A potential ecosystem that will provide verifiable ownership and a path to monetization for literally anything.

Is this it? Has the sheer weight of the internet and all its content; shrieking clubhouse sessions, snarky podcasters, Twitter shitposters, Farcaster viberz, and TikTok-punchable-faces (TPFs?), plunged us into a post-irony world where we are just shelling out thousands for a JPEG?

On March 11th, 2021, Christie’s auction house sold Beeple’s Everydays: The First 5000 Days for the eye-watering sum of $69m. Sixty. Nine. Million. Dollars. This sale kind of sparked a spectacular 18 months run of NFT activity that reached about ~65bn$ in cumulative sales volume. Digital art NFTs today encompasses a variety of different types of art including Profile Pics (PFPs), On Chain Art, Generative Art, 1/1 Pieces, and various 10k Collections. The NFT craze then spilled over into digital membership tokens, gaming tokens, and music NFTs as well, I will not dive into these further as each probably requires its own dedicated post.

An obscene amount of money for JPEG files that you can just “right-click” on and save to your device. Right?

Well no, it’s not that simple.

*Homework Assignment Voice* The Non-fungible Token (NFT) is a unique on-chain token minted by the original creator representing the ownership of an off-chain asset. A token that is immutable (unchangeable) and thus eternally verifiable is supported by a smart contract to determine its variables and attributes. It is essential to understand that the token is not supposed to hold or save the asset itself, but only embody a relationship to it that is only verified by the creator and the surrounding community. Like a digital IOU, scribbled into the Blockchain. That link between the on-chain token and the off-chain asset is reflected in different ways depending on the asset itself. In the case of digital art, it is merely a link to a file that can be stored in different methods on the internet. In other assets, the representation could be shaped in the form of a serial number, an ID, a hash, or even a simple algorithm.

So what does the owner of the $69m digital artwork actually own today? If you find yourself delving into technicalities of JPEGs and saved files, then you are failing to understand the utility of NFTs all together. The value is created by the relationship between the on-chain token and the off-chain asset, and the social contract and community that validates that relationship. What this means is that Beeple can easily just create another token, representing the same digital artwork, and sell it again rendering the original NFT worthless. On-chain assets are enforceably scarce, but the associated off-chain asset is not! You are buying into a fragile social contract, that everyone including the platforms, marketplaces, creators, and corresponding community promise to withhold. Remember during sleepovers when you all played ouija board? Even though we all knew that the older sibling was nudging the ring, we collectively decided to believe in the paranormal and scare the shit out of each other.

The first known human reference to the idea of money were collectibles that were used in barter. Tribes would determine what resources other neighboring tribes would value, and go about collecting them to use in trade. These collectibles were scarce and usually passed down generations as a store of value. This behavior and addiction to collecting items continued to evolve throughout history leading to the creation of a common standard as a medium of exchange called currency. People continued collecting items, and the ownership element of these items gives most humans a sense of gratification that never really subsides. Paintings, sculptures, watches, antique furniture, old video game cartridges, sports cards, toy figurines...etc, are all just a small subset of things that some people collect and obsess about. We can display and showcase them to our local communities and circle of friends. Part of the allure of NFTs today is the same sense of desire to own unique items and show them off, but on steroids. NFTs have a potentially global audience with the availability of global marketplaces to provide liquidity and monetization. I think of it as an emergence of a new virtual economy backed by an updated framework for digital ownership.

NFTs have the potential to redefine the fundamentals of ownership, and there is a possible future where everything potentially valuable a person owns can be represented as an NFT. Real estate assets, cars, tweets, jewelry, furniture, clothing, social media profiles, or even memes. All physical/virtual goods represented on the blockchain, with immutable and verifiable ownership, that can be traded on global marketplaces providing new paths to monetization and seamless liquidity. There is additional value created with the ability to trace back ownership across years and generations.

There are so many possible future cultural and emotional implications to this. Imagine 50 years from now being able to open a blockchain browser and trace back all the different possessions of your great grandparents, find out who currently owns them, who previously owned them, and then try to buy them back. You might find out that your great grandfather used to own Cryptopunk #169 that he later sold for 50 ETH to Marc Cuban (the 50th president of the United States). What was he thinking selling it for so little? Maybe you find a wallet address of your now deceased grandmother, and notice that she used to collect Luka Doncic NBA TopShot highlights from his rookie days, now worth billions after he wins multiple rings and retires as a HOFer.

But.

You do not have the seed phrase to unlock the wallet and take ownership. Oh, the horror. The future possibilities of jumping into different rabbit holes are endless.

You can travel through time on a blockchain explorer, weaving through time-stamped transactions and looking for patterns and connections.

The growth trajectory of the NFT craze will continue to evolve and change, with easily foreseeable ups and steep downs that will take many projects and enthusiasts with them on the ride. An expansive amount of different applications, projects, and marketplaces will spring up as people try to catch waves.

One still underdeveloped element of the whole ecosystem is the IRL display part. On the internet there are many possibilities, with wallet apps, social media platforms (Instagram and Twitter), and different marketplaces allowing you to easily navigate your wallet and showcase your collections. But in my opinion collectibles are meant to be displayed in the physical world as well. The current market for this is quite bare, as companies are still trying to gauge the longevity of NFTs before diving into developing hardware.

Maybe that is the future of NFTs, incorporating display technology across devices so that these million-dollar art pieces can be carried around and displayed whenever some clout is needed. Imagine shuffling over to the bar, sitting down next to your guy or gal of choice, running your fingers from your knee to your pocket, slowly and firmly removing your phone, and breathlessly whispering “Hey. You wanna see my NFT*?”.

Exciting times.

*(Please don’t).

Original version of this blog was posted by me on the Verve Ventures substack on April 7, 2021.

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