A meditation on the term NFT, and why collectible doesn’t quite capture the full essence of the underlying technological breakthrough. To begin, let’s not shy away from the complicated nature of the term NFT (non-fungible token).. which implies a user first must understand fungibility.
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Non-fungibility in very plain english simply means unique
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Ipso facto fungibility means interchangeable
Thus non-fungible tokens can be defined as unique items stored on a shared database. Movements of these unique items recorded on to a shared database is better known as “blockchain”.
Expanded just a wee bit further, an even better definition of NFT emerges as “organized serial numbers stored on a public blockchain” Each word is its own interesting story we will break down and analyze later.
Collectibles are thus a single (very fun and valuable) use case for NFT serial numbers.
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A quick moment before we start to acknowledge the importance art and collectibles have played in the foundation of the NFT space. It’s understandable why some may associate NFTs with this initial killer app.
Who doesn’t love the concept of a Michael Jordan rookie card, or the Mona Lisa. Both are examples of unique (non-fungible) items in the world that can’t be exchanged for anything else. Their rare beauty attracts us like Gollum to the ring. We clamor to spend large amounts of fungible value (Dollars, Bitcoin, ETH) to acquire “collectibles”.
But there is so much more to NFT than keeping track of artistic objects on a blockchain. Let’s dive in and explore other valuable things NFTs can keep track of..
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don’t just take it from us -
Nihar Neelakanti, CEO of Ecosapiens says:
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NFTs are more than just JPEGs, the underlying smart contract is a really exciting piece of technology that can enable more commodities and assets to swap hands easily, like real estate deeds, for example. [They] can be leveraged to raise awareness and capital for social good in an incredibly swift and easy way that traditional philanthropy and ESG bonds can’t.
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Moving around real numbers
Some day this low-friction seamless exchange of serial numbers will happen at scale. The closer to real value a serial number touches, the harder the conversion of regulated industry from fallible middlemen to NFT will be.
Non-trustworthy industries in desperate need of blockchain serial numbers right now include:
-Carbon credits
-Property titles in developing countries
-Charity, aid, and related supply chains where there is a delta between money raised and non-fungible items sent to those in need
These use cases are all extremely close to governments and regulation, thus extremely difficult to upgrade to blockchain.
Industries that seem slower to need blockchain serial numbers include:
-Commercial supply chains - Toyota does a pretty good job of delivering cars. Maybe suppliers want to share data, but likely not to maintain margin and trade secrets. The central hub benefits disproportionately from data sharing.
-Social networks - a shared state across all participants doesn’t scale. Though trustworthiness without immutable verification is dubious so maybe serial numbers are still helpful after all.
-Tradfi - Those with a vested interest yield monopoly power and enjoy the Cantillon effect closest to the fiat slop pit. Looking at you Barren Wuffett. Fight the good fight Paypal USD.
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Serial numbers are deeply tied to money, and math, and keeping-track-of-things
Which are 3 inherently hard topics to understand, let alone execute on, let alone automate in a trustless way (until the Bitcoin whitepaper).
The government and large corporations also happen to love these 3 concepts.
Those that can keep-track-of-things using money and math are handsomely rewarded with prestigious jobs as senators, bankers, and fed officials.
With blockchain we need different kinds of humans involved in creating a trusted ledger. Node operators, coders, and miners:
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All indifferent entities that record whatever transactions their customers wish to record
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All bound together by a secure code base that is hard to manipulate or modify
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Little NFT big blockchain
10,000 unique Monkey pictures you can own is a great way to conceptualize what a Non-fungible token is.
Just remember the token part which really means blockchain
which really means an earth shattering rewrite of all of our most fundamental intuitions of money and power from trusted people to trustless computers.
It’s hard to:
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Conceptualize a serial number on an immutable shared blockchain ledger (Technically hard)
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Understand why it’s a good thing to let important data see the light of day on an incorruptible shared ledger (Philosophically hard)
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Be cognizant of privacy issues this may cause and how to safeguard customer data. Blockchain databases are public and show a coded fingerprint of transactions. Once you bind associated personally identifiable information with a blockchain addresses.. all transactions become exposed publicly (Morally hard)
So don’t feel bad if you’ve been calling NFTs collectibles. You are basically right that NFTs are collectibles, but oh they can be so much more.
