The Obvious Series: Non-Fungible Tokens (NFTs)

There are two parts to The Obvious Series:

1. Simple explanations for newer entrants

2. Abstract wtf are we doing here reflections

A non-replicable digital item existing on the blockchain ledger.

An NFT is an ownership token. Its existence is verifiable on the blockchain and undeniably proves the holder’s ownership of whatever asset it ‘contains’. Some assets that leverage this technology include:

• art (generative, visual, ai, etc)

• music

• podcasts

• videos

• blogs

• ebooks

• game assets

• deeds to a home

• certificates

• portfolios

• tickets

• collections of other NFTs

• voting weight in an organization

People often confuse the asset with the NFT, and in some sense it’s not incorrect, but the technical truth is that an NFT is a token proving you own the asset it points to.

Digital ownership is an abstract concept to many.

Why would I pay for that when I can just right click and save it?

Part of this dissonance is due to the trends set on the social web. You post on Instagram, or Facebook, or TikTok, Twitter, Tumblr, Reddit, or even your own website. Who owns the digital footprint?

You may say “I do because it’s on my account.” But who owns your account? You then may say “me, because I’m the only one who can log in.” But what if you get banned?

We can not confuse origin with ownership. Even though there are value opportunities available to the originator of an idea, data, concept, artwork, etc, the lions share of the value goes to the owner of it. Take a look at the app store data-capture-details on various apps. There’s a reason they make us sign away rights to it. Data is digital gold.

If you’ve heard that term used elsewhere it’s likely they were talking about crypto. And in the context of this essay it makes perfect sense why.

NFTs are containers for digital data. They allow the originator of data to simultaneously become the owner of it. This is one of the most fundamental shifts on the internet since its inception.

Now a valid counter question here is:

How is this valuable if other people don’t want to engage with it?

And the only real answer I can provide is that this is the natural filter for all innovations of interdependent value mechanisms. Fiat currency is backed by nothing beyond mutual agreement on its value mechanism. Social media is backed by a mutual agreement on its value. Entertainment is the same.

All non-essential (shelter, food, clothing) innovations in human civilization only become valuable when we agree they are valuable. NFTs will be no different.

If enough of us agree that ownership of our digital data is valuable then NFTs will become valuable. If not, then they won’t. But honestly… which do you think is more likely?