NFT’s Tangible – Intangible Aspects…

Michael D. Moberly, Principal, Founder kpstrat and ‘Business Intangible Asset Blog, Business Intangible Asset Strategist – Risk Mitigator

I am hopeful readers consider this post @ Business Intangible Asset Blog a reasonable path for comparing – contrasting business things intangible to NFT’s (non-fungible tokens), e.g., business’s intangible assets, i.e., various forms, contexts, applications of…

  1. the right intellectual (knowledge, know how), structural (process, procedure), and relationship (association) capital, proprietarily developed and held, are
  2. generally non-fungible, because of the manner – intent for their introduction…
  3. at the right time, in the right way, at the right cost, and converged in a business’s operating culture, for purposes of competitiveness, valuation, revenue generation, and sustainability, are (generally) non-fungible.

Preferably, business’s intangible assets are proprietarily developed, held, and introduced to an operating culture…

  1. are not wholly replicable (inter-changeable, or transferable elsewhere).
  2. remain proprietary, risk mitigate-able, and safeguard-able.

We are obliged to recognize…

  • non-fungible’ translates as things which are particularly unique, one-of-a-kind, not subject to replication – duplication.
    • NFTs may exist in various forms, contexts, applications, ala individual-tokens, i.e., marks, signs, symbols, coins, keepsakes, piece of art, or souvenirs, etc.
    • NFT’s may have particularly unique information, data-representation embedded which underlie their attractivity – valuation, which can be applied for verification, validation, authenticity, providence, origination, and ownership.

As readers have, no doubt observed, some NFT’s may be anomalies (one off’s so-to-speak), but their emergence – offering – sale may be symbolically important to the NFT marketplace.

The valuation of an NFT can be speculative and, and to date, in my view, appear create-able and/or establish-able by some relevant market and demand.  Broadly speaking, NFT’s may be…

  • bought – sold in a manner, similar-to physical – tangible objects-assets, e.g., a piece of art, and deemed essential to NFT’s attractivity, relative to the holder – seller, and prospective buyers.

Bitcoin is fungible, e.g., one can trade a bitcoin for another bitcoin, and the holder has exactly-the-same-thing.

A one-of-a-kind – unreproduced-able (1950’s) baseball trading card (on-the-other-hand) is non-fungible, thus,

  • if the holder of same, traded it for a different 1950’s baseball players’ card, they would have something different, presumably, with greater or lesser (market) valuation.

NFTs can be physical and/or digital, and can be traded and sold in non-traditional ways, which may place a sell – buy transaction outside the scope of conventional (business – asset) valuation and/or taxation. Let there be no doubt, federal and state revenue entities are aggressively pursuing legislative language on these issues.

Questions – guidance regarding NFTs variously remain, e.g.,

  • debate regarding ‘what owning an NFT’ means, in the absence of conventional issuance as IP, i.e., the copyright to a work of art, a trademark associated with a product or service, or a patent held to an invention, etc.,
  • NFT’s may be (intangible) ala entries on a blockchain and/or a work of art, or other form of (tangible) tokenization, or involve tangible – physical things, e.g., a video, admission to a private event, etc.

NFTs are of interest (of course) to IP (intellectual property) law arenas, particularly, the process of ‘tokenization’ which essentially allows various works, such as art, literary, marks, inventions, images, GIFs (graphic interchange format), or music, to be transformed ‘digitally’ (as assets) and offered for sale in various marketplaces.

  • ‘Tokenization’ is a process for replacing sensitive (NFT) data with unique identification symbols that retain the essential information about the data without compromising its security.
  • ‘Tokenizing’ tangible – physical things, renders buy – sell – trade transactions more efficient + reduces the probability of fraud.

Perspective for this post was gleaned from…

  • How do you tax NFTs? States are in a quandary’ by Jennifer A. Kingston, Axios Cities
  • NFTs, Explainedby Mitchell Clark, Verge, Aug 18, 2021
  • Tax Notes, Jeff Cook, Madeleine Smith and Harley Duncan of KPMG
  • Route Fifty, which reports on state and local government issues
  • Lawrence Zlatkin, at the crypto exchange Coinbase, sited in Politico
  • Rakesh Sharma, Doretha Clemon, Pete Rathburn, Investopedia, February 26, 2022
  • Adam Hayes, Jefreda R. Brown, and Suzanne Kvilhaug, Investopedia, March 5, 2022

The ‘Business Intangible Asset Blog’ is experientially-researched, written, and produced by Michael D. Moberly, to provide perspectives, insights, and additional and sometimes alternative perspectives to readers, ala business leaders, management teams, boards, and investors, etc., to aid in identifying, distinguishing, assessing, valuing, safeguarding, and lucratively – competitively utilizing -applying their ‘mission essential’ intangible assets. 

Readers are-encouraged to review and comment on this, and other posts wherein arrays of issues related to business things intangible are authentically and practically conveyed.

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