Lawyer Monthly - June 2022

royalties are a completely new avenue for artists to generate passive income. These royalties further provide some additional financial security to artists so they can focus on what they do best: creating art. Do NFTs give rise to unique cybersecurity concerns? NFTs give rise to unique cybersecurity concerns for individuals, but your exposure is limited. There are two main types of NFT wallets. A “hot” wallet is an electronic wallet that exists on your browser or phone and is connected to the internet. A “cold” wallet is a physical wallet that you can purchase that is only connected to the internet when you are performing a transaction. The significance of this is that cyber criminals can easily target hot wallets and transfer the NFTs and cryptocurrency that you have stored there. Generally, these hackers use typical techniques like phishing links or emails to gain access to your hot wallet and transfer its contents to themselves. 91 JUN 2022 | WWW.LAWYER-MONTHLY.COM THOUGHT LEADER - KEVIN KELLY With a cold wallet, since you need to approve the transaction on the physical device, a cybercriminal cannot steal your NFTs as easily compared to if you were using a hot wallet; however, hackers are using other techniques to convince individuals to willingly transfer their NFTs from their cold wallet. It is important to clarify that although your NFT is stored on the blockchain, what is stored within the wallets is akin to a key to unlock, transfer, and own the NFT. There are also options for recourse in the event that your NFTs are “stolen” or unknowingly transferred to a hacker’s cryptowallet. Since all transactions on the blockchain are public, it is possible to track down stolen NFTs; however, recovering them is a different story. Some individuals have gotten lucky and were able to track down, reach out to the owner of the wallet where their NFT is now located, and then repurchase their stolen NFT from the innocent third party purchaser. Given the lack of regulation, how can individuals in the NFT space protect themselves from threats and limit their exposure? For artists, traditional art laws still apply so contracts and intellectual property rights. There are a few legal questions that remain unanswered in the NFT space, but the best way to protect your exposure as an artist is to make sure that you speak with legal counsel who Kevin Kelly Associate, Mazzola Lindstrom LLP 1350 Avenue of the Americas, Second Floor, New York, NY 10019 Tel: +1 646-216-8300 ext. 115 | +1 215-378-2966 E: | Very few people have been involved with NFTs for more than a year at this point and even the true “veterans” have only been in the NFT space since 2017 at the earliest.

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