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Let's say you've tokenized your house as a non-fungible token (NFT) on the Ethereum blockchain.

if an NFT simply represents ownership of a tokenized asset, what actors or agencies currently will uphold the rule of law in the event of theft of that physical asset, given that the house cannot be stored on-chain?

You might own a house according to an NFT, but if someone walks in, changes the locks, and steals the house from you, will the authorities really save you based on the supposed credibility of the NFT you showed them?

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  • That entirely depends on the jurisdiction you are in. We are doing just that at roji.io and our NFTs are backed up by legal contracts that bind NFT's and real-world objects together. Also, this might touch other aspects of law, like securities laws, especially when you fractionalize the NFT or create derivatives. Expect significant amounts of lawyer fees if you plan to do something like this.
    – Martin Wawrusch
    Commented Apr 21, 2021 at 19:30

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This will essentially depend on the national/local legislation from which the law is applicable to such an asset.

In general terms, as of today, the answer is NO unless there is an underlying contract signed by a public notary to validate the ownership of the asset through an NFT. If this is not granted, a theft of that physical asset can't be legally covered by an NFT ownership.

Same principle actually applies for non physical assets, such as intellectual property, software licenses, etc. Again, a legal contract or agreement must exist beyond the underlying technology.

An NFT can ensure the provenance of an asset, traceability when ownership is transferred, tamper-proof features, etc, but they don't provide legal coverage on ownership without a 3rd party intervention that gives legal validity.

Nevertheless, a mainstream blockchain adoption is likely to facilitate a transition where governments & countries will begin to rely on this technology to enhance the current and inefficient legal bureaucracy (e.g.: I read some time ago that Japan was trying to place the entire land registry into the blockchain).

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  • so governments (i.e. public notary) would have to give the authority and recognition of NFTs, for blockchain ownership to be upheld by law?
    – user610620
    Commented Mar 2, 2021 at 17:45
  • Yes, that's the summary in one sentence ;)
    – Sergi Juanati
    Commented Mar 2, 2021 at 17:57
  • everyone out here collecting NFTs, even though wallets in which tokens are kept have no way to be identified back to their owner by first, last and social-number name
    – user610620
    Commented Mar 2, 2021 at 18:02
  • They are just paying for a collectible 'thing', but if they do it through a non-custodial wallet, it is hard to trace identities back. However, the token seller could force a KYC process before the purchase, although that would create friction for buyers and it's probably not what the seller/art creator wants.
    – Sergi Juanati
    Commented Mar 2, 2021 at 18:57
  • What would be an example of a custodial wallet for NFTs vs non-custodial wallet
    – user610620
    Commented Mar 2, 2021 at 19:54

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