Non-Fungible Tokens
= "Non-fungible tokens are therefore completely unique expressions of an asset on a blockchain". [1]
Contextual Quotes
1.
"a one-pixel differentiator in a JPEG makes that image unique from any other. Dollar bills in your wallet are fungible for one another, but an image of video or song, these are sort of like unique ideas that can come to be represented as unique tokens. So what we're talking about is taking unique digital things, and making them individually ownable on the internet for the first time without any third party. Fungible tokens benefit from blockchains because the technical properties of blockchains force their scarcity, the fixed supply of Bitcoin, well, with NFTs you can reduce that fixed supply to one-on-one."
- Jesse Walden [2]
2.
"The more sustainable and revolutionary aspect of all this is the way NFT technology can be used almost like a benevolent, and surveillance-free form of digital rights management for independent creators. Most simply, an NFT unleashes a new potential for the internet to do two-way linking — where every instance of a file links back to its origin, the creator, who can be paid for the sale or use or reuse. A writer can issue a book as an NFT. A musician can release a song. And, potentially, even filmmakers can release whole movies and television shows that way, liberating themselves from the studio system, television channels, or streaming services.
Every creator becomes a studio, a publication, or a streaming service, a new universe of à la carte everything.
For consumers, this is the direction things have been going ever since the internet swallowed up television into its digital universe. Like many who are too invested in trying to keep up with streaming media, I have purchased subscriptions to more apps and channels than I can afford the time or money for. I can justify HBO and Netflix, as well as maybe Amazon (it comes free with Prime, anyway) and a cable package (family demands the food and home shows). But I ended up signing up for Peacock to see Grant Morrison’s version of Brave New World, CBS all access (for Star Trek when it was on there), Paramount (for Star Trek when it moved there), Criterion (which I actually watch), Disney (so the family could see Hamilton and Grogu), and AppleTV because it came with my new laptop.
It’s too much. The idea of offering people the ability to purchase some media à la carte is great. Someone who only watches a few channels, or who doesn’t want to support a particular news channel, should be able to purchase what they want. But many of these new channels are the only way to watch certain shows, effectively Balkanizing audiences into separate groups."
- Douglas Rushkoff [3]
Characteristics
Salvatore Iaconesi:
“ blockchains host transactions;
blockchains try to automatize trust (or, saying it in a different way, aim at being able to operate in a trustless environment); there can be infinite blockchains, private, public, sidechains, etc; multiple blockchains do not necessarily speak with each other;
- NFTs are one type of these trustless transactions, among the many types that are possible on blockchains, often called smart contracts;
- NFTs can be associated to anything at all, from digital images, to songs, to physical objects, trees, medical data, apartments, etc.;
- NFTs need not be directly attached to the entity they mediate; for example the digital images for which they stand for are not on the blockchain which hosts the NFT itself; an NFT is a certificate which is unique for that image or other entity, even if that entity circulates freely; it is the certificate which is unique;
- thus, NFTs can transform anything into a trustless transaction, into a smart contract.”
(https://xdxd-vs-xdxd.medium.com/nft-12cb8583ca23)
Discussion
NFT's and value retention
Jesse Walden:
" once it's in your wallet, you can bring it to any third-party application, and so developers can build all kinds of new exciting experiences to attract you to come and bring your stuff there. What I think we might start to see that might resemble royalty or ad-based revenues that you have in Web 2.0 is that you might see applications that pay some portion of the revenue that they're generating back to the NFT holder for the reuse of that asset in the context that they're building. Today that doesn't exist by and large, but I think that's where we may be heading. And what's cool is, all of these new revenue streams or new royalty flows can be programmatically administered in a transparent way. Compare that to the way copyright is administered for music today where it's very opaque and goes through 10 different middlemen, now all of that is transparent and automated. And as a result, hopefully, the creators and IP owners will be able to retain more of the value.
...
Owning the original may not be for everyone. As you said, you're totally fine just listening to the song. But somewhere out there, there's a superfan who really wants to own the original, like this sort of infamous story of Martin Shkreli buying the one of one Wu-Tang album for a million dollars. That's one example. There's also the example of art in museums, anyone can go to the museum and see the painting for free or you can look at a postcard of the painting or look it up in an art book, but someone wants to own the original painting. It's true that physical work is desirable because you can like put it up on your wall or whatever.
But soon, we're going to see experiences that allow you to showcase your collection anywhere on the internet, where you get attribution for being the owner. So that little placard in the museum that shows here's the painting title, here's the owner was contributed by so and so. That's going to be everywhere on the internet. So there's social status involved in being the owner of a popular idea, a popular image, video, or song. And I would argue that the value of an NFT is in fact directly correlated with the number of times the image, the video, the song has been shared. So the more viral it is, the more value there is in owning the original. " (https://joincolossus.com/episodes/5917632/walden-a-primer-on-nfts)
NFT's and Creative Income
Chris Dixon:
"Crypto, and specifically NFTs (non-fungible tokens), can accelerate the trend of creators monetizing directly with their fans. Social platforms will continue to be useful for building audiences (although these too should probably be replaced with superior decentralized alternatives), but creators can increasingly rely on other methods including NFTs and crypto-enabled economies to make money.
NFTs are blockchain-based records that uniquely represent pieces of media. The media can be anything digital, including art, videos, music, gifs, games, text, memes, and code. NFTs contain highly trustworthy documentation of their history and origin, and can have code attached to do almost anything programmers dream up (one popular feature is code that ensures that the original creator receives royalties from secondary sales). NFTs are secured by the same technology that enabled Bitcoin to be owned by hundreds of millions of people around the world and represent hundreds of billions of dollars of value.
...
"There are three important reasons why NFTs offer fundamentally better economics for creators.
The first, already alluded to above, is by removing rent-seeking intermediaries. The logic of blockchains is once you purchase an NFT it is yours to fully control, just like when you buy books or sneakers in the real world. There are and will continue to be NFT platforms and marketplaces, but they will be constrained in what they can charge because blockchain-based ownership shifts the power back to creators and users — you can shop around and force the marketplace to earn its fees. (Note that lowering the intermediary fees can have a multiplier effect on creator disposable income. For example, if you make $100K in revenue and have $80K in costs, cutting out a 50% take rate increases your revenue to $200K, multiplying your disposable income 6x, from $20K to $120K.)
The second way NFTs change creator economics is by enabling granular price tiering. In ad-based models, revenue is generated more or less uniformly regardless of the fan’s enthusiasm level. As with Substack, NFTs allow the creator to “cream skim” the most passionate users by offering them special items which cost more. But NFTs go farther than non-crypto products in that they are easily sliced and diced into a descending series of pricing tiers. NBA Top Shot cards range from over $100K to a few dollars. Fan of Bitcoin? You can buy as much or little as you want, down to 8 decimal points, depending on your level of enthusiasm. Crypto’s fine-grained granularity lets creators capture a much larger area under the demand curve.
The third and most important way NFTs change creator economics is by making users owners, thereby reducing customer acquisition costs to near zero. Open any tech S-1 filing and you’ll see massive user/customer acquisition costs, usually going to online ads or sales staff. Crypto, by contrast, has grown to over a trillion dollars in aggregate market capitalization with almost no marketing spend. Bitcoin and Ethereum don’t have organizations behind them let alone marketing budgets, yet are used, owned, and loved by tens of millions of people.
The highest revenue NFT project to date, NBA Top Shot, has generated $200M in gross sales in just the past month while spending very little on marketing. It’s been able to grow so efficiently because users feel like owners — they have skin in the game. It’s true peer-to-peer marketing, fueled by community, excitement, and ownership."
(https://cdixon.org/2021/02/27/NFTs-and-a-thousand-true-fans)
NFT's and the Left
Yanis Varoufakis:
"NFTs differ in two respects from digital assets like the hats in TF2: The blockchain cuts out the company (e.g. Valve). And it allows the digital asset to emigrate from the game/realm that spawned it to any other digital realm.
Do I think that NFTs have subversive potential? Let’s see. In a digital environment, NFTs are like all other commodities. They reflect the triumph of exchange value (with which capitalism trounced experiential or use value) within a metaverse (Valve-like or Zuckerberg-style). In that sense, NFTs offer nothing new within digital worlds, except perhaps that they turbocharge the ideology of capitalism (exchange value rules supreme). In the analogue world, NFTs have value only to the extent that bragging rights offer utility to those who care for them. Even though in so doing, they force outfits like Sotheby’s and Christie’s (which used to monopolise the trade in bragging rights) to change their ways, NFTs in no way subverts the structure of property rights creating and underpinning the oligarchy’s exorbitant power over the many.
So, no, I see little radical potential from NFTs. Having said that, a good, future, liberal techno-communist society may find ways of using them as part of a broad network of technologies helping us keep records of our identities, property, etc."
(https://metacpc.org/en/crypto-blockchain/)
More information
- a study on NFT markets in 2021:
"Here, we analyse data concerning 6.1 million trades of 4.7 million NFTs between June 23, 2017 and April 27, 2021, obtained primarily from Ethereum and WAX blockchains. First, we characterize statistical properties of the market. Second, we build the network of interactions, show that traders typically specialize on NFTs associated with similar objects and form tight clusters with other traders that exchange the same kind of objects. Third, we cluster objects associated to NFTs according to their visual features and show that collections contain visually homogeneous objects. Finally, we investigate the predictability of NFT sales using simple machine learning algorithms and find that sale history and, secondarily, visual features are good predictors for price."