NFTs And The Future of Value
The birth of Rock & Roll was a cultural flashpoint, wasn’t it?
A loud, swashbuckling, and above all, intense form of music that had anyone who wasn’t in on it wondering;
“Do we even know what music really is anymore?”
Take that same amazement, disbelief, and most important of all, complete uncertainty on what a new concept really means, and you might as well call NFTs this generation’s cultural flashpoint of sorts. Just as AC/DC’s virulent screeching had heads being scratched over what it meant, a $600,000 NFT of a cat trailing rainbows has us all dumbfounded. And it’s just going to get a whole lot more complicated, before it gets any better.
Before we even think of understanding NFTs though, it’s essential to dissect The Blockchain. Read any primer on Cryptocurrency or NFT or even high security banking transactions, they all tout the blockchain system as the primary source of any secure traits these instruments may have. And yet, paradoxically so, a simplified explanation of how it all works is left upon the reader to find. We can give that a shot here though.
Primarily, a Blockchain is code that involves multiple components to ensure security. To put it as simply and crudely as possible, the base component is a record, with multiple records forming a block, and multiple blocks forming the blockchain. Every block has a number denoted to it, called hash. And whenever a block is “attached” to another block, the new block’s hash number contains part of the previous block’s hash number.
When a record is entered, say of a transaction, it forms what the block is made of, and it’s what influences the hash number. So when any minuscule change is attempted on the record, that changes the hash number for the larger block.
Basically, the principle is that if the hash number has changed, then it won’t tally up to the hash numbers further down in the blockchain, and thus such changes won’t be accepted.
Here is a more in-depth explanation of it all.
Now, where NFTs come in, is in the fact that blockchain technology is seen as far more secure than any other. A NFT is a simple record of ownership, not much further off than a certificate, that deems the holder as owner of a digital work. It’s not that you own the work in the traditional sense. Others can still view, download, and even use that digital piece without your knowledge or consent. What you have, is a digital equivalent of a stamped, attested paper saying you own that work.
And all that is possible, and legitimized only through blockchain tech. As mentioned before, since blockchain is virtually tamper proof, digital records can be securely made without concern of theft or otherwise. And at the base of it, an NFT is just that. A single record, which is part of a larger block, which will form a blockchain. What’s being sold, is that single record.
The advent of this new instrument has certainly revolutionized the art world, first and foremost. Where digital art was scoffed at by the finely cultivated gatekeepers of gallery curators, just because it’s commercial viability was next to nil; NFT transactions have legitimized what digital art is worth, both commercially and culturally.
Cases like those of the digital artist Beeple selling an NFT of his work for $70 million, all paid in bitcoin, have left watchers dumbfounded. The first question becomes, what even is the NFT? And when that’s answered, comes the next, seemingly pragmatic follow up-
Why would you even pay that much for just a certificate?
That’s where a fundamental disconnect in our viewing comes in. For the majority, any value, or lack thereof, in an NFT is to be determined by its utility. Why pay for a painting when I can’t even be the only one viewing it? Why pay for a tweet which everyone else has already seen?
Is it posterity? Or do we boil it down to NFTs being nothing more than collectibles, an indulgent playground for the rich and their dealings?
The right answer seems to be that for now, NFTs are limited to what our imagination allows them to be. Beyond just certificates of digital memorabilia, their potential for secure transactions when it comes to goods and services like music, software, auctioning and more, has barely begun to be tested. And surely, as the NFT further becomes mainstream, our understanding of it will expand the potential for its uses.
Even in the near future, pioneering changes are inevitable when it comes to NFTs. Beyond the art world itself, which has been the primary focus of this phenomenon, fields like real estate are well-primed to revolutionize the way they function. Where any real estate transaction is mired by the unending drawl of agents, notaries, banks, attorneys, and then the same all over again; NFTs can cut through the long winding processes that characterize the industry right now.
Expenses, time-wise and monetary, keep adding up where mediators are involved in transactions. With NFTs, quick agreements made possible through the secure identification and transfer of ownership can accelerate the property-buying process. Even concepts like fractional ownership, often complicated ventures that pose more obstacles than not, can be eased with how NFTs function. The root of it all lies in the fact that ownership records and rights are instantly verifiable due to blockchain technology. In a procedural system where latency adds up with long winded formalities and processes, NFTs can possibly speed it all up tenfold.
For corporates and institutional banks, the challenge lies in figuring out how to optimize an increasingly decentralized system for their use case scenarios. Traditional institutions can consider NFTs as a tool to track financial assets, which might be inefficient or costly to do with current methods.
Going beyond that, it would be remiss to ignore any intersection of the creative economy and traditional corporates and other institutions. Where so many corporate undertakings work with creators and influencers, NFTs present a new channel for ownership and distribution through a marketing perspective.
And as said before, ownership is at the crux of how all of this functions, and the possibilities it presents. For so many setups, the distinction between employee and creator is next to nil. And traditionally, ownership of employee’s ideas and contributions has been limited to an equity based model; aligning incentives with the success of the company. As well as that model has worked for some, it’s accessibility has been limited. NFT can change that, with the possibility to make anyone who contributes, an owner of their share of the work done.
What this presents is a concept where people won’t have to be full-time employees to earn ownership in the value that they provide to any platform and service. A fundamental factor of innovation is due credit and ownership to induce said innovation. NFTs are a way forward in that scenario.
With all the boundless potential that this phenomenon presents, it’s easy to look to devote every aspect of future progress to NFT and blockchain tech. To provide every idea within the domain of how these concepts function.
But for now, for so many of us, fact remains that this novel, gimmick-seeming instrument has made us question all that we know of value. Where people pay in virtual currency that is loyal to no Government, for a virtual record of something that can be easily accessed by anyone else.
It’s the kind of reality warping phenomenon that makes you wonder whether this is how the market, the economy, and the world truly works. Whether this is really the next step, or a short lived fad. And if no one understands it, can it truly take hold? For now, NFTs raise more questions than they can possibly answer.
But then again, AC/DC screaming Thunderstruck had their fair share of doubters too, right?
Written by Debashish Dumbre.
