Before we delve deeper into legal implications of IP laws on NFTs, it is important that we understand some basic concepts such as blockchain, which will help us better understand the various facets, aspects and provide overall clarity on the functioning of NFTs. A blockchain is nothing but a sophisticated database.
On the blockchain, data is collected into units known as blocks, when one unit has reached its capacity, it is closed and linked to the previous unit. This process is continuously repeated and resultantly, a chain or string of blocks (storage units) is created. Once a block is created, it can no longer be destroyed or manipulated.
A traditional database is a storage where relevant data is stored electronically on a central server. These databases are used for storing, maintaining and accessing any sort of data. A traditional database provides four key functions – Create, Read, Update and Delete/Destroy. Collectively, these functions are referred to as CRUD functions. The blockchain is designed differently from traditional databases and does not perform CRUD functions. On the blockchain, primarily two functions/operations can be performed. First, existing data can be read (retrieved/verified) and second, new/more data can be added.
The key differentiating factor between a traditional database and a blockchain is that, data on the blockchain cannot be edited, manipulated or destroyed. In a traditional database, anyone with access to the central server can manipulate, influence and corrupt the data. There is heavy reliance on protection and security infrastructures to be in place to prevent such manipulation of data in traditional databases. The blockchain was designed to overcome this shortcoming. It uses a decentralized database, as a result of which the security is built into the very structure of the database.
Source: Barandbench
