Understanding NFTs
Join me on this journey of understanding NFTs. We’re not diving into the technical details of NFTs, but the why of NFTs.
What is an NFT? The acronym stands for of Non-fungible Token. Fungible means that one thing can easily be replaced by another of the same thing. So, non-fungible means it is unique. Unique tokens, or Unique Assets. “Unique Assets” is the term we used originally in Ravencoin for tokens where there is only one, and it has a unique name.
Back to the why. What makes NFTs compelling? How can they sell for thousands, or sometimes hundreds of thousands of dollars?
Let’s draw on some analogies. Some NFTs are like rare comic books. Maybe they’re rare because they were algorithmically generated, and some came out more rare than others. Or, maybe they are rare because they were created by famous digital artists that will only create one of the original. Either way, the most valuable ones are rare.
Is it enough to be rare? No. Someone could take a picture of a pile of colorful items and that photograph would be one-of-a-kind. Could an NFT be made of it? Yes. Would it fetch big bucks? Probably not, unless something else made it more rare, like a famous photographer took the photo — maybe Ansel Adams, may he RIP.
So, it is the collectible value that makes it valuable. What makes something collectible? Ah, now we’re getting somewhere. Rare? Yes. Special? Yes. Others covet? Yes. Resale-able? Yes.
But aren’t digital items copyable? Yes, and no. What makes NFTs collectible and different than a digital jpeg is that they can’t be copied. Sure the digital artwork or jpeg attached to them can be copied. What can’t be copied is the token/asset that is the NFT. The token cannot be copied, only transferred. This is especially true on Ravencoin where the NFT is issued under a uniquely named root token, or sub-token. That provides provenance. Provenance just means where it came from — it’s origin. I think the provenance is the most important part of an NFT.
Ok, so we’ve established why an NFT is different than just a digital image, although the visible part is often just a digital image or 3d model. We’ve also established that the digital image can be copied, but isn’t the same as non-copyable token that is the NFT.
Now we’re going to zoom out, and establish some more analogies. We’re going to do this to adjust our thinking. We sit in the physical world, on earth, every day, and so we get used to some of the odd things that humans do. Let’s pretend we’re extra-terrestrials (friendly ones), and we’re going to zoom out and observe the earth like it’s a blue marble. We’re going to watch the humans.
As we look down at the blue marble with our super powerful alien trinoculars (they exist), we observe humans valuing certain things. They collect certain rocks and put them in jewelry when professing their love to one another. They hoard some yellow metal and ascribe it a value. Different sub-groups collect various things — baseball cards, spoons, cars, comic books — sorry — graphic novels, stuffed animals — sorry — Beanie Babies, marbles, dolls, action figures (boy dolls), movie props, vinyl records, vintage — well… anything, ticket stubs, and souvenirs.
Collecting items in the physical world is universal. Some of it is for status — large diamonds. Some is for flexing — fancy watches, fast cars, or toilet paper during early days of COVID. Some collecting is just the joy of having a hobby. Often it’s social, as we join with others who value and collect similar items.
The world is moving to digital — quickly. The COVID lockdowns accelerated this transition, by about 20 years in my estimation. Zoom, Facetime, Hangouts, Discord, Telegram, Snapchat, eMail, Texting, Signal, iMessage, Twitter, WhatsApp, Clubhouse, Facebook — sorry — Meta, WeChat, and more are bridging space, time, and language barriers. National borders are being erased, and time shifting is becoming natural. We can now communicate with anyone in the world, or with everyone in the world through the magic of the Internet combined with real-time translation.
Everything is being dematerialized. Physical is going digital. Blockbuster Video learned this lesson the hard way.
The next phase, which includes VR (virtual reality), AR (augmented reality), and the metaverse will follow quickly. Don’t worry, the “metaverse” is just a made-up term for the convergence of these immersive 3-dimensional worlds. It will happen. Just like you can go “on the Internet”, you’ll be able to “enter the metaverse”. Even if the terminology changes, the “entering” part will likely remain. VR and AR are very immersive, and you feel like you’ve entered another world.
In this virtual 3d world, your prized diamond ring means nothing, your expensive physical jewelry isn’t visible, your $400,000 Patek Philippe watch isn’t on your avatar’s virtual wrist. Gold monogrammed cufflinks — missing. Even your shoes are generic avatar shoes with no brand and have the same shine as every other avatar. Your status is reset. This will hit the wealthy fashion-aware New Yorkers the hardest — sorry Jamie Dimon.
NFTs to the rescue. I’m guessing that the term “NFT” will be phased out pretty quickly as counterfeit-proof digital assets specialize into categories. What is not likely to change is the desire to display status, display a unique and custom personality through your digital purchases, and socialize through the shared experience of collecting in the digital realm. NFTs help with this, and they can be used across platforms. All it takes is for these VR/AR platforms to allow you to display your NFTs. Digital masks, digital jewelry, digital wristwatches, digital cufflinks, digital land, and digital brands. The metaverse could let anyone verify the authenticity of these digital items. Don’t be the schmuck sporting a fake brand — digital authentication is a bitch.
The other use for NFTs is going to be for membership into clubs, social groups, limited premiere experiences, fan clubs, once-in-a-lifetime events, season or lifetime ticket holders, etc. These NFTs will serve a dual purpose. They will enable entry into the club, event, or experience, and will be proof of attendance. And in some cases, like lifetime memberships, or recurring events, they will be transferrable, and will be inheritable.
Now, let’s talk about RVN being the money of the Metaverse.