NFTs — we’ve all heard of them. Many associate NFTs with JPEGs that sell for millions of dollars. Those who know a little more about the technology might think of GameFi and avatar assets in the Metaverse. Those who have been following Acceleration Economy for a while will know what they’re really for — digitizing assets and securing digital property rights, a function that creates new markets and can be used across all industries.
But what do these different layers of meaning behind NFTs have in common? For one, they’re all about value. How come easily copy-able JPEGs cost millions of dollars? Why would NFTs be useful in the Metaverse? And why do assets need to be digitized? These are all valid questions, and the answer lies in understanding how NFTs have evolved our perception of digital value.
The definition of an NFT has changed dramatically over time. While the modern association with digital art, memes, and Ethereum began around 2015, the idea behind NFTs (blockchain tokens that represent ownership of unique assets) started on the Bitcoin chain in 2012-2013 with the idea of the “colored coin” that represented real-world assets like cars or real estate. While the idea was there, the execution was not. There was no clear direction. The colored coins were described simply as a new technology with raw possibilities for the future.
That direction gained clarity in 2015 when Counterparty, a peer-to-peer financial platform, teamed up with Spells of Genesis, a video game creator. Together, they issued the first ICO (initial coin offering) and were GameFi’s first case, distributing in-game tokens that also existed on a blockchain. Soon, Counterparty partnered with Force of Will, a popular trading card game, and launched their collectible cards on their platform.
The year 2016 was considered the birth of crypto art with Rare Pepe Wallet’s launch, as creators around the world began selling their digital art. The rest is history. In 2017, CryptoPunks launched as an ERC721 / ERC20 hybrid token on Ethereum; OpenSea was founded; CryptoKitties started; and so on. Suddenly, digital collectibles had value just like trading cards or physical artwork.
Interestingly, the vision for NFTs came long before digital art. The first “colored coins” on Bitcoin from 2012-13 had much broader applications, from precious metals to cars to equities and digital collectibles. Of course, that vision couldn’t become reality in 2012. The industry needed easier hooks to grab and work up from. For NFTs, that hook was digital art.
The same thing unfolded with the Metaverse — the sweeping vision spelled out in Neal Stephenson’s Snow Crash, published in 1992, was followed in the real world only decades later by low-fidelity, simple applications on bulky headsets that targeted hyper-specific markets like surgeons in training, Air Force pilots, or high-performance gamers.
But digital art is just the start. Now, NFTs can tokenize new asset classes and the original vision of the colored coin is finally unfolding.
Since the exponential improvement of internet tech and services, especially post-pandemic, digital has been synonymous with costless production and distribution. Social media, emails, AI-generated art — it all seems free. The replicability, transferability, and low barriers to entry have allowed the internet to contain an unfathomable amount of digital content.
The problem is, in many cases, you can no longer distinguish between the creator, owner, and distributor of those digital items. You might remember from Economics 101, markets can’t exist without property rights. As NFT skeptics say, “Can’t you just copy-paste the NFT for free?” Yes, you can copy-paste the image associated with that NFT, but you can’t gain ownership of the image by doing so, just like you can save a picture of the Mona Lisa but that doesn’t mean it’s yours.
In that way, NFTs can be thought of as a broadly applicable framework for ensuring property rights of digital assets through distributed ledger technology (DLT), becoming a new vessel for containing value streams in the chaos of the Internet.
And of course, digital does have value streams. My perspective as a digital native Gen Z may be different from yours here, but I know most of us work, socialize, shop, have fun, and, invest in our digital environment just as much as our physical one.
You might argue that we already pay for things on the internet. Don’t they have value that is effectively captured? Why do we need NFTs?
But think about your purchases on the internet. Nearly all of them occur through organizations —Netflix, Amazon, Google, Meta, etc. NFTs, on the other hand, have enabled digital assets to have direct, independent value separate without the need for bundling by these large corporations. Because they’re not bundled, they can work across organizations and borders. NFTs can be traded peer-to-peer, without paying the middleman, with data records stored immutably on the blockchain.
Beyond just asset transfer, NFTs are also providing new vectors for various other business aspects: community building, loyalty programs, membership passes, new revenue models, shareholder schemes for artists and projects (not just companies), governance in digital-first communities, digitizing important documents, and so on.
All in all, NFTs lend more legitimacy to the digital world. For better or worse, the direction of history is clear, human lives will continue to merge with technology. It’s important to have the right tools in place as we move forward, especially as we enter the Metaverse.
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Founder, The Utopian
Computer Science Student
Toni Witt runs The Utopian, a blog/podcast about how blockchain and extended-reality are joining to form the next Internet. He’s also interning at a VR startup and studying computer science with a focus on HCI, immersive tech, and blockchain. He has strong entrepreneurial aspirations.
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