NFT - non fungible tokens

What are NFTs? (sometimes called "nifties")
NFT stands for non-fungible token and it’s a term used to refer to digital assets.  Digital assets could be the rights to art works, music rights, and even intellectual property (IP).

Auction house Christie’s recently announced the artist Beeple sold an artwork for more than $69 million, the third highest price for a living artist. But the work entitled “Everydays: The First 5000 Days” is not a physical work of art. It is all digital.[1]

Physical money and cryptocurrencies are “fungible,” meaning they can be traded or exchanged for one another. They're also equal in value—one dollar is always worth another dollar; one Bitcoin is always equal to another Bitcoin.

While NFT's use the same blockchain technology that imparts security to the token, they are non fungible which means they cannot be exchanged for one another. An NFT for company A cannot be exchanged for an NTF for company B. One then asks how does one liquidate NFTs - that's easy, markets exists for one to buy/sell NFTs. Read on...

How NFTs impact the valuation and monetisation of intellectual property?
NFTs simplify transactions with the added benefit of security and can be applied to both digital and other assets. Patents are assets to the companies that develop them.

In order to participate in the monetisation of these assets investors traditionally need to wait for the company to issue an IPO to secure their share in that company but not necessarily a secure share with the primary asset itself (the patent/s) whose rights down the line may be sold out to another company.
  
Intellectual Property owners now have the option to monetise their patent rights using NFTs. This gives owners a quicker financing route & investors more security. The rights they purchase via the NFT are secure and should the company sell the IP down the line, the investors' stake travels with that IP and not left behind in a shell company that may not reflect the full value of that asset.  If the IP is sold for $1m and an investor holds 1% their NFTs will yield $10k.  They would not have to sell. They could choose to retain their 1% and stand to gain (or lose) with the next majority owner and their further commercialisation of that patent.

Similarly, if the company chooses to license its rights under the IP, the royalties that flow from those licenses would flow in proportion to each investors share in that IP. If an investor holds 1% and the annual royalty is $1m then that investor would receive $10k annually. Music rights are already using this feature to automatically route royalties to those holding the NFTs.

This makes it easier for patents to be sold, traded and commercialised by innovators and represents a huge potential return in successful projects for investors who get in on the ground floor.

Dilution
There exist multiple mechanisms to dilute investors share in a startup. The mechanism of NFTs does not allow this.  At the outset the startup company will decide on a total unchangeable quantity of tokens that will be issued and this is protected by the blockchain.

Example
If the company issues say 1mil tokens and releases 10,000 tokens for the first round of financing to raise USD3.3mil (1000 ETH at USD3300/ETH) then the selling price for the NFTs would be 0.1 ETH ( USD330) each.
Clearly this puts the investor at risk/return on the ETH price but they can convert ETH to hard currency at any time.
It also puts the onus on the company to ensure value as all subsequent financing rounds rely on the value of the NFT.

Patents are already using NFTs (source)
The following is an extract from 
In April 2021, IPwe and IBM announced an agreement to represent patents as NFTs. Records of the NFTs will be stored in the IPwe platform which is hosted in the IBM cloud and powered by the IBM blockchain. Smart contracts may be used to facilitate the transaction and may be built into the token with standardized terms associated with every patent. The owner of the patent sets the contract terms, including what is public and what is not. For instance, Jack Fonss and his consulting company, True Return Systems LLC, are auctioning U.S. Patent No. 10,025,797 on the NFT marketplace OpenSea. Bidding for the patent, believed to be the first to be auctioned as a non-fungible token, started at around $7.5 million. Built into the NFT representing Fonss’ patent is a self-executing contract that simplifies the cost and number of documents required in the transaction. As discussed before, as ownership of an NFT is known (one owner), it is easier to determine who to contact if there is interest in, for instance, pursuing a licensing agreement or a straight purchase of the patent asset. There are some caveats in the implementation of NFTs for patents. Ownership of an NFT does not automatically confer ownership of the patent asset. Buying the NFT means you are the owner of the NFT in the blockchain. A proper agreement in writing will be necessary to complete the transfer of ownership and rights associated with the patent as well as proper assignment with the United States Patent and Trademark Office.

So, how does one trade NFTs?
An NFT can be sold on an exchange, at a price ruling for that NFT. Prices would adjust up or down like in any traditional stock market according to supply and demand for that asset. One would receive Etherium (ETH) into one's wallet which can be used to purchase other NFTs or just retain the funds in the wallet.
The top exchanges are:
Open Sea    Rarible   Foundation    Super Rare    Known Origin
 
What wallets are recommended?
Our researchers recommend Meta Mask 
There are other wallets and we will update this list as we review them but for now we recommend Meta Mask.

Fractional ownership?
Fractional ownership of NFTS is also possible. 
Through platforms like Fractional-Art one is able to buy, or sell fractions of an NFT.
This give you a better exit liquidity through on-chain exchanges.

Tax implications of NFTs
This Forbes post explains it better than we can (for US investors).
UK investors read this.
Most other markets have not developed any mechanisms to tax this investment vehicle.

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