NFT, the business opportunity of 2022
But, what is an NFT?
Non Fungible Token, is a digital certificate of authenticity through block chain technology, the same that is used in cryptocurrencies.
Is this business as profitable as it seems or is it just one more bubble to escape from?
Just to give you an idea, in March of last year Christie’s auction house closed a historic year with $150 million in NFT sales.
The culmination was taken by the artist Beeple, who got the 69 million dollars and becoming the third most expensive work of art sold by a living artist.
How do intellectual property rights work in NFTs?
One of the biggest concerns and unknowns accompanying the NFT market in the art world is about intellectual property rights.
As it is a digital asset, a representation, it must be taken into account that acquiring the property is not enough to be able to exploit said asset.
That is, in order to use this piece, the existence of a license to exploit these rights will have to be ensured.
Although this may seem like a disadvantage, we must not ignore the fact that the application of NFTs to the art world can be an opportunity for the fight against counterfeiting.
Due to block chain technology, it is possible to prove the authenticity of the work, something that takes on special relevance before auction houses, museums or collectors.
What risk coverage do they have?
Faced with this new business opportunity, the concern about what happens if we are victims of a cyberattack or any other problem that may put our investment at risk is present.
That's why we want to reassure you. In the market there are solutions that cover this type of potential risks.
But they have nuances and limitations to keep in mind:
The coverage of digital assets is sui generis and depends in some way on the type of asset. Therefore, coverage is limited to three categories:
- Property (not intellectual property).
- Cybersecurity and crimes.
- Physical or financial damages.
Another challenge that insurers have to face is the high volatility, the almost non-existent track record, cybersecurity and the null or scarce regulation in the matter at the legal level.
Where is the insured risk located in a digital asset?
Given the uncertainty in the traditional insurance sector, different risk coverage models are being used:
- Ancillary coverage to the wallet custody service (such as Coincover) where the range of obligations and responsibilities of the custodian is relevant, the service is limited to custody and collaboration with the sector is unnecessary.
- And the model that comes from the hand of DeFi and smart contracts that are based on decentralized peer-to-peer platforms that cover the risk of each of the pools of the platform, but not cyberattacks.
Is it safe to invest in NFT?
Although today we find unknowns when securing digital assets, the NFT market remains booming.
Which means that as long as such significant figures are moving, it will be essential to cover the risk.
That is, sooner rather than later we will find the perfect solution to ensure that our investments in NFT are safe.
For the time being, we can only wait.