9 August 2023

Non – Fungible Tokens And Their Implications For International Trade

Fungible refers to anything that can be replaced by a similar item or that is mutually interchangeable with something else. For example, money is a fungible asset.
Ghana Technology
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The writer is a lawyer and an Associate of Koranteng & Koranteng Legal Advisors and focuses on intellectual property, technology and commercial law


Fungible refers to anything that can be replaced by a similar item or that is mutually interchangeable with something else. For example, money is a fungible asset. One dollar can be easily replaced with another and the value remains the same.

Non–Fungible, therefore, means a thing that is unique, which cannot be interchanged or replaced with something else. Thus, Non-Fungible Tokens (NFTs) are a one-of-a-kind digital asset, that can be bought and sold like any other piece of property. They can take the form of anything digital including music, drawings, animated GIFS etc. and can also represent real world physical assets.

NFTs allow you to keep track of who owns what by storing these records on a shared ledger known as the blockchain. By allowing you to verify who owns them, NFTs can be thought of as certificates of ownership of both digital and real assets such as the deed to a car, legal documents or the tickets to an event.

When someone wants to create an NFT, they 'mint' it on a blockchain, which allows all other people on the blockchain network to recognize its creation and view its ownership. Most NFTs are part of the Ethereum cryptocurrency blockchain but other blockchains can implement their own versions of NFTs. The use of blockchain technology is at the heart of NFTs many advantages.

Blockchain Based Advantages

The advantages of NFT's include increased transparency and security. It is nearly impossible to change, hack or fake records of transactions involving NFTs because of the use of Majority Confirmation, the Hash and the Proof of Work mechanism, among other things.

Majority Confirmation refers to the fact that a blockchain is a distributed ledger that is completely open to anyone. The ledger of transactions is duplicated and distributed across the thousands of computers on the network. A new block/ record cannot be created until every node has checked the validity of the transaction and the majority have declared it valid. Any change/ tampering with the contents of the block can be detected and blocks that have been tampered with will be rejected by the computers on the network.

Each block contains data, a Hash and the Hash of a previous block. The Hash is unique, acting as a "fingerprint" that identifies a block and all of its content. Hashes therefore help you detect any change in a block on the chain because changing something inside the block will cause its Hash to change. Moreover, changing a single block will make all the following blocks invalid because the Hash of the preceding block will be 'wrong'.

In addition, a 'Proof of Work Mechanism', usually involving computers solving complex math puzzles, increases the difficulty level of generating new Hashes and slows down the creation of new blocks such that one is produced about every ten minutes. This makes it even harder to tamper with the block, because the proof of work will have to be recalculated not only for that block but for all the following blocks in the chain as well.

The moment one block is changed therefore, it becomes apparent that it has been tampered with. Hackers wanting to tamper with the blockchain system would therefore have to change every block on the chain across all the distributed chains, redo the proof of work, and take control of more than 50% of the peer to peer network before the tampered block will be accepted. This is almost impossible to do.

Its Usage


Currently, NFTs are being used to buy, sell and trade digital art, forming a multi-million-dollar industry that only keeps growing. Perhaps you have heard of the iconic GIF of a Nyan cat being sold for $580,000 or the 1st tweet by Twitter's founder Jack Dorsey being sold for around $3,000,000.

There are now a number of digital marketplaces including Zora, SuperRare, and Nifty Gateway — where collectors can buy and sell digital works. The platform, NBA Topshot, allows users to buy and trade NFTs in the form of videoclip highlights of basketball games. Further, auction houses such as Christie's, which have in the past sold iconic portraits such as the portrait of Shakespeare and the last known painting of Leonardo di Caprio, are auctioning NFTs. On March 11 2021 Mike Winkelmann, an artist known as Beeple, had a picture (composed of 5000 digital pieces) auctioned at Christie's for $69 million (Everyday's the First 5000 days.) In addition, Beeple's 10 second video "Cross Roads" originally sold for $67,000 in October 2020 and resold for $6.6million in February 2021.

NFTs could have many other uses in mainstream commerce.

Global Trade

In global trade, where the consignee must present a bill of lading to the shipper, indicating that the consignee does in fact own the goods and the shipper can transfer them into his possession, "Tokenisation" of the bill of lading would bring speed and efficiency to the process by allowing that same ownership to be verified in a decentralised manner and avoid delays caused by multiple actors and slow mail services. It would also help to reduce the cost of delivery and to avoid demurrage charges from late pick-up of goods at the port.

Oumi Blockchain Technology outlined its plans to apply NFTs to the digitisation of invoices for functions such as factoring, which involves a business selling its accounts receivable to a third party at a discount, to obtain immediate money for amounts due on accounts receivables or business invoices.

Real Estate

Real estate agents can also employ NFTs by issuing listings as NFTs with fractional ownership of assets. This allows multiple buyers to have a stake in a single property according to specific conditions.


With valuable assets like cars and property representable on Ethereum, you can use NFTs as collateral in decentralized loans. This is particularly helpful if you are not cash or crypto-rich but own physical items of value.

Further Advantages

Generally, "tokenising" trade documents brings to the table a single source of truth, multiparty automation, fraud reduction, greater transparency and trust – as well as removing cumbersome paper-based processes from the equation.

In addition, the fact that NFTs are a distributed ledger means there is no need for a central authority and that avoids the weaknesses that come with it, including the risk of bribes and corruption.

The blockchain also helps prove ownership and authenticity of the NFT by providing a full ownership history from when the NFT was minted. The authenticity of the NFT is secured on the blockchain and allows one to surpass less efficient, paper-intensive authentication methods.

NFTs also have the advantage of easy transferability from one person to another, worldwide, helping to ensure a higher pool of potential buyers. The fact that the code and meta data of an NFT cannot be changed lends it permanence and immutability.

The ability of NFTs to generate revenue or be exchanged for real world assets also presents a significant advantage.

NFTs that represent physical assets can help make those physical assets more accessible to a wider audience. With NFTs, physical assets can be easily traded on digital marketplaces, which can increase their exposure and make them more attractive to buyers. The security of transactions on the blockchain can also help bring added confidence to ownership transfers as transactions on the blockchain are transparent and verifiable.

In addition, NFTs employ smart contracts, a digital code for the transferring of assets from one person to another that exists on the blockchain. Smart contracts are automated contracts; when defined pre-conditions are met, the contract moves onto the next step. By the time all payments are made, property automatically transfers without the need for an intermediary.

Moreover, within the art industry, NFTs allow artists to directly profit from all sales of the NFT, taking into consideration even the appreciating value of the NFT. This means that a piece of art that originally sold for $10 before rocketing to $1million for the next sale would make its creator money based on its new value, rather than just the original $10. NFT royalty payments are both perpetual and automatic, so creators can just sit back and earn royalties as their work is sold from person to person.

Though NFTs have many advantages, there are also some disadvantages to their use that should be kept in mind.


There is a concern that NFTs are not eco-friendly because the blockchain that NFTs are created on consumes huge amounts of energy. For example, each NFT transaction on the Ethereum network consumes the equivalent of the daily energy used by two American households and millions of transactions take place each year.

Finding solutions for the proof of work mechanism which provides security for most of today's NFT networks requires a lot of computational power which in turn drives electricity consumption. It should be noted however that Ethereum has plans to change its proof-of-work algorithm to an energy efficient proof-of-stake algorithm called Casper. The Casper Protocol's implementation will upgrade Ethereum to version 2.0 (aka ETH 2.0), making Ethereum faster, more efficient and more scalable.

Richard Crook, director of financial services software company LAB577 and former head of emerging technology at the Royal Bank of Scotland (RBS), noted in 2021 that there are many better ways [than proof of work] of ordering transactions. "One of the ways we do that is by creating trusted nodes on a network to validate them. A good example of that is Corda. There are already technology choices out there that you could use to do NFTs that will not result in this huge electricity footprint. I don't doubt that if you issue an NFT on Ethereum that there is an outsized environmental impact, however that is not where we are going to end up over five or 10 years."

Amy Fisher, former Head of Business Development at R3, the blockchain firm behind Corda, explained that Corda's peer-to-peer architecture means it only involves parties to the transaction, as opposed to the entire network, as is the case with public blockchains like Ethereum. "This avoids the high time and computing resources that public blockchain consensus requires, which serves as a serious impediment to scalability, not to mention wasted resources," she said.

Another disadvantage to be noted is that NFT trading requires a digital wallet that can hold them and these wallets can be hacked, so it is important to ensure there are plenty of defence mechanisms in place.

Despite these disadvantages, NFTs have become a worldwide phenomenon whose popularity continues to grow as our understanding of them increases.

Richard Crook has stated, "Everything from the provenance of goods, fraud prevention and even debt management can be streamlined and verified using blockchain-based NFTs."

A look towards the future


primarily traded using the native (crypto) currencies of the blockchain they are hosted on. Some NFT marketplaces, such as Nifty Gateway and NBA Top Shot, accept credit cards for NFT payments. But many other NFT marketplaces require cryptocurrency to make purchases. In addition, making any sale on the blockchain requires that you pay a blockchain transaction fee known as gas fees, often in cryptocurrency as well.

Many African countries have not taken kindly to cryptocurrency use within their jurisdiction. Those who have not restricted trading activities outright have cautioned their citizens against investing in crypto. So far, crypto trading is banned in Algeria, Egypt, Morocco, Tunisia, Nepal and Qatar among others, while countries like Nigeria, Cameroon, and Gabon have some forms of prohibition regarding crypto trading. It is noted, however, that some African countries recognize cryptocurrency as a financial product and have taken steps to regulate it. An example is South Africa which has classified cryptocurrency assets as financial products which the Financial Sector Conduct Authority (FSCA) has said are to be regulated from October 19th, 2022. It is therefore legal to own and trade cryptocurrency in South Africa and crypto can be used for financial transactions.

Since NFTs are usually traded using the native currencies of the blockchain they are hosted on, it is difficult for NFT enthusiasts in countries where there are restrictions or prohibitions to carry out trading with ease. In Nigeria, for instance, financial institutions are restricted from carrying out crypto-related transactions and are mandated to close accounts operated on that basis. This effectively drove users to use Peer-2-Peer platforms to carry out their trading activities.


There is no cryptocurrency legislation or regulation in Ghana explicitly restricting or prohibiting crypto-related transactions. However, Ghana's central bank – the Bank of Ghana (BoG) – has issued several notices to the general public stating that cryptocurrencies are not recognised as legal tender and that people who trade in these currencies do so at their own risk. In 2022 (NOTICE NO BG/GOV/SEC/2022/03), the BoG reiterated that digital currencies (also known as cryptocurrencies) such as Bitcoin are not regulated under any laws in Ghana, and are therefore not backed by any guarantees or safeguards.

In March 2019, in a communiqué to the public, the Securities and Exchange Commission (SEC) was emphatic on the non-recognition of cryptocurrency as currency or legal tender in Ghana, and asserted that it does not regulate these types of product offerings and their accompanying online trading platforms or exchanges.

This lack of regulation may act as a deterrent not only to the adoption of cryptocurrencies but also the trade and sale of NFTs which relies on such cryptocurrency.

On a brighter note, some movements are being made by regulators in Ghana towards the recognition and adoption of blockchain technology. On 25th February 2021, the BoG established a FinTech and Innovation Office to drive the bank's cash-lite, e-payments, and digitalisation agenda. The office also develops policies to promote innovation in the banking sector and FinTech interoperability. The office successfully launched a Regulatory and Innovation Sandbox pilot under which one of the categories it gave preference to was products and services leveraging blockchain technology. This was in line with its commitment to evolve an enabling and inclusive regulatory environment that promotes Fintechs and supports innovation.

The opening of the Fintech and Innovation Office's Regulatory Sandbox from 13th February to 14th March 2023 to its first participants suggests that Ghana is moving to a place where blockchain and cryptocurrencies may one day be officially regulated, and by extension NFTs as certificates of digital ownership which rely on both the blockchain and cryptocurrencies to successfully engage in trading. The regulation of NFTS may then act as an incentive to their use with the increased security and guarantees such regulation provides.

However, it must be noted that the obstacles that stand in the way of Ghana fully embracing NFTs extend beyond the lack of regulation of blockchain and cryptocurrencies and the non-recognition of cryptocurrencies as legal tender in Ghana.

This lack of trust is compounded by the fact that many people in Ghana do not yet have the knowledge required to understand the underlying blockchain technology behind NFTs, how to perform cryptocurrency transactions or how they can benefit from them. This is a problem not only found in Ghana and Africa but also around the world.

Lack of trust thrives on lack of knowledge, both impeding the adoption of NFTs and the cryptocurrencies often required to trade in them.

There remain big limitations even for those who want to purchase NFTs without owning cryptocurrency. Fiat currency can only be used as an alternative to cryptocurrencies in certain places, under certain conditions, for certain NFTs. An example of these limitations can be taken from OpenSea and Rarible, two of the world's largest NFT marketplaces in the world.

With OpenSea, the crypto-payment platform Moonpay works behind the scenes to buy cryptocurrency via the customer's fiat and uses that crypto to pay the seller. However, debit or credit card payments are not available in all U.S. states or countries in the world. Rarible allows the customer to use their regular bank card in almost every country in the world but the customer can only employ it to buy NFTs for a fixed price, not to take part in auctions.

As a result of NFT marketplaces avoiding doing the currency conversion themselves, there is also a need to jump through additional know-your-customer security hoops when purchasing NFTs without cryptocurrency. On OpenSea, you will need to verify your identity with Moonpay directly before you can pay as described above. Moonpay, as a payments firm, is a completely separate entity from the marketplace. The same identity verification must be done with Wert (Rarible's payment partner that deals with the exchange of dollars to Ethereum).

In addition to the above barriers, there are extra fees that need to be paid to buy NFTs with fiat currency as opposed to cryptocurrency. Moonpay charges its own fees on top of the customer's credit card fees. The blockchain in question's gas fees must be paid as well. On Rarible, there is a fixed 2.5% service fee and a 4% Wert fee on top of potential credit card and gas fees.

This brings us to yet another obstacle to the adoption of NFTs in Ghana and Africa as a whole: the weak economies of African countries. Payments concerning NFTs are usually alternatively priced in dollars. This presents a difficulty for people living in struggling economies such as those in many African countries. In Ghana in particular, this problem is compounded by the exchange rate and the value of the United States Dollar against the Ghana Cedi. Adding to this is the fact that minting an NFT could cost anywhere from a few dollars up to several hundred depending on gas fees, the fluctuating processing fee for crypto transactions and the platform on which the digital work is minted.

Despite the challenges in adopting and trading in NFTs in Africa in general and Ghana more specifically, the noted benefits of NFTs make these challenges well worth overcoming. In a part of the world where ownership of properties is still validated through manual means, the use of NFTs could go a long way in ensuring transparency and authenticating ownership, helping to quickly locate property owners and depending on their application, facilitating intra-African trade with the tokenisation of documents and other innovative uses of NFTs.

This being said, there is no rush for African countries to adopt NFTs. Countries can tread cautiously, building up the population's understanding of what NFTs, cryptocurrency and the blockchain are and how they operate, while giving our regulators time to set up the required policies and laws.

Adoption of NFTs by African countries

The projects coming out of Africa give hope that NFT adoption will gain more traction in years to come. These include businesses working on SMS-based blockchain transactions, thus utilising an existing infrastructure a good deal of Ghanaians are familiar with, which may help accelerate cryptocurrency's adoption. This accelerated adoption will then help facilitate transactions with NFTs.

In addition, more than 70 countries are currently working on establishing a digital equivalent of their national currencies, referred to as central bank digital currencies (CBDC). A digital equivalent of national currencies given out by central banks may amp up consumer protections and spark a regulatory framework, entailing fiscal and monetary policy, for a significant part of the financial system involving the use of blockchain technology, which has so far widely eluded authorities.

Social media is also playing a role in increasing the popularity and accessibility of NFTs. Meta's CEO and Founder, Mark Zuckerberg, announced in 2022 that the business would integrate NFTs into Instagram in upcoming months, allowing users to mint such assets right on the platform. Though Meta, the company that owns Instagram announced on 13th March, 2023, that they were winding down their work with NFTS on Facebook and Instagram to increase their focus on what they prioritize, it is observed that the integration of NFTs in Instagram would have made it easier to acquire and trade NFTs, lowering the restrictions for this type of digital asset. Apart from Instagram, big internet firms such as Twitter and Snap plan to include NFTs in their networks. In 2022, Twitter began letting people who have joined Twitter Blue, a paid premium service that includes capabilities not available to ordinary users, display their NFTs as verified profile images.

In 2021, Verified Market Research (VMR), a global research and consulting firm, indicated the NFT market possessed a total market cap of more than $11.3 billion which was equivalent to and greater than the Gross Domestic Product of many small countries such as Kosovo, Togo, and Somalia. In 2022, NFTs saw an increasing growth in popularity and a report published by VMR in 2022 further predicted a compound annual growth rate of 33.7% in the following eight years and that the NFT space will see its total market cap climb to $231 billion by 2030.

However, despite positive predictions, a weak crypto market in 2022 harmed demand for NFTs, causing prices to fall in the latter half of the year. In addition, the quantity of sales of NFTs decreased leading to a great number of buyers and sellers exiting the market. In January and February 2023, NFT sales began to see a comeback. In January 2023, the value of NFT sales reached nearly $1 billion according to the website, rising by over 40 percent compared to December 2022. In February 2023, NFT sales reached nearly $2 billion. A DappRadar report, published on 30th March, 2023, mentioned that trading volumes climbed to $4.7 billion in the first quarter of 2023, an increase of 137 percent over the previous quarter. Altogether, the first quarter of 2023 saw a total of 19.4 million NFT sales, an increase of 8.5 percent from the last quarter of 2022.

According to CNBC – TV 18, the NFT market therefore appears to be witnessing a recovery in 2023, consistent with gains made by Bitcoin and Ethereum since the start of the year. It is observed that the lull faced in the crypto market did not dissuade several high-profile brands and businesses, including Starbucks, Louis Vuitton and Disney, from venturing into the NFT market. Meanwhile, celebrities such as Snoop Dogg and Paris Hilton made news after launching their own NFT collections.

It is further observed that projects such as NFTfi, Ubuntuland, and AJE: The Afriverse, are pacesetters when it comes to NFT use in Africa. As time progresses, more projects may surface with the prospect of revolutionizing Africa and its people in this digital world.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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