When NFTs burst into the mainstream less than two years ago, there was a double dose of confusion. First there was, ‘WTF is an NFT??’ Then there was, ‘someone paid HOW MUCH for a small block jpg of a cartoon face???’
It would be comforting to know that this confusion is now cleared up, but alas. Most people don’t know why so much money is paid for so little, nor do they know what an NFT is. And they probably don’t know either that there’s considerable excitement among deep tech buffs and futurists about this blockchain-born creature with the goofy “non-fungible token” extension.
Recently, a clever financial columnist gave the shortest, most concise definition of an NFT I’ve ever seen.
He said, “Oh, I understand. It’s a receipt.
Exactly. It’s a receipt for something someone owns. A very secure, non-counterfeit or changeable receipt, secured by sophisticated cryptography. Or, if you want to get all the hifalutin, you could say it’s a digital title deed. Same thing really. It specifies that something is owned and it specifies who owns it and under what conditions this ownership can change.
It is important to remember that an NFT is (with some exceptions) not the thing the owner owns. It’s just a record of ownership of that thing. A jpg or digital animation or e-book or mp4 file that lives somewhere else, perhaps on a server in the cloud. Or maybe even something physical, like that old piano in the basement.
Why is this important? Because all other “possession” documents like your smartphone receipt or your house title or car registration can (and should) be lost, counterfeited or stolen. NFTs can’t (unless someone gets their hands on your personal password for your NFT).
The second question. Why, in October 2021, would someone have paid more than 40 million rand for Bored monkey #8817 — a graphic of a primate with an earring, propeller cap, and streamer between its lips? The answer is — I don’t know. That’s what they paid for.
The buyer has acquired ownership of the bored monkey chart and they got membership in an elite club. They thought it was worth over R40 million. I also don’t know why someone paid $91 million for a little stainless steel sculpture of a bunny by Jeff Koons that I wouldn’t have looked twice at if I had seen it at a garage sale . Go figure.
There are jpgs of that bored monkey and millions of other NFT connected digital content all over the web. What prevents someone from posting a graph of #8817 on their screen and save the image? Take possession of a copy, so to speak. Nothing. But that person does not own it and the bragging and selling rights that come with ownership.
There are, according to recent measurement, over 80 million NFT-connected digital artworks available in NFT marketplaces, but as you can imagine, almost all of them are sadly overlooked, and the majority of the few that make trade bring in less than $200. . The good old days when a 13-year-old could sell his doodle for $60,000 are over (true story).
The entire value market is now dominated by celebrities, brands and corporations (sanded only very occasionally by a brash newcomer). Like Adidas, Lamborghini, Coca-Cola, Nike, Louis Vuitton, Samsung, Pepsi, McDonalds, Burger King, Ray-Ban. And Eminem, Snoop Dogg, Grimes, Paris Hilton, Kevin Hart, LeBron James etc.
I find it all a little depressing, but I don’t know why. It may be the co-optation of something that was fresh and new by the usual suspects with access to means and influence.
NFT prices and activity have crashed dramatically in recent weeks, some by more than 60%. Also, a 74% drop in interest via Google searches over the past month. This led to a healthy dose of mirth and a whole lot of doom from the Peanut Gallery. I do not agree. Everything in this economy has collapsed, so no surprises there. He will recover. (It turns out that 23% of millennials in the US have tried it. They’re still there, waiting for the next bull).
Which brings me to this.
Beneath the pizzazz and feel of these NFTs and digital art markets lies a truly new idea: NFT represents a new way of defining property. Rather than the age-old understanding of ownership – (it’s mine, to have, hold, or give away) – NFTs are expressed in computer code, allowing much more complex forms of ownership to be imagined: I own this today. today my wife owns the thing tomorrow my best friend owns it when it rains and if it’s sold 5% automatically goes to Donation from Donors. That sort of thing.
When ownership is elastic, rather than constrained by a piece of paper in immutable, inflexible formats, a lot becomes possible. A surprising number of new innovations are already surfacing, all based on the concept of the elastic property.
Finally, a word about the soul. In fact, more specifically “soulbound”, a slice of jargon that has recently found its way into the NFT parlance.
One of the fundamental capabilities of the non-fungible token is that it can be transferred from one owner to another, either during a sale or under some other condition, such as a donation. But what if someone wants to tie an NFT indisputably to a particular human individual, in other words, let him be non transferable? For example, a form of digital ID document or an entry ticket to a single-person event?
It’s called a soul bound NFT. A beautiful combination of words, both poetic and corny. With all sorts of potential applications that require simple, instant authentication of a specific individual’s identity, without having to pull an ID from a physical wallet.
So watch in a bit of bemusement as people make and lose fortunes in the Wild West of digital art markets, if you will. But there’s a whole bunch of other more transformative NFT stuff on the way.
I leave you with just one example. Imagine you own all the data Facebook has about you, which they currently sell to advertisers for hundreds of billions of dollars a year. Now imagine that they have to share that revenue with you, because you, not them, own your underlying data.
Think about it. The fact that you clicked on a site to find out the price of dining room furniture is your data. Nobody else.