The bubble in non-fungible tokens (NFTs) a couple years ago has left a lot of people battered. Like most of these situations, it turned a lot of people off. The claims that NFTs are dead and worthless are spewing.
Unfortunately, also commonplace, is tossing the baby out with the bathwater.
Here we see the issue with market exuberance versus technological development. Another way to frame it is the proverbial speculators vs builders.
The former took it on the lip.
Just because there was a major bubble hyping nonsense does not mean the technology is not valid. In fact, when it comes to Web 3.0, NFTs might hold some of the greatest potential.
As for history, we have to keep in mind many made similar accusations about the Internet after the dotcom bubble. There was a belief that it was nothing more than vaporware and most of these companies were nothing. It turns out the likes of Google, Amazon, and Priceline turned that on its ear.
When it comes to a new ownership structure, NFTs are central in this idea.
In fact, if one does a simple thought experiment, consider the idea of a NFT being created for the ownership of everything. Whatever is around you, picture that as having a NFT.
Does this mean each is going to be worth millions of dollars? No. We have to get away from the speculation mindset. Think like a system builder.
The concept of real world assets being tokenized holds a great deal of merit. NFTs are the engine that is going to make this a reality.
Let us start with a simple concept.
Anything with a serial number can have a NFT. Suddenly, this becomes the "deed" or "title" to the asset. Obviously, a NFT for an old rocking chair might not be necessary (unless it is an antique), one for a car or house could be.
Taking this a bit further, we can really see it clearly in the world of collectibles. Paintings, sculptures, wine, dolls, and a host of other items are collected by people. Some items can generate enormous value. That means a host of entities get involved such as insurance companies. Authenticity is crucial.
If we look at supply chains, the same holds true.
For perishables, such as food, these can be time stamped and tied to the NFTs. If we are dealing with non-perishable items, it makes it easy to track for things such as warranty and defects.
NFTs create individual ownership tied to a specific item. This allows for the enhancement of markets are liquidity could be achieved in an easier way. Many items have enormous layers of friction. Here we are eliminating some of that.
Perhaps the biggest benefit to NFTs is in the ownership of digital assets.
We will start by looking at what most are accustomed to: the website.
Who owns this? Obviously, we can look up the URL to get some information. People basically have the website registered allowing them the rights to that site. This is transferrable and, in some cases, worth a lot of money. After all, what is Google.com worth?
For decades, this was the basic digital asset that everyone can identify with. The NFT craze of a couple years ago gravitated to the other digital asset we understand, images. This is why NFTs tied to a jpg were sold. Even Justin Sun got into the action by paying $300K for the first Tweet. The reality is that sun doesn't own the tweet, Elon Musk does.
That said, we do have the potential to radically alter the Internet.
With the server-client architecture, all data (webpages) are owned by the ones behind the servers. This is Google, Amazon, or Joe from Joe's Used Violins. This is not open data.
Web 3.0 alters this by using public databases. This means that anyone can incorporate it into a website. Here we see data that is unowned.
However, we can use NFTs to alter this some. Basically, a NFT can be created for each webpage, generating an owner. This means that we are looking at the potentiality of many pages on the Internet being owned by individuals. Revenues could be generated through different means, providing value to one's ownership.
It is here we see a massive amount of potential unleashed. Suddenly, millions of people have a vested financial interest in the "performance" of different pages tied to a specific website. It takes platform economics to another level.
The final part of this discussion are generic NFTs. By this we mean those not associated with something specific.
Under this scenario, the NFT operates as a certificate of value. Instead of being tied to an item, it is associated with a particular amount, most likely in USD.
The utility of the NFT, or what it is tied to, is fluid. This means that in one game it can be tied to a weapon, whereas it can be transformed into fuel for another. Through an exchange, swapping of utility can occur based upon the monetary value associated with the NFT.
Think of this like a gift card that can be spent on anything. Unlike a coupon which is specific to an item, a gift card carries a specific monetary amount.
Of course, the value will fluctuate based upon the market prices associated with various forms of utility. For example, if one buys a sword in a game for $10, and the game becomes very popular, that item might jump to $30. If the person is leaving the game, he or she could sell the sword and have $30 on the NFT. When it decides to "purchase different utility", it will have $30 to spend.
This does not only apply to assets.
The same concept could be applied to activity. Perhaps there are certain NFTs issued for levels of activity within a game or platform. These could be issued and also have a market price. As that moves up or down, it could be swapped in the Network for something else.
Basically anything that can be quantified could have a NFT associated with it.
The possibilities are just beginning.
