​​⚖ The Quantum Case

The Quantum NFT, an animated GIF, was originally minted on the Namecoin blockchain in May 2014 by artist Kevin McCoy. In June 2021, the artist recreated the NFT on the Ethereum blockchain, referencing the original NFT on the Namecoin blockchain. The Ethereum asset was sold for $1.47 million USD. In February 2022, the current owner of the original Namecoin NFT filed a lawsuit against the auction platform for advertising the auction with false claims. The case reached its first decision

On Saturday, May 3, 2014, 01:27:34 (GMT/UTC), artist Kevin McCoy created an NFT on the Namecoin blockchain that linked to an external asset with filename quantum.gif, an animated GIF with 179 layers, each with a duration of 30 ms. The name of the original Namecoin record is just the SHA-256 hash d41b8540cbacdf1467cdc5d17316dcb672c8b43235fa16cde98e79825b68709a of the file, while the data value was a declaration of the rights of ownership:

I assert title to the file at the URL http://static.mccoyspace.com/gifs/quantum.gif with the creator's public announcement of it's publishing at the URL https://twitter.com/mccoyspace/status/462320426719641600 The file whose SHA256 hash is d41b8540cbacdf1467cdc5d17316dcb672c8b43235fa16cde98e79825b68709a is taken to be the file in question. Title transfers to whoever controls this blockchain entry.

The creation of the Namecoin asset was intended as a proof of concept for digital publishing technology and claiming ownership of an original digital artwork, presented at the annual conference Seven on Seven at the New Museum of Contemporary Art in New York City by Kevin McCoy together with technologist Anil Dash. The term “monegraphs“ (monetized graphics) was introduced (see live reco​rding​). At that point, the term non-fungible token (NFT) was not even established or known. On January 24, 2018, Ethereum introduced the term with the Non-Fungible Token Standard. Anil Dash summarized the history of the term “NFT” as well as of the Quantum asset in April 2021 in an article of the magazine “The Atlantic”. While the concept of NFTs has evolved since then, it's clear that Namecoin's assets can be considered the earliest NFTs in the crypto space (see section Definition of NFTs).

In June 2021, in the wake of the global NFT hype, Kevin McCoy replicated the same NFT on the Ethereum blockchain and listed it for auction on the Sotheby's platform. It sold for $1.47 million USD. On February 1, 2022, the current owner of the original Namecoin asset, a member of the NFT community representing Canada-based legal entity Free Holdings Inc., filed a lawsuit in the United States District Court for the Southern District of New York. The subject of the lawsuit was the statement in section “Condition Report” on the auction detail page, stating that “this specific Namecoin entry was removed from the system after not being renewed, and was effectively burned from the chain.” The applications of the lawsuit were in particular the determination of monetary damages, the omission of the further marketing of the Ethereum asset as “Original Quantum NFT” as well as an obligation on the part of the Defendant to make corrections in public media with regard to the interested parties, the bidders and the buyer of the auctioned Ethereum NFT.

Plaintiff's reasoning was that the auction description would be false and thus devalue the original Namecoin asset. However, the lawsuit was dismissed on March 17, 2023, i.a. with the justification that the Plaintiff had not proven any concrete actual or imminent financial loss. While a court appeal is still being debated, the trial revealed that the artist of the original Namecoin asset somehow tried to revoke his original May 2014 statement on the Namecoin blockchain with an indirect third-party argument, but referred accurately to this original asset to make his newly created Ethereum asset appear valuable.

Cryptographically, the Namecoin address N2nunKeYiYeqDCunDzJ3EQQh1fbAawegPW was and still is assigned to the original record. This address is the hash of the cryptographic token's public/private key pair, which in the case of a Namecoin asset is a colored coin with a value of 0.01 NMC. On the one hand, it is true that its token is being burned upon expiry, since the owner loses access to that colored coin. An expired flag is set on the last record of the asset.

On the other hand, the key/value pair's cryptographic asset is not defined solely by its active record, but by any records immutably attached to the asset. When querying the history through the implemented RPC call name_history of the Namecoin Core wallet, the entire history of records is shown, regardless of whether the asset has been re-registered in the meantime or not. Last but not least, the court should be made aware that the original creator is still able to prove his ownership of the original NFT on the Namecoin blockchain via the signing message feature, at least if he still has access to his wallet containing the original Namecoin address, which is a legacy address capable of signing messages with the asset's private key. The signature can be verified by any node within the Namecoin network. The statement that the original record would have been removed from the blockchain is thus undoubtedly proven twice to be false.

It should be noted that the court decision is not to be understood as a leading decision on the definition of the term “NFT”. Notably, the court has not ruled whether or not Namecoin assets can be considered NFTs. Rather, it stated that it depends on interpretation.