following explanation:
Here the T are “transactions” of some sort. Examine this diagram for a
while, and appreciate the power of the chaining. The value H3 is
calculated by hashing the whole of block 3, which includes the hash of
block 2, which in turn includes the hash of block 1 etc. Note that because
of the one-wayness of the hash function, this chain can only be calculated
from left-to-right. So already we have some of the properties we want.
This hash chain can potentially be used as an immutable record of
transactions. Any attempt to tamper with it can be detected, as the hashes
will change.79
Virtual Currencies
The genesis of virtual currency appears to result from the massive popularity of
online games.80 As of March 21, 2021, Coinmarketcap.com lists 8,905 different
79
Id.
80
See generally Hiroshi Yamaguchi, An Analysis of Virtual Currencies in Online Games (Sept. 1,
2004), http://ssrn.com/abstract=544422; Vili Lehdonvirta, Real-Money Trade of Virtual Assets:
New Strategies for Virtual World Operators (2008). VIRTUAL WORLDS, Ipe, Mary, ed., pp.
113-137, Icfai University Press, Hyderabad, India (2008), http://ssrn.com/abstract=1351782;
Levent V. Orman, Virtual Money in Electronic Markets and Communities (June 7, 2010). ICAST
Journal of Institute for Communication, Social Informatics, and Technology, Johnson School
Research Paper Series No. 27-2010, http://ssrn.com/abstract=1621725; Sulin Ba & Dan Ke,
Optimal Pricing and Permissions Strategy for Virtual Good Creators in Second Life (Sept. 15,
2008), http://ssrn.com/abstract=1271684; Vili Lehdonvirta, Virtual Item Sales as a Revenue
Model: Identifying Attributes that Drive Purchase Decisions, 9 Electronic Commerce Research,
Vol. 9, 97 (2009), http://ssrn.com/abstract=1351769; David A. Bray & Benn Konsynski, Virtual
Worlds: Multi-Disciplinary Research Opportunities, 38 The DATA BASE for Advances in
Information Systems, Special Issue on Virtual Worlds, (2007), http://ssrn.com/abstract=1016485;
Sukwon Thomas Kim, Why Bitcoin?: Structure and Efficiency of Markets for Online Game
Currency (Dec. 18, 2013), http://ssrn.com/abstract=2334000; Matthew Elias, Bitcoin: Tempering
the Digital Ring of Gyges or Implausible Pecuniary Privacy (Oct. 3, 2011),

cryptocurrencies, having a total market capitalization of approximately $1.782 trillion.81
This contrasts with 1,935 cryptocurrencies and aggregate market capitalization of about
$191.54 billion reported by professor Trautman at September 11, 2018.82 And, just a little
more than two years prior, as of July 15, 2016, professors Trautman and Harrell report
that the market capitalization of virtual currencies at that time approximates just $13.01
billion.83
Ranked by market capitalization at March 21, 2021, the top ten cybercurrencies
are: Bitcoin ($1.073 trillion); Ethereum ($205.48 billion); Binance Coin ($41.351
billion); Tether ($39.616 billion); Cardano ($38,288 billion); Polkadot ($34,199 billion);
XRP ($23.489 billion); Uniswap ($17.416 billion); Litecoin ($13.016 billion); and
Chainlink ($12.075 billion).84 Note that as of the relevant date, Bitcoin (BTC) comprised
60.2 percent of all virtual currency market cap, while Ethereum (ETH) approximated
11.5 percent.85
Bitcoin
Influenced by ideas from b-money86 and Hashcash,87 “Bitcoin is a cryptographic
object represented as a chain of digital signatures over the transaction in which the coin
http://ssrn.com/abstract=1937769; Jun-Sok Huhh, An Economic Analysis on Online Game Service

(Aug. 28, 2009), http://ssrn.com/abstract=1335120.
81
All Cryptocurrencies, Coinmarketcap.com (Mar. 21, 2021), https://coinmarketcap.com/.
82
Lawrence J. Trautman, Bitcoin, Virtual Currencies and the Struggle of Law and Regulation to
Keep Pace, 102 MARQ. L. REV. 447, 453 (2018), https://ssrn.com/abstract=3182867.
83
See Lawrence J. Trautman & Alvin Harrell, Bitcoin Versus Regulated Payment Systems: What
Gives?, 38 CARDOZO L. REV. 1041, 1053 (2017), http://ssrn.com/abstract=2730983.
84
See All Cryptocurrencies, supra note__ [now just 3 ahead]
85
See All Cryptocurrencies, supra note__ [now just 3 ahead]
86
Joshua A. Kroll, Ian C. Davey, & Edward W. Felten, The Economics of Bitcoin Mining or,
Bitcoin in the Presence of Adversaries, The Twelfth Workshop on the Economics of Information
Security (WEIS 2013) 3, Washington, DC, June 11-12, 2013, citing W. Dai, b-money,
http://www.weidai.com/bmoney.txt (1998),
http://www.weis2013.econinfosec.org/papers/KrollDaveyFeltenWEIS2013.pdf.

was used.”88 Bitcoin “aims to be completely distributed, free of central authorities or
points of control, and at least somewhat anonymous.”89 As shown in Exhibit 5, Bitcoin
has grown rapidly, from a mere idea during 2009 to a legitimate currency by 2021, priced
at over $52,000 each on March 24, 2021,90 and market capitalization of bitcoins in
circulation, valued in excess of $1 trillionUS during late March, 2021.91
Exhibit 5
Bitcoin Market Price 2009-2021
87
Id. citing A. Back et al., Hashcash-a denial of service counter-measure,
http://www.hashcash.org/papers/hashcash.pdf (2002).
88
Id.; See also Robert McMillan, The Two Sides of Bitcoin: It’s a Crypto-anarchist rebuke of the
Fed! No, It’s the Future of Payments! Inside the fight for the soul of a New Currency, WIRED 96
(April, 2014).
89
Id.
90
Blockchain.com, Market Price: The Average Market Price Across Major Bitcoin Exchanges,
https://www.blockchain.com/charts/market-price (last viewed Mar. 26, 2021);
91
Blockchain.com, Market Capitalization (USD), https://www.blockchain.com/charts/market-cap
(last viewed Mar. 26, 2021); See generally Robin Teigland, Zeynep Yetis & Tomas Olov Larsson,
Breaking Out of the Bank in Europe - Exploring Collective Emergent Institutional
Entrepreneurship Through Bitcoin 3 (May 11, 2013), http://ssrn.com/abstract=2263707; See also
generally David Christopher Vitt, Breaking Bitcoin: Does Cryptocurrency Exchange Activity Lead
to Increased Real Activity Outside Cryptocurrency Exchanges? (Dec. 5, 2013),

Threat of Data Breach
Data breach negatively impacts many aspects of modern life and remains a threat
to individuals,92 business enterprises,93 and all nation state actors.94 While the integrity of
blockchain distributed ledger technology seems to hold at this point, several entities
actually holding blockchain assets have been breached. One example of “a smart-
contract-based attack happened on Ethereum in June 2016, when about $60 million was
stolen.”95 More recently, customers of cryptocurrency company Coinbase suffered from a
similar hack, resulting in “drained accounts.”96 Accordingly, attorneys Cohen, et al.,
warn, “Ensure you understand where the underlying work referenced by your NFT is
stored. In most cases, the work is not actually stored on the blockchain and the NFT will
“point” to a traditional internet site where the work is housed.”97
Theft of virtual currencies and other digital assets from data breach takes place in
several ways. As Andrew Balthazor describes, “Crypto-theft occurs when a person
92
Lawrence J. Trautman, Mohammed T. Hussein, Emmanuel U. Opara, Mason J. Molesky &
Shahedur Rahman, Posted: No Phishing, 8 EMORY CORP. GOV. & ACCT. REV. (2021),
http://ssrn.com/abstract=3549992;
93
Kenneth A. Bamberger, Ran Canetti, Shafi Goldwasser, Rebecca Wexler & Evan Zimmerman,
Verification Dilemmas, Law, and the Promise of Zero-Knowledge Proofs (Feb. 7, 2021),
https://ssrn.com/abstract=3781082 ; Michael Mendelson, From Initial Coin Offerings to Security
Tokens: A U.S. Federal Securities Law Analysis, 22 STAN. TECH. L. REV. 52 (2019); Lawrence J.
Trautman, Seletha Butler, Frederick Chang, Michele Hooper, Ron McCray & Ruth Simmons,
Corporate Directors: Who They Are, What They Do, Cyber and Other Contemporary
Challenges,http://ssrn.com/abstract=3792382; Lawrence J. Trautman & Neal Newman, Securities
Law: Overview and contemporary Issues, http://ssrn.com/abstract=3790804; Lawrence J.
Trautman & Peter C. Ormerod, Corporate Directors' and Officers' Cybersecurity Standard of
Care: The Yahoo Data Breach, 66 AM. U. L. REV. 1231 (2017), http://ssrn.com/abstract=2883607.
94
Lawrence J. Trautman, Is Cyberattack The Next Pearl Harbor?, 18 N.C. J. L. & TECH. 232
(2016), http://ssrn.com/abstract=2711059.
95
See Gatteschi, et. al., supra note 68 at 68. See also Adam J. Kolber, Not-S-Smart Blockchain
Contracts and Artificial Responsibility, 21 STAN. TECH. L. REV. 198 (2018).
96
Kellen Browning, Coinbase Users Got Hacked, N.Y. TIMES, Mar. 27, 2021, at B1.
97
Daniel S. Cohen, Clifford C. Histed, Jeremy M. McLaughlin, Jonathan M. Miner & Anthony
R.G. Nolan, The Coming Blockchain Revolution in Consumption of Digital Art and Music: The
Thinking Lawyer’s Guide to Non-Fungible Tokens (NFTS), XI NATIONAL L.J. (Mar. 28, 2021),
https://www.natlawreview.com/article/coming-blockchain-revolution-consumption-digital-art-
and-music-thinking-lawyer-s.

dispossesses the rightful owner of the address’s bitcoin without the true owner’s consent.
This may happen because the private key (which controls the bitcoin address) was
compromised, which is what occurred in the Mt. Gox hack.”98 Observe that “Private keys
are stored in any number of ways: digitally, online, offline, encoded into devices, or
written down on paper.99 Crypto-thieves acquire an address’s private key by hacking,
malware, social engineering, coercion, or any other manner of taking the private key from
a person.”100 Consider:
The thief then uses the stolen private key to send the address’ bitcoin to
another address under the thief’s control, stealing the bitcoin from the true
owner. Alternatively, an owner may be extorted or forced to transfer
cryptocurrency to a thief’s address without necessarily surrendering
private keys. For example, criminals may infect a system with ransomware
(a form of malicious computer code), which infects a system and denies
access to user files until a bitcoin payment is made to a specific address.101
IV. HOW NON-FUNGIBLE TOKENS MAY SOLVE ART WORLD PROBLEMS
Mechanism of Action
Financial journalist Jason Zweig, writing for The Wall Street Journal observes
that while previously discussed “prices are baffling and may, in fact, be crazy NFTs
98
Andrew Balthazor, The Bona Fide Acquisition Rule Applied to Cryptocurrency, 3 Geo. L. Tech.
Rev. 402, 407 (2019), citing Robert McMillan, The Inside Story of Mt. Gox, Bitcoin’s $460
Million Disaster, Wired (Mar. 3, 2014); see also Lawrence J. Trautman, Virtual Currencies:
Bitcoin & What Now After Liberty Reserve, Silk Road, and Mt. Gox?, 20 RICH. J. L. & TECH. 13
(2014), http://www.ssrn.com/abstract=2393537.
99
Andrew Balthazor, The Bona Fide Acquisition Rule Applied to Cryptocurrency, 3 GEO. L. TECH.
REV. 402, 407 (2019), citing Max I. Raskin, Realm of the Coin: Bitcoin and Civil Procedure, 20
FORDHAM J. CORP. & FIN. L. 969, 989 (2015).
100
Andrew Balthazor, The Bona Fide Acquisition Rule Applied to Cryptocurrency, 3 GEO. L.
TECH. REV. 402, 407 (2019), citing Mariella Moon, Cryptocurrency Expert Kidnapped for $1
Million Bitcoin Ransom, ENGADGET (Dec. 30, 2017).
101
Andrew Balthazor, The Bona Fide Acquisition Rule Applied to Cryptocurrency, 3 GEO. L.
TECH. REV. 402, 407 (2019), citing Kate O’Flaherty, ow to Survive a Ransomware ttack nd
Not Get Hit Again, FORBES (Aug. 17, 2018). See also Lawrence J. Trautman & Peter C. Ormerod,
WannaCry, Ransomware, and the Emerging Threat to Corporations, 86 TENN. L. REV. 503
(2019), http://ssrn.com/abstract=3238293.

could solve problems that have dogged the art world and other markets for centuries.
Think of a non-fungible token as a unique serial number that certifies the authenticity and
ownership history of an associated object.”102 The value of an NFT rests in its ability “to
transform a digital good that can be endlessly copied into something one of a kind. When
someone buys an NFT, what they’re effectively getting is the knowledge of owning an
official version of a cat with a Pop-Tart body,”103 among other examples. Mr. Zweig
writes, “Think of a non-fungible token as a unique digital serial number that certifies the
authenticity and ownership history of an associated object.”104 Consider:
By connecting the blockchain to art and other creative work, NFTs bring
the objectivity of computer code to fields that are notorious for
subjectivity. Artists, writers and musicians struggle to find audiences and
make a living. Curators, dealers, collectors and art historians bicker
nonstop about the quality and value and the authenticity of major works.
Consider the French artist Jean-Baptiste-Camille Corot, who was
jokingly said to have painted 3,000 canvases, 10,000 of which were
bought in the U.S. Is a particular Corot genuine or a forgery? Who were its
previous owners? Has it ever been exhibited at a museum or previously
sold at auction? Was it ever seriously damaged and extensively restored?
Until now, buyers often had to take the answers to such questions
on faith. An NFT, however, can integrate reams of information about an
artwork into an authoritative, permanent digital record.105
The Wall Street Journal explains, “NFTs act as virtual deeds, conveying
ownership of a digital asset. Each one gets uploaded to a digital ledger where it tracks
information such as the date it was created, when it was sold, for how much and to
whom.”106 Attorneys Cohn, West and Parker write:
102
2021 at B5.
103
Shira Ovide, Some Straight Talk on NFTs, N.Y. TIMES, Mar. 29, 2021 at B3.
104
2021 at B5.
105
2021 at B5.
106
Anne Steele, Musicians Find Revenue in NFTs, WALL ST. J., Mar. 24, 2021 at B4.

Smart contracts are most efficient for contracts that can be reduced to
simple ‘if-then’ statements, as their terms are easy to convert to computer
code and can be executed automatically… a blockchain-based smart
contract is a contract between two or more parties that is stored and
digitally executed on the blockchain using code. While human
involvement is needed to define the contract and input the code, the actual
execution of the contract is automated based on a defined parameter, such
as an event or price.107
This smart contract allows the original creator to establish “the terms of this digital
certificate of authenticity… and it allows the creator to take a cut in music, usually 10
to 30 of any resales.”108 Of great significance to song writers and musicians, “Owning
an NFT doesn’t equate to owning the copyright to a given asset, music or otherwise, but
scarcity helps push up valuations.”109
NFT Revenue Source for Musicians
The Wall Street Journal reports, “ fter a year with no live performances,
musicians hope to connect with their fans on the blockchain and make up for lost revenue
by selling them non-fungible tokens.”110 For example, “Electronic-music artist Justin
Blau, known as 3L U, fetched 17 million… from NFTs, helped in part by a tokenized
release of his three-year-old album ‘Ultraviolet,’ which grossed 11. million and briefly
held the record for the highest price paid for a single NFT, 3. million.”111 Musician
Justin Blau observes, “It’s a way to monetize your fan base in a way that’s never been
107
Alan Cohn, Travis West & Chelsea Parker, Smart After All: Blockchain, Smart Contracts,
Parametric Insurance, and Smart Energy Grids, 1 GEO. L. TECH. REV. 273, 281 (2017).
108
109
110
111

possible… I think this technology will definitely change the world, but I’m cautiously
optimistic because no one really knows how to value this stuff.”112
The Business of NFTs
The business environment of NFTs is an amalgam of various areas of law and
enterprise and may encompass issues involving: art, copyright, cybersecurity,
entertainment, intellectual property, music, performance, technology, and video editing,
just to name a few.113 In just a matter of months, “In new online marketplaces such as
Nifty Gateway, SuperRare, and Foundation, artists can upload, or ‘mint,’ their works as
unique N.F.T.s, then sell them.”114 As an informative case study of just one example,
journalist Kyle Chayka writes:
On October 30th [2020], Winkelmann [Beeple] launched his first ‘drop’ of

three art works on the N.F.T marketplace Nifty Gateway, to test his
salability. One was a piece called ‘Politics Is Bullshit,’ featuring a
diarrheic bull half-daubed in an American flag pattern amid a rain of
dollar bills. The work came in an edition of a hundred, at a cost of one
dollar each. core feature of blockchain technology is ‘immutability’: all
transactions recorded are permanent and transparent, which means that
any N.F.T. purchase or sale is visible to the public. As of March, 2021, the
editions had resold for as much as six hundred thousand dollars. (In N.F.T.
marketplaces, artists receive a percentage of resale prices, typically around
ten percent.)115
ttorneys Cohen, Histed, McLaughlin, Miner, and Nolan write, “If you are an
artist or musician who is interested in issuing NFTs as a way to monetize your creative
112
113
Lawrence J. Trautman, nthony “Tony” Luppino & Malika S. Simmons, Some Key Things
U.S. Entrepreneurs Need to Know About The Law and Lawyers, 46 TEX. J. BUS. L. 155 (2016),
114
Kyle Chayka, How Beeple Crashed The Art World, NEWYORKER, Mar. 22, 2021,
https://www.newyorker.com/tech/annals-of-technology/how-beeple-crashed-the-art-world (last
viewed Mar. 28, 2021).
115
Kyle Chayka, How Beeple Crashed The Art World, NEWYORKER, Mar. 22, 2021,
https://www.newyorker.com/tech/annals-of-technology/how-beeple-crashed-the-art-world (last

content, you need to be careful on how you proceed.”116 The authors list the following
considerations:
 Ensure that the piece of art/image, digital music or other creative work
associated with the NFT is unique and authenticated. Ensure that you
have all of the rights necessary to reproduce and distribute the work.
 Work only with a reputable technology company that will issue the
token on your behalf in a manner that is transparent and secure.
 Inquire about the technology company’s position on payment of
royalties. While certain token standards prohibit royalties (because
they are viewed as stifling the ability to freely transfer tokens) there
have been discussions in the Ethereum community about the creation
of a royalty standard.3 At present, artists generally receive a payment
when their NFTs are initially sold, but often not if they are resold in
the future.
 Work only with a reputable marketplace that does not over-promise or
hype the NFTs, and that does not require you to make significant up-
front payments in order to issue and sell your NFTs. Find out which
blockchain platform the technology company is using…
 Make sure disclosures are clear regarding the purpose of the NFTs as a
royalty vehicle, whether there is expected to be an established trading
market for them, risk factors or other special considerations, and
whether they are or are not investment contracts or other types of
securities.117
In sum, “NFTs and the related concept of the blockchain hold the promise to, in
part, give people ways to make their work more valuable by creating scarcity. There is
promise in letting creators rely less on middlemen including social media companies, art
dealers and streaming music companies.”118 For example, on March 31, 2021 we learn,
“Michael Jordan and Kevin Durant are among those betting that the company behind
116
117
118
Shira Ovide, Some Straight Talk on NFTs, N.Y. TIMES, Mar. 29, 2021 at B3.

NBA Top Shot is poised to build on the craze over digital collectibles. Dabber Labs Inc.
said… it raised 305 million from investors… [valuing] the company at 2. billion.”119
The Wall Street Journal reports:
The sums reflect an exploding interest in non-fungible tokens, or NFTs,

which use the blockchain technology behind cryptocurrencies to
authenticate unique digital assets such as art, music or video of basketball
highlights. The market for NFTs grew to at least $338 million in 2020,
according to a report from NonFungible.com and research firm L’ telier,
from around $41 million in 2018.120
V. LAW OF DIGITAL PROPERTY
Elsewhere, professor Joshua Fairfield has provided an excellent account of the
current law regarding NFTs, described in detail practical problems that need to be
addressed, and provided a roadmap for the legal treatment of the NFT. We will not
attempt to duplicate that effort here.121 However, a brief treatment of significant issues is
now presented.
Virtual Property and “Bundle of Rights”
Problems With Existing Legal Framework
License vs. Ownership
119
Sebastial Pellejero, Starts Help Raise $305 Million for Basketball NFT Site, WALL ST. J., Mar.
31, 2021 at B4.
120
Sebastial Pellejero, Starts Help Raise $305 Million for Basketball NFT Site, WALL ST. J., Mar.
31, 2021 at B4.
121
Joshua Fairfield,

What About Smart Contracts
Proposed Framework for Digital Property
VI. THE FUTURE OF DIGITAL PROPERTY
s professors Schultze and Mason write, “Virtual communities and social
networks assume and consume more aspects of people’s lives. In these evolving social
spaces, the boundaries between actual and virtual reality, between living individuals and
their virtual bodies, and between private and public domains are becoming ever more
blurred.”122 We will now provide a few thoughts about likely futures for digital property.
Artificial Intelligence (AI)
Reports abound of artists using various machine learning techniques to create
novel works of art. t the Google Cultural Institute, code artist Mario Klingemann, “is
applying deep learning to large datasets for creating huge, stunning digital art.”123
nother example of those “who have started a journey of finding out how creativity can
122
Ulrike Schultze & Richard O. Mason, Studying Cyborgs: Re-examining Internet Studies as
Human Subjects Research, 27 J. INFO. TECH. 1 (2012).
123
Bo Xing, Creativity and Artificial Intelligence: A Digital Art Perspective (2018),

be enhanced by I… [is] Matthew Yee-King, a musician who is employing evolutionary
and genetic algorithm to work on sound synthesis.”124
Payments for Artistic Endeavors
Financial journalist Jason Zweig suggests that NFTs’ provide an opportunity for
artists to gain a greater payback for their labors by providing “an ownership stake they’ve
never had before.”125 He presents the example of :
Josei Bellini, an artist based in Chicago who majored in finance in college

and worked briefly at an investment-advisory firm. Since late 2018, she
has sold about 300 of her paintings this way.
One of her NFTs, a dazzling digital work titled ‘Yours Truly #0,’
is on sale by its current owner, an account called Bitbuzz, for 250 ether.
That’s a cryptocurrency, worth a total of about 450,000. Ms. Bellini, who
sold the NFT for 50 ether in February 2020, will receive a 5 royalty if it
sells now and anytime again in the future.
Typically, when an NFT is traded on the blockchain, that network
won’t allow a sale and purchase to be completed without forwarding the
predetermined royalty to the wallet, or account, of the artist who created it.
‘It’s so amazing that even if it gets traded 10 or 20 times or more,
I’ll still be getting my fee for it,’ Ms. Bellini says. ‘That’s totally not how
the art world has worked until now.’126
Future Regulatory Compliance Issues
Rapid adoption of novel technologies such as NFTs vividly illustrate the struggle
for our laws and regulations to keep pace.127 Characterizing the technologies involved
and use of these assets may have different legal outcomes raising new issues in law.
124
Id. citing Carnegie Mellon University, Machine learning for artists and designers, School of
Art, ArtFab, (2018), https://artfab.art.cmu.edu/tutorials/machine-learning-forartists-and-designers .
125
Zweig, supra note __.
126
Zweig, supra note __.
127
Lawrence J. Trautman, Governance of the Facebook Privacy Crisis, 20 PITT. J. TECH. L. &
POL’Y 41 (2020) (Facebook struggling with privacy issues), http://ssrn.com/abstract=3363002. See
also Lawrence J. Trautman, How Google Perceives Customer Privacy, Cyber, E-Commerce,
Political and Regulatory Compliance Risks, 10 WM. & MARY BUS. L. REV. 1 (2018),
https://ssrn.com/abstract=3067298; Lawrence J. Trautman, E-Commerce and Electronic Payment
System Risks: Lessons from PayPal, 17 U.C. DAVIS BUS. L.J. 261 (2016),
http://www.ssrn.com/abstract=2314119.

Among the questions that may arise include: whether your NFT or work of art is
characterized as a commodity, security, or usage subject to money transmitter laws that
continue to evolve. Attorneys Cohen, et. al., warn:
Understand whether the NFT sponsor is carefully addressing compliance

with regulatory requirements, and understand the potential effect on
liquidity if the NFT is marketed as a security or a commodity, and
understand potential rescission rights if an NFT that is not marketed as a
security is subsequently determined to be a security that was issued in
violation of the registration requirements of the securities laws.128
The Future of Digital Property
As to the likely future of NFTs, professor Michael M. Dowling reports that his
initial finding suggests inefficiency in pricing along with “a rapid rise in value.”129
Professor Dowling observes, “Early-stage markets tend to be driven by a volatile search
for suitable pricing models and only slowly emerging market efficiency.”130 Exhibit 6
depicts the NFT U.S. Dollar Price Chart and the rapid rise in total dollar expenditures
since January, 2021.131
128
129
Dowling, supra note __ [now 60] at 9.
130
Dowling, supra note __ [now 60] at 9, citing S. Khuntia & J. Pattanayak, Adaptive Market
Hypothesis and evolving predictability of bitcoin, 167 ECON. LETTERS 26 (2018).
131
NFT U.S. Dollar Price Chart, Nonfungible.com, https://nonfungible.com/market/history (last

Exhibit 6
NFT U.S. Dollar Price Chart
Writing about virtual land NFTs in March of 2021, professor Michael M.
Dowling remarks about how “early 2021 has seen these markets explode in popularity.”
In a personal conversation on the topic he remarked to me:
We’ve seen prices for every NFTable part of virtual worlds shoot up this
year, but that was following a similar growing trend in 2020. It was just
not as notable in 2020 because the absolute prices were not as high. That’s
on the back of some clear value propositions emerging. Worlds like
decentraland, unlike a lot of their early competitors, genuinely look good,
and so people are starting to see sparks of how this could become a viable
business in addition to a viable metaverse.132
VII. CONCLUSION
132
E-mail from Michael Dowling, Professor of Finance, DCU Business School, to author (Mar.
28, 2021 at 7:15 CST)(on file with author).

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EARLY DRAFT-COMMENTS WELCOME- 4/11/2021 5:50 PM

VIRTUAL ART AND NON-FUNGIBLE TOKENS

* BA, The American University; MBA, The George Washington

Keywords: art, Beeple, bitcoin, blockchain, Christie’s, collectibles, copyright, crypto

JEL Classifications: G14, G12, K11, K12

© 2017-2021 Lawrence J. Trautman Page 1 All rights reserved

Electronic copy available at: https://ssrn.com/abstract=3814087

© 2017-2021 Lawrence J. Trautman Page 2 All rights reserved

Electronic copy available at: https://ssrn.com/abstract=3814087

VIRTUAL ART AND NON-FUNGIBLE TOKENS

agriculture;2 artificial intelligence (AI);3 business supply chains;4 carbon markets;5

© 2017-2021 Lawrence J. Trautman Page 3 All rights reserved

Electronic copy available at: https://ssrn.com/abstract=3814087

commercial real estate;6 commodity platforms;7 copyrights;8 creative and artistic

markets;13 and the Internet of Things (IoT);14 just to name a few.

© 2017-2021 Lawrence J. Trautman Page 4 All rights reserved

Electronic copy available at: https://ssrn.com/abstract=3814087

currencies. Fourth, we explore non-fungible tokens. Fifth, we look briefly at unresolved

thoughts about the future of digital property. And last, we conclude.

Enforcement in Banking, Bitcoin, and the Blockchain, 17 NEVADA L.J. 1 (2016),

© 2017-2021 Lawrence J. Trautman Page 5 All rights reserved

Electronic copy available at: https://ssrn.com/abstract=3814087

significant impact on the future of innovation and property law.

I. MARKET FOR DIGITAL ART EMERGES

primarily because it carries an NFT, or digital proof of purchase that is recorded on a

digital ledger known as a blockchain.”15

Metakovan Purchase of Beeple CryptoArt

ccording to Christie’s, “a cryptocurrency investor based in Singapore called

Metakovan is the founder of Metapurse, a crypto-based investment firm.

© 2017-2021 Lawrence J. Trautman Page 6 All rights reserved

Electronic copy available at: https://ssrn.com/abstract=3814087

cryptocurrency that, among millennials, is almost as well known as Bitcoin.”18 Although

of Beeple’s EVERYD YS: THE FIRST 5000 D YS, 2021.21

© 2017-2021 Lawrence J. Trautman Page 7 All rights reserved

Electronic copy available at: https://ssrn.com/abstract=3814087

sales, also sees an opportunity to cozy up to a largely untapped audience of crypto-

millionaires.”22 The Wall Street Journal reports:

Christie’s is capitalizing on the momentum by reorganizing its sales in

© 2017-2021 Lawrence J. Trautman Page 8 All rights reserved

Electronic copy available at: https://ssrn.com/abstract=3814087

two biggest sales by their artistic styles like impressionist-modern and

500,000 in cryptocurrency landed in my digital wallet.”26 Exhibit 2 is an image of Mr.

Roose’s winning art. Mr. Roose reflects:

Some NFT collectors believe that owning early, prominent crypto-tokens,

© 2017-2021 Lawrence J. Trautman Page 9 All rights reserved

Electronic copy available at: https://ssrn.com/abstract=3814087

History of Digital Art

of duplication traditionally made it near-impossible to assign provenance and value to the

“when it registered the entire 42-lot Barney A. Ebsworth Collection of 20th-century

© 2017-2021 Lawrence J. Trautman Page 10 All rights reserved

Electronic copy available at: https://ssrn.com/abstract=3814087

The recent introduction of Non-fungible tokens (NFTs) and blockchain

dditional transactions taking place before the Christie’s million Beeple’s

James dunking a basketball sold for 208,000.”32

© 2017-2021 Lawrence J. Trautman Page 11 All rights reserved

Electronic copy available at: https://ssrn.com/abstract=3814087

Global Internet Use

As a point of reference, Exhibit 3 depicts global internet use estimates as of first

significance of population penetration in other parts of the world.