NFTs and the future of digital ownership.
NFTs finally allow digital assets to be truly "priceless".
What does it mean to own something? For something to be truly yours? What does it mean for someone to be the “creator” or maker of something?
For many of us, these questions aren’t things we need to concern ourselves with. But for many creatives, it is integral to their upkeep.
In 2017 a new standard on the Ethereum blockchain would forever alter our relationship with digital assets by allowing us to imbue them with “uniqueness” and consequently making them ownable. The standard would introduce into digital assets the characteristic of being non-fungible.
On Digital Fungibility
Fungibility, the concept underlying the entirety of our discussion is fascinating. It asks that we ascribe value to an asset by comparing it with similar assets.
You can substitute a $5 bill for another because the information contained in both dollar bills is the same. However, would one be willing to readily exchange the original painting of the “Mona Lisa” for that of “The Birth of Venus”?
Such an exchange possibly occurring would depend on the aesthetic tastes of the participants involved. That, and their subjective view of the objective value (time of creation, the arrangement of color patterns, etc) of a given piece. This is the concept of fungibility encapsulated.
The dollar bill is fungible while the art-pieces in question are non-fungible. It is this non-fungibility that we often ascribe the quality of being “priceless”. It is also that before 2017 it would have been difficult to ascribe to any digital asset whether they be art, writing, game object, etc, the quality of being non-fungible or “priceless” to the extent we see today.
You see, digital objects mainly exist as bits and binary values brought into order by code. Digital objects are easily reproducible with very little to no distinction. You could make 1000 copies of a digital image and yet there could be nothing “unique” about any one of them, let alone the original image. Forgeries of original paintings can usually be told apart by expert curators. But digital art? Maybe there’s an Instagram tag, a username, or logo that may indicate a creator. But other than that? Nothing. Non-fungibility in this sense had thus far been exclusive to physical goods until standardized by ERC721 in the digital world.
ERC721 brought us here
There’s a lot to be said about the utility of the blockchain (or lack thereof) but in my opinion, Vitalik was quite evidently a genius for the realization that the blockchain datatype could be used for far more than just transactions. Vitalik envisaged a platform first and an economy second in his creation of the Ethereum blockchain. It would be on this foundation that the Ethereum Request for Comment 721 standard would be established.
Decentralization risks fragmentation, and on a decentralized platform like Ethereum, there needs to be some centralized consensus. Ethereum standards like ER721 establish a foundation for shared work. In this case, the ERC721 standard set the groundwork for a “nonfungible token” or NFT: A piece of information that when imbued, or signed in a digital asset provides the demarcation of both uniqueness and “possessorship”.
| contract ERC721 { | |
| // ERC20 compatible functions | |
| function name() constant returns (string name); | |
| function symbol() constant returns (string symbol); | |
| function totalSupply() constant returns (uint256 totalSupply); | |
| function balanceOf(address _owner) constant returns (uint balance); | |
| // Functions that define ownership | |
| function ownerOf(uint256 _tokenId) constant returns (address owner); | |
| function approve(address _to, uint256 _tokenId); | |
| function takeOwnership(uint256 _tokenId); | |
| function transfer(address _to, uint256 _tokenId); | |
| function tokenOfOwnerByIndex(address _owner, uint256 _index) constant returns (uint tokenId); | |
| // Token metadata | |
| function tokenMetadata(uint256 _tokenId) constant returns (string infoUrl); | |
| // Events | |
| event Transfer(address indexed _from, address indexed _to, uint256 _tokenId); | |
| event Approval(address indexed _owner, address indexed _approved, uint256 _tokenId); | |
| } |
Concise ERC721 definitions
This standard would first and most prominently be used in the game “Cryptokitties” which allowed the collection of cat-like pets which could be bred, nurtured, and traded. Each cat, imbued with an ERC721 standardized signature was distinct and facilitated the creation of a micro-economy on which the value of each “Cryptokitty” could be accounted for and upon which auctioneering could occur. This would be the first broad use case of an NFT.
Fast forward today and digital artists can not only feel like they created a piece of work but that they have the initial instance of its creation; that they own evidence of effort, of work, of narrative, and value.
It is this simple technology that has gifted us a new era of art. Crypto art auctions are booming. Mike Winkelmann or the artist known as Beeple has already had his art— art which is purely digital in nature— auctioned by one of the world’s most prestigious auction houses with it raking him millions in mere minutes.
But it doesn’t end there. These tokens which are at their core smart contracts can be manipulated based on certain conditions. This allows the manipulation of digital assets even after a change of possession. A beautiful example of this is with async art, which allows artists to create NFTs that can then be manipulated layer by layer if a particular condition is met. This would allow for the automation of layer movements in respective pieces of art.
In many ways, it’s a more eloquent, more purposeful implementation of the cryptographic digital signatures that came prior.
NFTs change our relationship with digital assets
It’s easy to see how this would change our relationship with purely digital goods. Scarcity introduces a whole different dimension to a good. For one, it makes a good susceptible to the forces of demand and supply. On the other hand, every rare NFT becomes a contract between the creator and the recipient. The artist is in a sense obligated to ensure that there is indeed some meaning, some effort, and some scarcity in the digital good.
When Bugatti introduced its Veyron lineup it had created merely 450 of these cars. The company promised to its potential owners, the possessorship of one of the fastest street-legal cars to date, with the Veyron Grand Sport Vitesse being the fastest roadster in the world. The potential owners were promised the best of German engineering. And by all accounts, it was what the future owners were given.
While certainly not impossible, it would have been highly inconvenient to try making such a promise concerning a digital creation before 2017.
NFTs introduce an element of history in digital assets
NFTs add another dimension to digital ownership: a sense of history. A lot of physical assets have their value defined by their previous possessors. The Mona Lisa which was meant to be given to a particular royal who had commissioned it would be withheld by Leonardo Da Vinci—the artist himself— so he could make endless modifications to the piece. A narrative that has come to symbolize the perfectionism of a person hailed as the quintessential renaissance man.
There is value in history because there’s value in the narrative. And now specific digital goods can have and make history too.
There are controversies brewing
But digital scarcity and private ownership are all concepts that emulate contentious issues that have also contributed to some of humankind’s most tragic disasters. Battles over scarce resources have resulted in far too many lives lost. It may seem distant or impossible, but it’s all fun and games until we are forced to discuss what digital assets can be privately owned; in short, a discussion over the morality of ownership in the digital world.
I have no answers to whatever dilemmas NFTs and their subsequent evolutions may bring. If there is one thing I’m certain of, it is that NFTs introduce an exciting new frontier to the internet. They’ve introduced a world in which creatives whose domains are substantially digital can truly say “I made this, and it has a value” without the need for an intermediary. All this albeit the obvious elements of human greed and consumerism this new frontier may introduce. But what is humanity if not eternally hungry? In this way too have we come to have our creations embody us.
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