NFTs? — regenseed.io

My favorite thing about NFTs is what they do to our brains when you start thinking about them. They are one of these things that defies simple categorization. Yet it is defined by a simple fundamental constraint. It is non-fungible. It can’t be split up. It has the ability to remain whole. It has a firm digital identity. And it moves around in digital space. That’s the box. But that’s where the constraints end. The rest of it can be as out of the box as it wants. Once there’s the thing that can’t be split, the idea of the thing can be split up, rearranged, mixed, stretched, bent, made sticky and scattered to the winds. How many different ways are there to own a digital thing? At one extreme, you can mint an NFT as a registered security from the jump subjecting it to the regulations of any jurisdiction that wishes to regulate it. Or it can run on raw collectibility and free itself to capture hitherto uncontacted value in a shared world that defies boundaries. Like any technology, it is a tool, neutral but useful.

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Quick background for those new to NFTs. A token is a digital asset. An asset is a thing that has value that can be quantified relative to another asset (that’s typically a fungible currency like a dollar, stablecoin, or ada.) True Love is not an asset. A box of valentines candy is an asset. A non-fungible asset is non-fungible because it’s unique and it cannot be split up the way a dollar can be split into coins, or —taking the “fungible” word literally— how a piece of fungal mycelium can be sliced into pieces and those pieces can go on to grow the same fungus. If you want to buy a Winnebago (a non-fungible asset) and all you have is a Homer Pepe NFT (another non-fungible asset), you will probably want to sell your Pepe to someone for cryptocurrency (fungible) and unless your dealer is hip, you’ll probably need to sell someone a bit of that crypto in exchange for fiat currency like dollars (fungible), hand that cash to the dealer, and drive off in your Winnebago (non-fungible).

The asset itself —the .jpg or .gif or .mp3 or .pdf, folder or whatever digital file that contains the zeroes and ones that comprise the asset being issued CANNOT be split up— that’s the non-fungible aspect. FOOTNOTE: To get into the weeds for a sec, interestingly the value chain associated with the asset CAN be split up thanks to things like multi-wallet support and multi-sig transactions…. and that can work on both ends, allowing for multiple artists to co-own a single piece of digital property, while on the receiving end multiple collectors can hold the NFT. Not important for now. I digress. Back to the basics. There’s this idea that anyone can copy the file, and unless its something that’s been completely concealed from its inceptions, this is true. But, critically, no copy of the filecode can pretend to have the same Value as the original, because the NFT itself certifiably traces back to the original sale which is preserved on a permanent public, trustless ledger. The private keys associated with the public wallet address that holds the NFT (and give the private-key-holders the sole power to do something with it, like sell it, in the future) are private, and the public keys are connected to the original sale forever- as are any future transactional events involving the NFT. This public accounting backed by cryptography is nothing new- it’s the way Bitcoin and other blockchain based crypto-currencies work. The chain of custody for a digital asset is carved into digital granite.

An NFT is not a certificate of ownership per se, but it can be enriched with data and connected to other nodes in a network in ways that give it unique properties, and one of those properties is that it could act as a certificate of ownership for some physical thing- a deed to a parcel of land, a title to a vehicle, perhaps even a trademark or copyright…. But it needn’t be linked to anything physical, and all of these more “official record” applications are a bit dicey at the moment as the regulations around these types of activities haven’t been parsed out yet. In the meantime, we have Collectibles where the sky’s the limit.

As of early 2021, the biggest use case for NFTs is in digital artwork. It’s an easy story to tell, something that can be summed up in a headline. NFTs hit the front page in early 2021 when a traditional auction house hosted an auction for digital artwork. Instead of leaving the auction with a framed canvas with paint on it, the auction winners received a token in their digital wallet- that token is linked to an image. An image that was copied and pasted into articles about this auction all over the internet. In the same resolution as the original. But there is only one original because of that aforementioned chain of custody carved into stone. Are such NFTs speculative assets? Sure. Is it more of the same, in that rich art collectors now have more ways to preserve and expand their wealth? Sure, yeah. Does this make zero sense to the average person. Absolutely. But, you can’t argue with the value of these non-physical pieces because we can no longer live in a world where we can say someone wouldn’t pay millions of dollars for a jpg. Because they have. And not all of it was for money laundering.

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In 1998, what would happen if you asked the average person to put their credit card number into the internet to buy shoes? Today, most people buy their shoes online- and new shoes are something you probably should try on in meatspace. That’s how powerful e-commerce is. We are participants in a world where more and more things are moving digital, and more and more new things are popping up in digital space. FOOTNOTE: Does this mean that we should embrace the master plan for the great reset and go willingly into the matrix? Hell no. We need to fight harder and harder to preserve our human-ness and our planet. But we can try to understand what the phenomenon of NFTs means, and what GOOD might be possible in a world where anyone can issue anything and anyone else (with the means) can assign that thing value by taking ownership of it. And find positive use cases for it. New ways of mobilizing resources for good.

“Ownership” feels like a dirty thing- a greed thing. What now- the rich have bought up pretty much all the real stuff, so now we’re making fake stuff to sell to them and that fake stuff is going up in price just like every other asset class out there— you know the way things like Food and Shelter are going up?? Some are warning us that this NFT mania is just a grotesque symptom of end-stage capitalism. Sure there is something a little grotesque about sums of money that can feed thousands of people being spent on a jpg file. There is something a little matrixy about it. But all these technologies are neutral in a vacuum. It’s what we make of them.

One of the cool things about NFTs is that they can be anything- and in a free market where things are assigned value based on what people will pay for them, there are NFT markets provide the function of instantly and frictionlessly (relatively) moving resources to places with inherent value that hitherto lacked a way of leveraging that inherent value to do something. Is there an ugly side to this- could it lead to further commodification, exploitation? Sure! When central banks left with nothing else to inject liquidity into start issuing NFTs, you know you have a problem. And that problem isn’t NFTs. It depends on who is issuing it- but what is amazing about this technology is that anyone with an internet connection can essentially list an asset on a digital marketplace. There are a lot of Good, amazing, things in the world that want to grow but can’t because there isn’t a mechanism for value to flow to them. There is a lot of desperate need out there, creative people full of energy without the resources to better their situation and help lift up those around them.

Kickstarter was a big leap forward in this regard. It proved that people can build things on others’ altruism. And Kiva is another big leap saying that instead of keeping your money in a savings account earning interest rate at a fraction of the real inflation rate, why not take part of your paycheck and give someone in Honduras a micro-loan. Thanks to US military hegemony your dollars or other “developed country” fiat go really long way in places like Bhutan and Sudan, and there’s a good chance you’ll get your loan paid back- and you’ll make more interest than you would have putting it in the bank in an environment of near zero and zero and even negative interest rates set by central banks. Cryptocurrencies like Cardano are on pace to disintermediate centralized platforms like Kickstarter and Kiva simply because of the high fees associated with those services, and NFTs are one way of replacing them with something better. Plus, NFTs done right come with some extra fire power- specifically the power of Virality and Collectibility, and Novelty

Having a good cause and stamping an NFT on it isn’t good enough. Maybe at one level it is- in that one can set up a crowdfunding campaign as a relatively uninspired NFT gallery- the people who would support your kickstarter come and support your cause by buying up NFTs. But while that works in your circle for people who know you and want to support you and- it probably doesn’t’ translate much outside your circle to those who are looking to have some light-bulb switched on when they see your NFT.

There is no magic plug-in for virality and collectibility. Novelty alone doesn’t have value especially if that novelty is generated by an algorithm producing a large series. In an ecosystem of digital things, collectibility is earned. There is a certain amount of artistry involved. And probably some luck. If one takes the leap to make NFTs we should start by asking ourselves:

What do the people I want to connect with want to collect?