NFTs brought back into fashion an old law concept: fungibility.
Put simply, goods have only two modes of being: they are mutually interchangeable - or they aren't.
In a supermarket, the front pack of rice has exactly the same value as the one in the stock - they're undifferentiated. Same for coins: you could exchange the 1$ note in your pocket for mine, it wouldn't matter. Yet, you wouldn't accept, as easily, the offer from someone asking to swap his condo for yours. Since each one is unique, you must consider each apartment individually to estimate its value.
Uniqueness is what characterizes non-fungible assets and what prevents them to be considered as a whole.
Non-fungible assets are pretty common in our everyday life: Art, Real Estate etc. Even a human is non-fungible since you can't replace one with another. It's very interesting that such an ordinariness became that viral. Indeed, NFTs are only a non-physical version of non-fungibles assets. It seems pretty unremarkable, isn't it? So did we lose our minds to be hyped so much?
Not really.
Until now, virtual "non-fungible" assets were not readily achievable. Before the blockchain era, virtual worlds were too closed (video games, social media) or too open (P2P file-sharing protocols like Limewire). Thereby, virtual objects did not fully transcribe the real-world experience of private property and scarcity. Indeed, for example, you don't buy items in usual video games; you only rent the right to use them since your access to them is restricted, and you can't resell them easily. (No property) And objects lose their scarcity in free download platforms since they allow the creation and spreading of an unlimited number copy of any files without any traceability.
The Internet, as we know it, was not designed for creators to profit from their creations. Artists are exploited and underpaid on centralized platforms, leaked and disrespected on P2P applications. They are an excellent way to be recognized but not earn a living.
The internet, as we know it, inherits old WEB1/WEB2 patterns.
From an end-user perspective, WEB1 was all about reading information. Except for coders, it was not possible to create online content. Few people were publishing on the Internet and a lot were consuming or buying their creations - E-commerce like the old Amazon were the epitome of web1.
WEB2 represents the paradigm shift in how the Internet is used: Early 00s, thanks to mobile internet access and the rise of social media, lots of people were now able to create and interact through online content, effortlessly. Wikipedia, WordPress, Facebook, and Uber represent all the shades of this new Internet era where you could write on a blog, create your own website, publish creative content, interact with other people and even propose your services, to a worldwide audience and without any programming skills. Those big companies solved the programming friction and established themselves as the foundations of the new age of the Internet. Indeed, Web2 applications were a scalable way to achieve internet mass adoption, but they neglect elements that appear essential for long-term development.
Each industry is led by a few powerful actors (Lack of decentralization) that are absorbing all of the economic value created by their users (Lack of fairness). Twenty years later, we saw that letting them full powers could even be dangerous. Because our world is increasingly more digitalized and our identity has become more and more defined by our online presence; we should not give the responsibility to create and rule virtual worlds to revenue-centric platforms. In essence, their objective is misaligned with users' interests.
And because they compete fiercely against each other, the internet is scattered into several conflicting parts that prevent composability. So the main problem comes from the lack of harmony on today's internet, which is built on private databases. This leads to coordination problems for the developers and the end-users
Apps work highly well if you stay within the application that the database was built for. For example, It’s very easy to send money between 2 Cashapp users. But it’s way harder for a Venmo user to send cash to a Revolut Customer. It’s impossible for a Telegram user to send a message to a Whatsapp user. Composability does exist but it’s very limited: you can for example send a tweet using WhatsApp to a WhatsApp user, but the UX/UI is very poor.
This is what a blockchain tries to enhance: as a shared and open database that acts as a base layer for the internet, a blockchain frees the web from its rigidity.
For developers, it's a dreamed life to build inside a shared execution environment, and for the users, it is life-changing to jump from one application to another without friction. Thousands of different applications can instantly talk to one another using standardized calls. For example, Maker, Aave, and Uniswap work together seamlessly because they're both built on the same common credibly neutral layer, Ethereum.
That's the power of Blockchain.
So the main advantages that give blockchain technology are true composability, security based on high-level cryptography, and endless opportunity to build the foundations of a fairer Internet. Everything that was missing to recreate an unbiased experience of the virtual world.
This is WEB3 and it's a godsend for virtual non-fungible assets.
Indeed, blockchain-based NFTs are easily transferable, 24/7 traceable, scarce if wanted and they are YOURS.
Art is the first industry that comes to people's minds when one mentions industries that could be disrupted by NFTs, and it's highly pertinent. Think this world cornered by powerful galleries that sign artists and become the only entity that could legally certify their work: they are an expensive, not efficient, and profit-driven certificate of authenticity. Yet, Artists could put their work on-chain, become their own gallery, and receive royalties on each new sale. A blockchain is an agnostic pitch for them to display and sell their work in a frictionless way.
NFTs will also disrupt our way of playing video games. One day we'll look back on the pre-blockchain gaming era as the crazy time when players didn't fully own their in-game assets. Indeed, people are spending thousands of dollars on items where the supply is mutable, and they don't really care. It's funny to remember that this is even the reason why Vitalik started to get interested in decentralized systems: World of Warcraft made him realize that "centralized services can bring horrors". NFTs will power the from-rent-to-buy paradigm shift: they are provable ownership of digital assets.
Non-fungible objects are not only meant to be collected: they can be rented, shared-but-not-transferred, and earned. We'll write dedicated articles for each of those object's dimensions but we can already assert that earned NFT will disrupt this industry by allowing Ethereum addresses to be more like souls which unlocks countless opportunities.
As we said earlier, humans themselves are non-fungible. Our digital identity is shaped by our social media profiles: Linkedin for our professional life, Instagram for our "better self", Twitter for our crazy self, etc. All those identities, in addition to being a burden to manage, don't belong to us.
We are slaves on mainstream social media, but NFTs have the possibility to free us from Web2 social platforms and give us back our sovereign identity: you can read our previous article to understand how.