NFT WTF?!?

2021-03-27T00:00:00-07:00

There’s been a lot of noise about NFTs lately, mostly related to the absurd sums of money that some of these assets are fetching. Like most concepts related to blockchain, however, the real purpose of NFTs relates to creating systems that resist the tendency for people to accumulate disproportionate power (e.g. money). The fact of the matter is, the capabilities that NFTs provide are fairly straightforward, and focusing on the human reasons for such technologies can make them seem much more approachable. Furthermore, since most of the news about NFTs has to do with artists and other creators using blockchain technologies to support themselves, it’s a relatively simple and relatable topic that can be used to better understand how blockchain technologies are about more than just cryptocurrency; in fact, they may even change the world. Sound interesting? Keep reading to learn more!

NFTs are non-fungible tokens, which is a fancy way of saying “something that is unique”. An asset class is described as “fungible” if each item in the class is equivalent. A classic example of a fungible asset class is currency - i.e., all $1 bills are equivalent. Another way of describing this equivalence is that there are not any attributes that can be used to meaningfully distinguish fungible assets, like $1 bills. Non-fungible asset types, on the other hand, have attributes that distinguish individual assets from one another. The attributes of non-fungible assets are important because they add essential context or meaning to the asset. Property deeds are a good example of a type of non-fungible asset - although each individual deed has the same type of attributes (e.g. address, size), the specific values of these attributes meaningfully distinguish each deed from one another.

So, ostensibly speaking, the concept of NFTs is just an idea that people use to describe unique assets. In reality, however, the term “NFT” is used to describe assets that are both unique and digital (i.e. existing within a computing system as opposed to “in real life”). Furthermore, NFTs are typically associated with unique digital assets that are stored on a blockchain. So what does the term “NFT” really mean?

First of all, what are some common examples of digital assets? One such example is online accounts. Think about the process of creating an online account - usually, it’s necessary to fill out a form in order to provide a unique combination of values for some set of attributes, like username and password. Once this account has been created, people typically describe it as a type of asset that is “owned” by its creator. In fact, Twitter accounts, although they do not exist “in real life”, have been bought and sold as assets for years now.

Most digital asset capabilities that exist today are provided by monolithic centers of authority. Consider the example of a social media account - in this case, the “owner” of the account must trust the social media platform to keep track of their username, password, and possibly other personal data, such as their address or credit card number. In this way, the social media platform becomes a monolithic center of authority by serving as the root of an entire “web of trust” on which the capabilities of the community are built. Although these centers of authority may have the best of intentions to “not be evil”, the vulnerabilities they expose are proven by every new hack or password leak that hits the news.

The “modern” Internet is rife with such monolithic centers of authority for the simple reason that the network infrastructure on which it is built was not designed with the concept of trust in mind. The Internet as it’s known today was designed in the late-1960s with the intention of broadly facilitating communication between well-known but disparate systems, not with the intention of securing (or establishing trust) in the data that was being communicated. In order to achieve this goal, two decisions were made. First, the infrastructure on which the Internet is built was designed to run on “two tin cans and a string”. At the same time, all “intelligence” that was related to anything other than transmitting data (such as securing that data) was pushed out to the well-known, trusted “edges” of the network. Although this infrastructure may have served it’s purpose at the time, it was simply never designed to support the type of vital and global personal services that the Internet is used for today.

This is where blockchain comes in. Blockchain is a next-generation network infrastructure that was designed to support the types of capabilities that are currently provided by the Internet. It’s not within the scope of this writing to explain how blockchain technologies make this happen, but by using cutting-edge cryptography and concepts like game theory, blockchains allow people to form communities that support themselves, as opposed to relying on monolithic centers of authority for support.

So, an NFT is a unique digital asset that exists on a platform designed to resist monolithic centers of authority - what does this all have to do with artists and other creators? Although people have been using computers to create digital art since at least the 1950s, the network infrastructure of the Internet makes it difficult for digital creators to support themselves for at least two reasons. First, how can one prove digital uniqueness or authenticity? With the modern Internet, the only way is by relying on a monolithic center of authority, like how the users of a social media platform trust that the platform will maintain the uniqueness and authenticity of their usernames. Furthermore, how can digital creators transact with a global audience in order to sell their work and support themselves? Once again this devolves to a reliance on monolithic centers of authority, as both buyer and seller typically insist upon a trusted third-party for payment processing and to guarantee the sale. Although these systems may seem “convenient”, they create overhead for both buyers and sellers, as well as singular points of vulnerability that are constantly susceptible to attack or simple human error.

NFTs allow digital creators to prove and maintain the uniqueness and authenticity of their work in a way that is both more secure and more independent than current systems. Furthermore, the blockchain networks on which NFTs exist allow community members to safely and securely transact with one another without the need to rely on (and pay) trusted payment processors. This is just one example of the types of novel forms of human interactions that are enabled by blockchain technologies. Just like the invention of computers created mechanisms for new types of artistic expression, it’s possible that the capabilities of blockchain networks will result in new types of human interaction that have yet to even be imagined.

Sound interesting? Inspired yet? Want to learn more and start getting involved? Hopefully! If so, this is just the beginning. There are many interesting blockchain networks out there, but one of the most exciting is the Kusama Network, the “wild cousin” of the more serious Polkadot Network. There are lots of different ways to get involved in these communities and some great resources out there to help get started. Comment below with questions or suggestions for future writings!

Glossary

NFT (non-fungible token): a unique asset
Blockchain: a way for people to work together without relying on trusted third-parties like administrators, arbiters, brokers, or moderators

Dan Forbes

NFT WTF?!?

Glossary