Rethinking Property Rights, Relations, and Wealth Inequality in the Age of Non-Fungible TokensUmut Yertüm
Blockchain technology and the possibility of its impacts entered the world with the printing of the first Bitcoin block in 2009. Although overshadowed by Bitcoin due to its popularity, blockchain has a potential far beyond Bitcoin. Non-fungible tokens (NFTs) are defined as unique digital assets built on blockchains and constitute one of the most important parts of this potential due to its technological infrastructure. This study aims to compare the reasons for the creation and usage areas of important NFTs that have been actively implemented within the framework of traditional property relations. The information and data in this study were prepared using the literature review method and were obtained through projects’ websites and blockchain browsers. The fact that the blockchain infrastructure does not allow things such as copying or modifying NFTs eliminates the need for a third intermediary or approval mechanism in property relations. This results in thousands of dollars-worth of art, games, physical products, and partnerships paving the way for NFTs to be bought and sold without the need for a third-party approval mechanism such as a notaries or Ted Registry Offices. These NFTs are even traded in decentralized secondary markets like OpenSea and have reached a sales volume of over $20 billion. However, 85% of NFT trades are found to have bene made by thetop 10% wallets. The fact that the vast majority of valuable NFTs are concentrated in a small group reinforces the phenomenon of wealth inequality in blockchain.
Değiştirilemez Tokenler (NFTs) Çağında Mülkiyet İlişkisi ve Servet Eşitsizliğini Yeniden DüşünmekUmut Yertüm
2009 yılında ilk Bitcoin bloğunun basılmasıyla hayatımıza giren Blockchain teknolojisi ve muhtemel etkileri; popülaritesi nedeniyle Bitcoin tarafından gölgelense de onun çok ötesinde bir potansiyele sahiptir. Blockchain üzerinde inşa edilmiş benzersiz dijital varlıklar olarak tanımlanan değiştirilemez tokenler (NFTs), teknolojik altyapısı sayesinde bu potansiyelin en önemli parçalarından birisini oluşturmaktadır. Bu çalışma, aktif olarak hayata geçmiş NFT’lerin oluşturulma nedenleri ve kullanım alanlarını geleneksel mülkiyet ilişkileri çerçevesinde tartışılmasını amaçlamaktadır. Literatür taraması yöntemiyle hazırlanan bu çalışmadaki bilgiler ve veriler; projelerin internet siteleri ve Blockchain tarayıcıları üzerinden elde edilmiştir. Yapılan literatür araştırması sonucunda, Blockchain altyapısının NFT’lerin kopyalanması ya da değiştirilmesi gibi durumlara imkan tanımaması, mülkiyet ilişkilerinde üçüncü bir aracı ya da onay mekanizması ihtiyacını sorgular hale getirmiştir. Binlerce $ değerindeki; sanat, oyun, fiziksel ürün ya da ortaklık NFT’lerin Noter/Tapu Müdürlükleri gibi üçüncü bir onay mekanizmasına ihtiyaç duyulmadan alınıp satılmasına imkan tanımıştır. Öyle ki OpenSea gibi merkeziyetsiz ikincil pazarda alınıp-satılan bu NFT’ler 20 milyar $’ların üstünde satış hacmine ulaşmıştır. Bununla birlikte, NFT alım-satımlarının %85’inin en büyük %10 cüzdan tarafından yapıldığı tespit edilmiştir. Değerli NFT’lerin büyük çoğunluğunun küçük bir grupta toplanması, Blockchainde servet eşitsizliği olgusunu güçlendirmektedir. Son olarak, maddi değerlerinin dışında diploma gibi tek bir kişi için üretilen ve benzersiz olan kanıt niteliğindeki belgeler NFT’ye dönüştürülerek diploma işlevi de görmeye başlamıştır.
The transition to settled life and the production, consumption, and utilization of goods in line with people’s needs occurring within a social framework has resulted in the problem of who will own these goods and how. Due to all these features, property has become the subject of social order on one hand and social conflict on the other. As a result, who will own property, who will have savings, who will benefit from these, and what will be the boundaries of property have become controversial issues. Thus, property rights are used to express relationships between people regarding the benefits and responsibilities associated with certain objects. For example, when a purchase-sales transaction takes place in the market, essentially two property rights are exchanged. Although the right to own a physical commodity or service is generally defined, the value of the things being exchanged is determined by the property right itself.
John Locke was one of the leading representatives of neo-classical economics and defined the right to property as a natural right. According to Locke, the right to property is a natural right that precedes the social contract, and the proper role of government is to protect private property rights against the behaviors and interests of other citizens. A third intermediary and approval/registration mechanism became needed for the transfer of ownership, which has been accepted as a natural right, and for the regulation of property relations. For example, unless otherwise proven regarding intellectual property rights, the ownership of a work is determined by law to belong to its creator. There is a registration requirement for movable goods such as motor vehicles or immovable goods such as houses. A transfer of ownership cannot be registered without a license or title deed. The main reason for this is to prevent problems that may be encountered when the ownership of these goods changes hands.
Unlike traditional property relations, blockchain requires no third party or authority to validate or check any transaction. All transactions can be seen on the blockchain’s scanner, so anyone who has Internet access can actually see which wallet owns the unique NFT. The fact that the blockchain infrastructure does not allow things such as repeated NFT sales, copying, or modification has eliminated the need for a third intermediary or approval mechanism regarding property relations, thus making the existence of traditional approval mechanisms questionable. This has paved the way for NFTs worth hundreds of thousands of dollars to be bought and sold without the need for a third-party approval mechanism such as notaries or registry offices.
The first NFTs such Quantum and CriptoPunks had been minted as digital art, and many have followed since then. Unlike traditional institutions that validate ownership, all these NFTs have been sold and bought in decentralized market places that require no third party to validate these transactions. Thanks to blockchain scanners, anyone can see the original NFTs, and deceiving buyers with a copy of an NFT is quite difficult. This feature gives all NFT collections the authenticity that all art makers fiercely demand.
A similar situation applies to limited edition collections. Clothing companies in particular apply this method for special brands. With the introduction of 3D printers, the demand for NFTs that can be converted into physical products has also increased. These NFTs, also called phygital products, can be used both to ensure authenticity and to prevent the sale of counterfeit products. As such, these NFTs are traded for thousands of dollars, with Nike making $185 million in sales in 2022. Since the first NFT sale, more than $20 billion in sales has occurred, and this volume keeps growing.
However, the vast majority of valuable NFTs are shown to concentrated in a small group, so much so that 10% of NFT trading wallets alone accounted for 85% of all transactions and 97% of all NFT assets (Nadini etc, 2021). A study (Zomblings, 2023) examining NFT sales and wallets containing NFTs revealed 16.7% of wallets to own 80.98% of all NFTs. Thus, one can say that a wealth inequality exists in the sense of NFTs’ value.