A Rock and A Hard Place

There was a time, not very long ago, in which a picture of one's pet rock had, at best, sentimental value. The financial remedy process is a holdover from this more innocent time, when the most volatile assets a person might have would be company shares.

And oh, what a different world that was. Then came along cryptocurrency, and its curious cousin, the Non-Fungible Token (NFT). Whether you believe that crypto is a flash-in-the-pan fad, a herald of Web3, or basically a Ponzi scheme, there's no doubting that the blockchain technology behind it has serious potential to revolutionise the way we hold our assets. Which, in turn, has implications for how family lawyers conduct financial remedy cases.

So, pet rocks. How valuable could a picture of a rock be? Brace yourself: in the summer of 2021, two NFTs of pet rocks sold for north of $100,000. They were part of a limited-edition collection of 100 NFT rocks minted in 2017 (basically vintage). This is one of them:

I did not pay $100,000 for this rock, I pressed ctrl+c off the NFT holder's twitter handle. This being the central mystery of NFT digital art: if all you own is the private key to the metadata of the original – not the rights to the image, the royalties or the copyright – what is all the fuss about?

It is easy to get distracted by this baffling point, but headline-grabbers like pet rocks and bored apes can obscure the more obvious utility of NFTs. The music industry has had some of the most high-profile pioneers of NFTs, when the pandemic necessitated artists engage online with their fans in lieu of cancelled concerts. For example, singer Lewis Capadi minted and sold NFTs which entitle the holder to be entered into draws for tickets, win prizes, vote on aspects of his tour. The band Kings of Leon has produced NFT albums which allow the holder to download their album with exclusive artwork. Here, the NFTs are more akin to club membership. A person could also own an NFT of, say, a few seconds of a song. Using this, people could sponsor artists to create and would receive a percentage of the royalties for their snippet. These examples illustrate NFT's more mainstream applications, where the token acts as a secure, tradable certificate of ownership for goods and services 'off chain' (note this is an over-simplified distinction between functions of NFTs).

Where a client or their ex-partner has an NFT, our challenge as family lawyers is to look past the strangeness of the pet rock and get the key information: what is the public key, where is the private key, and how much is it worth?

The pet rock NFT is in essence digital artwork, and so our only novel concern is getting the right information from the disclosure process. NFTs which entitle the holder to off-chain assets present a more exciting challenge. Where a person previously may have purchased a year-long membership, or a debenture ticket, or put some money into a Kickstarter fund, they could now be holding an NFT which can be sold on much more easily. Thus, what was once expenditure becomes a tradable, sellable asset. The immutable and confidential qualities of NFTs make it an attractive prospect for financial instruments and other assets which require authentication, so there is every chance that the technology will become increasingly relevant in family law. With Ethereum's 'Merge' switching to a less energy-intensive proof-of-stake, and increasing familiarity with the concept of the blockchain, widespread adoptions of NFTs are something family lawyers must be prepared for.