Asia Markets News: The First Sale Problem for NFTs

2023-03-21, 07:43

Governments are not using the digital first sale since they cannot prove that when digital contents are transferred they are also deleted from the source folders or files.

NFTs prevent people from altering and deleting digital content that exists on the blockchain.

Silvergate failed to uphold “transparency and high-end security in the NFT Market.”

The closure of Silvergate Bank will enable NFT traders to switch to Signature Bank.

Keywords: NFTs digital first sale, NFTs first move, Asia NFT market, Digital sale problem, File coin, Chinese tokens, China tokens, Silvergate Bank, Signature Bank, NFT traders

Introduction

The Asia-Pacific region is an important part of the crypto market as there are many crypto investment activities as well as an ever growing crypto community. Apart from the increase in the adoption of cryptocurrencies, there is also high interest in NFTs.

However, the region is facing some challenges which include the decline in China tokens and the NFTs digital sale problem. In this article, we explore how blockchain technology is important to overcome the first sale problem for NFTs.

China tokens are underperforming

During the first months of 2023 there has been an increase in the number of Chinese tokens on the blockchain. These tokens have been traded mainly on exchanges that are not regulated by the government. That situation has led to a decrease in crypto investor confidence as the individuals are worried about investing in such tokens.

Due to the loss of investor confidence most China tokens were in red on 1 March 2023. For example, the value of NEO, a web3 eco token based on China’s national Blockchain Service Network, was down by 8% while Conflux’s CFX token, used by China Dapp developers, lost by 12% within 24 hours.

NEO Cryptocurrency - Medium

Lastly, the value of Filecoin’s FIL token also fell by 5.5%. As the situation stands, there is no certainty on how the market will respond as the year goes by.

The first sale problem for NFTs

The first sale problem for NFTs is another challenge the Asia NFTs market is facing. According to the first sale doctrine individuals and organizations can resell their legally acquired copyrighted content without fear of litigation.

Put differently, an individual who owns a copyrighted copy of a good such as an academic textbook can sell it without the copyright owner’s permission. Thus, this first sale doctrine limits the exclusive right of the copyright owner regarding the disposal of a lawfully acquired good.

However, at the moment the first sale doctrine does not apply to digital transfers of content. The reason why the first sale doctrine fails to apply to digital content is the intangibility and non-exhaustion aspect of digital content. In other words, an individual can distribute digital content to as many people as he/she wants.

Similarly, the transfer of digital content requires the owner to reproduce it which infringes the copyright owner’s re-production right. Now, the real issue is that when someone sends digital content to another person he /she still retains the copy as it is not deleted.

Therefore individuals can easily copy the digital content, thereby producing identical copies. If the people keep on making new copies of the digital content they lose their values since they are no longer scarce. The digital sale problem is common in Asia where piracy and intellectual property theft is prent.

The sad thing is that if the government adopts the first sale doctrine for digital content the entire secondary market will become illegal. This is because the original creators of the content will provide proof of ownership if someone else resells it in the secondary market. In this case, they can use their IPs as points of reference.

Currently, the courts of law believe that there is no way to ensure that when a file is transferred the original copy is deleted so as to avoid infringing the copyright owners’ rights.

Double spending and the blockchain

The use of NFTs can make it possible to use the first sale doctrine in the digital space. This is because people cannot copy or reduplicate content that exists as non-fungible tokens. When an NFT is sold a permanent record of the transaction is created on the blockchain which is a proof of ownership of the content.

Since the original owner of an NFT can verify his/her ownership of the digital content this prevents the problem of double-spending. However, if the NFT is not sold on the blockchain the problem of double-spending will exist.

How issues related to Silvergate affect the NFT market?

Analysts believe that the closure of Silvergate will negatively affect NFTs. The Silvergate Bank made it possible for businesses and individuals to convert cash to cryptocurrencies and vice versa. It provided different services that involved digital assets like NFTs.Therefore, it helped to bring liquidity in the crypto and NFT markets.

Silvergate Bank - Axios

The closure of the bank means the firms, platforms and individuals that used Silvergate to process their transactions can no longer do that. Some analysts believe that some of the problems which Silvergate faced were related to NFTs digital first sale. When there is no way to prove ownership of the NFTs, double-spending can take place resulting in financial losses. Therefore, with Silvergate Bank there was no “transparency and high-end security in the NFT Market” which resulted in financial losses.

Silvergate Customers can switch to Signature Bank

The shutting down of Silvergate Bank means that the NFT sector can no longer carry direct transactions with the banking sector. Since the cooperation between the NFT market and Silvergate has ended the traders are looking for a suitable alternative.

The most possible alternative at the moment is Signature Bank. Recently, CoinDesk reported that the bank has received new customers including NFT traders. This means that it offers crypto related services which NFT traders can use.

According to CoinDesk, Joseph DePaolo, Signature Bank CEO, said that the bank is attracting new clients and is ready to provide them with reliable high quality crypto services.

Conclusion

The NFT Asia market is facing several challenges which include the first sale problem and the falling values of Chinese tokens. The best solution to the problem of digital first sale is to use NFTs which prevent the challenge of double-spending. The banks that provide crypto should ensure there is transparency and high-end security to curb financial losses.

Author: Mashell C., Gate.io Researcher

*This article represents only the views of the researcher and does not constitute any investment suggestions.

*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.