A Non-Fungible Token (NFT) is a digital registration of a unique item, indivisible by nature. But a work of art is much more than a binary relationship between an individual and the work. Each art piece has multiple levels of legal rights associated with it even if it is registered as an NFT, and buyers should be aware of all these legal obligations when they engage in NFT trading.
NFT-PRO has a three-layer system designed for the next generation of legally-compliant item-representation on the blockchain - what we usually refer to as NFT.
Layer 1 (mandatory): The core NFT data layer, so called metadata - basic information about every NFT
That information is stored on-chain and represents an NFT item. The minting process creates an account for NFT-PRO containing core metadata with information on the creator and important data fields. This data set is not stored in a URI referenced file, but in the account itself. Additional data can be stored in an externally referenced file, but is not mandatory.
LORTs (License Ownership Rights Tokens) can be minted here, or in Layer 2 setup. Once LORTs are minted they can be distributed to potential owners.
Layer 2 (optional): License rights data layer (embedded into NFT) - defining terms and conditions of each license
Every NFT-PRO can have additional license information (Terms & Conditions) linked to the Layer 1 data structure and the NFT-PRO itself. Each license has its value in LORTs. Each license is represented by its own license receipt token, as proof of ownership of a specific license.
Layer 3 (optional): Transaction layer - cAMM pools, auctions or other sales mechanics
Once the license layer is set up and has a defined value, the transaction layer (a market) can be created for the NFT-PRO, either through a cAMM pool for LORTs managed by the All-Art Protocol, or through auction contracts that can create liquidity in cAMM polls.
If the creator wants to represent an item in the form of an NFT, Layer 1 metadata is needed. If an NFT is for sale, a contract of a sale or license transfer is necessary, thus Layer 2 is needed. And if sales are happening on-chain through automated market making or auctions, Layer 3 is needed.
Thanks to this new standard, collectors won’t be buying an art piece without understanding what they will actually own. Now they will own clearly defined license rights depending on how many LORTs of an NFT-PRO they have bought. These LORTs are placed in cAMMs and available for trading, while having constant automated liquidity.