I recently took a serious look at NFTs (non-fungible tokens) for the first time, and while I’m largely unimpressed by most of the current offerings, I think the concept has now been proven. It seems to be only a matter of time until all culturally and historically significant digital “items” are managed, exchanged, and sold via NFTs.
Ironically, I expect this will be blockchain’s killer app, NOT cryptocurrency. Currency seemed like it could have been the killer app, but some technical, regulatory, and wide-spread adoption hurdles still remain. It could still be a killer app in the future, but I no longer expect it will be the first one.
NFTs however dodge many of cryptocurrency’s current problems:
As a result, there seems to be a much clearer path to widespread adoption and popularity.
Aiding this, NFTs bring to the digital world something people have done for millennia: collecting items of cultural and historical importance (or even just of particular interest). The best comparison to the real world is probably art (which is why it’s not too surprising that NFTs are currently propelled by art). In the physical world, you can by prints of any masterpiece you want, however there is only one original, and only that one original has any real value. In the digital world, replication is effectively free, but to date there hasn’t been a way to identify the “original” of a digital item and derive any sort of tangible value for that item’s impact on the world. Obviously, the original Mona Lisa has tremendous value. Now Nyan Cat and the first ever tweet have real, tangible value.
To not sound too bullish, NFTs are almost guaranteed to create a bubble where a lot of people lose a lot of money on what amounts to worthless bits in a computer. That said, the core idea is too strong and will survive the bubble because some NFTs really do have cultural and/or historic value (such as the two examples given above). There’s just going to be a lot of garbage out there, so brace yourself.
One final characteristic of NFTs that I find interesting is that they can in theory be subdivided, i.e. it’s possible to buy fractional parts or shares in an NFT. So, while I can’t afford to buy the first ever tweet mentioned above (sold for $2.9M), in the future it might be possible to buy some percentage of it to use as an investment or store of value. I expect fractional NFT shares will become the norm and a NFT market (a “meme market” of sorts) will arise to ensure liquidity for NFT buyers.