When normal life is disrupted, and during times of crisis, innovation is often triggered. In 2008 big banks knowingly gambled with their clients money in high-risk ventures, plunging the U.S. into a financial crisis. It was in the aftermath of this disruption that blockchain was developed, becoming a massive enabler of change to a broken system. Blockchain is the engine, or system, in which all crypto currencies and NFT’s are built on. Blockchain records all transactions in a way that makes it difficult (if not impossible) to change, hack or cheat the system. Additionally it is decentralized, which means the transfer of control and decision-making changes from a centralized entity (individual, organization, or group thereof) to a distributed network (group of people). This revolutionary technology demands transparency, accountability and puts the power into the hands of its users.
The goal: to develop a new monetary system that wasn’t in the hands of a few who made decisions behind closed doors, rather a system that worked as a whole for all who were invested and a system that could be clearly monitored. The first major blockchain innovation was Bitcoin. Which was also the first global currency, a global currency that can be exchanged with ease between countries and without exchange rates. This becomes incredibly significant as we become a globalized society. Obtaining crypto currency works the same way as exchanging your country’s dollars for foriengn currency. The only difference is that instead of going to a bank, you exchange your money on a highly secure platform, such as Coinbase, Robinhood or Metamask. For those of you scared of the transference of money digitally, it is worth noting that traditional banks also hold your money in a digital format and run the potential of being hacked. The benefit of traditional banks is that they are insured. However, crypto is far more secure because it is built on the blockchain and every single touch point is tracked. This means higher security with less risk of being hacked and if there was a hacker they would be easily tracked.
The next blockchain evolution came in the form of Ethereum. Ethereum is also a crypto currency that additionally provides a versatile platform which allows developers to implement “smart contracts.” These smart contracts are packets of code that are connected to a digital asset that confirms the asset as individually unique, traceable and verifiable. These contracts can be applied to anything digital and are basically unhackable and uncopyable. All NFT’s (non fungible tokens) have smart contracts attached to them. NFT’s are simply goods that you can obtain in exchange for crypto, typically Ethereum. In other words, the new money is crypto and NFT’s are the digital goods you buy with your crypto money.
NFTs started grabbing mainstream attention when Beeple sold his “Everydays: The First 5000 Days” digital artwork for $69M in partnership with Christies. NFT’s tend to be associated with the art world…for now, but there are many ways in which NFT’s can be applied. Traditionally a piece of digital art (or data) can be copied over and over again, leaving the creator, or purchaser, with no control over this duplication or way to validate the original work. Michael John Peters who has been working in fine arts for over a decade explains the importance of NFTs for the art world, “It is very easy to fake certificates of authenticity or replicate art. Some paintings that are exact in size and composition sell for drastically different prices depending on if they have provenance (a tracked history) and certificate of authentication. For example a Picasso painting that had its provenance and authentication sold for 2.2 million dollars. Whereas a different Picasso painting that is the same size, composition and close to the same sale date, but without provenance sold only for 158 thousand dollars. NFT provides an iron clad indestructible proof of ownership along with provenance that will last for eternity. In the future every painting, both digital and physical, will have a NFT attached to it.”
Jessica Salomon adds, “NFTs can be accessed by a global community from a range of global NFT marketplaces that take a minimal (or even no cut) which allows artists to create more wealth, unlike the standard exchange of art where galleries and agents take a significant share of the artists profits. Moreover, NFTs allow artists to connect directly with their customers as each purchase is documented on the blockchain and the recipient and creator is clear. This transparency spurs viral communities and fans; enabling real dialogues between creators and buyers on other social platforms. It has created remarkable opportunities for artists like pplpleasr who last year was jobless due to the pandemic and applying to every job she came across, while this year she is selling out of magazine covers and sharing stages with renowned artists like James Jean and Steve Aoki.” Pplpleasr further commented that, “Crypto/NFTs changed my life not only because of the money and investing opportunities it exposed me to, but also because of a welcoming community of passionate people who aren’t afraid to challenge the status quo.”
It is just a matter of time before questioning the relevancy of NFTs will no longer be a discussion. Major companies know this and are building within this space:
- Twitter is integrating NFTs
- Facebook is taking part in the building of a metaverse
- Nike is creating NFT verification on shoes
- Coinbase is building a NFT marketplace
- Warner Bros. already released Space Jam NFTs and is wanting to release music NFTs
We are just scratching the surface of possibilities in regards to what NFTs and smart contracts offer, and why investors and collectors are enthusiastically entering this emerging market. To date the general public doesn’t understand the possibilities of NFTs and many look at it as a trend that will fade out. However, innovation in this space will continue over the next decade. These examples and first steps are just the most simple use cases of smart contracts. Here are a few other examples of industries that are likely next to be disrupted through NFTs:
The world of gaming will most likely be one of the next areas of application where we see a massive fundamental shift from NFTs. Gamers find deep intrinsic value in their digital identities; their personal history, achievements, communities, stories, and status. Gamers spend hundreds if not thousands of dollars in games, purchasing digital items; such as outfits to give their avatar a unique look, boosts to improve their performance in the game, or unlockable content to discover new stories and worlds.
Now, the Play-to-Earn model has arrived. Where players participate in a game, contribute value to the ecosystem through their gameplay, and earn NFT digital assets. By owning these assets, gamers can sell their NFTs and are actually earning money in conjunction with the game developer. This creates a symbiotic developer-customer relationship vs a potentially exploitative one. And these NFTs are truly owned by the gamer, vs centrally controlled by one game publisher. Even if the game shuts down, your NFTs can still be compatible and usable in other virtual worlds. This is a dramatic paradigm shift, which distributes power and prosperity.
What is really exciting is the positive influence NFTs can have in this world. Jeremy Dela Rosa is the founder of Leyline, a non-profit organization that is leading the charge with social impact through NFTs. Leyline’s mission is to create a sustainable NFT identity and ecosystem that celebrates, rewards, and gamifies social and environmental good. Users on their platform earn NFT collectables by doing positive deeds in the world. Their NFTs represent a cause or goal that people worked hard for, a unique moment in time, that made the world a better place.
The user’s story of the good they did is captured and memorialized on the users’ NFTs. You can display your Leyline NFTs as art pieces in your personal art gallery (both in the digital and real world). Your friends and visitors can click your NFT to see the story of your contributions. The best part about these NFT’s is that they can inspire others to perform acts of altruism and that these goods are obtained through the currency of social impact. Leyline does an excellent job of bridging the physical world with the digital world. People are encouraged to make a difference by solving real world problems and are rewarded digitally with collectable NFTs, as well as the ability to obtain physical goods, such as a Leyline bag or backpack.
Finally, it is worth noting the innovative way in which Leyline conducts business, which is deeply aligned with the foundation of why Blockchain was designed: transparency and democracy. They are building a DAO (decentralized autonomous organization), which is a new form and governance of organization where key decisions are not made just by one set of actors. For example, anyone on the Leyline platform can submit a proposal to be voted on by the larger community. They also record all their meetings and then publish them for the public viewing, as well as host Discord events where they answer the general public’s questions. This new wave of business is the model for a fresh approach to corporate transparency and responsibility. This type of format the public is craving after the recent release of misconduct from companies such as Facebook and Airbnb.
Real estate markets are ripe for disruption. Contracts, certifications, ownership and claim history will all be stored in the blockchain and publicly accessible. Automating countless paperwork and eliminating several layers of intermediaries. It will also mitigate fraud, which sadly, happens more often than you would think. Once more real estate contracts get created as NFTs and stored on a secure blockchain, real estate fraud will be a thing of the past, as such Smart Contracts are nearly impossible to alter, easy to verify and permanently stored. Any digital asset created as an NFT enjoys this level of security.
Futurist and disrupter, gmoney adds, “Mortgages are also NFT’s. Would the 2008 crisis have even happened if all the MBS indexes were fully transparent, on chain? There would have not been any possibility for re-hypothecation, underlying assets and leverage would have been able to be monitored in real-time, and the entire financial system wouldn’t have come crumbling down, needing a bailout by taxpayers.”
Companies are actively working on creating virtual reality metaverses. Metaverses are virtual worlds where essentially the internet is brought to life. There is an abundant possibility within metaverse worlds, where you get to design your life, interact with real people in virtual communities, design your avatar, work, play, and explore new worlds by using virtual reality headsets, augmented reality glasses, smartphone apps or other devices which include incorporating virtual touch. If you have ever watched the movie Ready Player One then you are familiar with what a metaverse is. With the help of advanced AI, the adoption of universal standards and ever increasing performance in computer processing power, entire virtual worlds are being imagined and built. Metaverses will be a place where you and your children can visit, and which will make the internet of today seem like a silent movie by comparison.
NFT’s will be an essential part of metaverses and will serve as the building blocks for assets that can be utilized across all these worlds. As you build your virtual home, your walls will have original NFT art and “prints” of duplicated digital art that you bought from collectors. You invite your friends over to your immersive digital home to listen to your NFT music and view your NFT art – which now represents not just a creator’s unique work, but also the art piece’s history and the story of how you came to own it. Your friends arrive instantly, burning no fossil fuels, needing no Uber. Sure, they didn’t stop along the way to pick up chips, but they did bring you a new digital shirt for your avatar, as a housewarming gift.
Through NFT’s the metaverse will also blend with the physical world. Some examples of this might be: physical venues will have digital counterparts in virtual worlds, NFT Art galleries can exist both in the physical world on digital displays, or music concerts will be held both in a concert venue and a virtual bar. Tickets will be sold as NFTs, and will live in your virtual collection of concert tickets that are on display in your virtual home, with an e-signature/ personalized message direct from the artist.
First-movers into the market include:
- Decentraland – A digital land
- Sandbox – Open gaming metaverse like Minecraft powered by NFTs
- OnCyber – 3D NFT Galleries
- VCCESS – Launched the first phase of their metaverse, which is a social marketplace.
Shortfalls of NFTs
We are still in the early days of NFTs. It is a tremendously complex piece of technology that the vast majority of people have difficulty comprehending. In order to gain mainstream adoption there are some key hurdles that need to be overcome:
1) There must be a useful function for the NFTs, or genuine value backing the NFT that communities universally agree upon.
2) The user experience needs to be simple and seamless. Most people don’t know how the algorithms in google maps work, they just follow the directions. Similarly, blockchain apps don’t need to educate users about NFTs, they just need to make it easy to use them.
3) Cross-chain and cross app compatibility. With the emerging metaverse, every developer recognizes that compatibility of their NFTs with other marketplaces, games, and apps will only add utility to their NFTs and benefit their users. It also expands their potential audience base through network effects.
4) Stabilization and adoption of cryptocurrencies. NFTs are purchased using crypto. If not enough people have crypto, or are afraid to spend any of it because it’s value could dramatically change up or down, your buyer’s market remains small.
5) Storage of your assets. One of the current challenges of NFTs is that the assets (image, video, audio) can be rather large in file size. So most developers will store that asset ‘off-chain’. This means that the actual song is not on the blockchain, the NFT is actually just referencing the file hosted on some other service. The problem with this is that if that service provider goes down, or the original NFT marketplace goes out of business, the actual asset behind your NFT would be lost. Basically receiving a ‘file not found’ error whenever you look at your NFT. There are solutions to this that are being developed (IPFS as an example, has high potential), as well as techniques to compress assets so that they can actually live directly on the blockchain. But there’s much work to be done before we can see NFTs that can live truly in perpetuity without any maintenance.
6) In order to create/mint a NFT, users have to pay a fee (also known as a gas fee). Griffin Anderson points out that, “Gas fee typically costs upwards $50 USD on most notable blockchains such as Ethereum. These costs can be prohibitive to artists and creators. Fortunately new blockchains like Archway will allow customization so that a project can subsidize gas fees so that the end user doesn’t have to pay an exorbitant amount to mint or even receive an NFT.”
Positives of NFTs
- Blockchain is fundamentally secure, decentralized, globally accessible, and designed for individual empowerment and wealth growth. It has built-in immunity to censorship and corruption from the powerful few. it lays the foundation for an entirely new apps and services layer to the entire internet. Literally every service and app that exists today can and will be recreated on blockchains due to these unique benefits. From decentralized Finance (De-Fi), social media, streaming services, to games, entertainment, commerce, healthcare, and supply chain management. And even more radical innovations will follow afterwards, like bio-engineering & AI safety protocols.
- The combination of a crypto and NFT marketplace affords modern investors the full range of investment risks, and a diversified portfolio, all while benefiting deserving creators and disempowering brokers who add no value to the process.
- Asset ownership is the pathway out of poverty. There are 1.4 Billion unbanked people in the world, and have no way to enter the traditional banking system. Just imagine not having your bank account you can’t: get a loan, credit card, buy a car, sell something on ebay, etc. This is taken for granted by most of us in the developed world. Cryptocurrencies and NFTs change this paradigm. Now these 1.4 Billion people immediately have an opportunity to have a wallet, participate in digital marketplaces, create art, music, games, and get financed to run their business.
They have the ability to build wealth for the first time in their lives. Bringing economic vitality to their families and their communities. The digital economy doesn’t care about state & national boundaries, it doesn’t have physical or logistical restrictions. Virtual communities and worlds create value exchange at almost zero operational cost.
- Collectors and investors can clearly see what they are getting in advance, confirm the assets validity through its unique identity and feel safe knowing that the contract cannot be changed or falsified. This technology is ushering in a new age of secure investing, while also functioning in a way that lowers barriers to entry and levels the playing field for the average collector and investor.
- Content on NFTs cannot be censored. No institution, corporation, or government can truly quash the content on the blockchain. There is no central controlling person or team they can fine or arrest, no single set of servers to shut down. This is the purest form of freedom of speech on the internet. Even if one application that uses NFTs gets shut down. The data remains intact on the blockchain, and any number of new decentralized apps can take its place.
Nick Emmonds, founder of Upshot adds, “The high level of excitement with NFTs is warranted. NFTs will move beyond art and collectibles and start to represent a much more diverse set of financial assets that can be used productively across the crypto/DeFi ecosystem. Things like taking out loans against your collection of digital art are just the beginning as people start interacting with real estate, insurance, options, etc. as NFTs. NFTs are the missing piece to decentralizing the rest of our financial system and enabling fundamentally novel financial interactions to take place. The result will be a massive increase in financial inclusion across the globe — letting large portions of the population interact with a financial system that has, up to now, been inaccessible to them.”
Humans, Technology and Change
Technology has always co-evolved with humans. The difference now is that technology is advancing faster than ever before. Innovations are usually accompanied by unforeseen impacts. The creators of the laptop most likely didn’t intend for their computers to create a vibrant nomadic communities throughout the world or the impact of checking emails while in bed which can make it hard to disconnect from work. The truth is that all innovations come with unexpected impacts.
It is hopeful to know that the pioneers of blockchain developed this technology with the intention to democratise and uplift global citizens. It will be critical that the originators stay true to their beliefs, especially when money, power, and acquisition offers from big companies start coming there way. As we enter into this new era of futuristic technological advances each one of us has the power to shape this new world and our society by the choices we make. We are at the very beginning of this evolution. Let’s enter into it with awareness of the world(s) we want to participate in, who we give power to, and how we shape the future of civilization.