I see a lot of hate online for NFTs and the crypto world in general. For a very long time, I myself was completely indifferent to this universe and so it was easy to convince me I shouldn’t invest too much time learning about it.
However, less than a year ago, I decided to make my own opinion on the matter and invested time figuring out as much as I could. My interest was piqued very quickly and I continued to dig deeper into this world until I finally decided to quit my web2 job to dedicate my entire focus to web3.
Now, this article is not about me trying to convince anyone that crypto is great or that everyone should focus their career on web3. Far from that. This article is about explaining one of the reasons blockchains and NFTs piqued my interest and that is: a new way of owning data.
I’ll go through why I believe this is a new shift in our technology and, in a follow-up article, how this is materialised in Solana which is the blockchain on which I decided to invest my time.
The current state of data ownership
Let’s start by checking how one traditionally owns something that does not have a physical form. That could be a song, a game, a movie, a particular clip of your favourite TV show, a digital illustration, a 3D animation, an icon, a website template, a license to use some software, a tweet, an event from your own life, a receipt, an expense, a tax return, a spreadsheet, a slide from your deck, a message on a chat, I’ll stop here.
Let’s start by discarding virtual ownership that originates from physical ownership. For instance, you buy a song as a CD or vinyl and upload its content onto your computer. Yes, you now own the virtual copy of that song but as a proxy of the physical good. The same goes for digital assets that only live on your computer since their ownership is essentially an extension of your computer’s ownership.
However, these assets are getting less frequent as hardware becomes more and more of a commodity. Conveniently, if you lose your smartphone or break your laptop, you can buy a new one and have an exact replica of its content in no time.
This means your digital assets are held somewhere else and you trust some company or external entity not to mess up with them.
Similarly, ownership of assets is increasingly becoming on-demand. Meaning we pay a subscription to some company to access a huge number of songs, movies, tv shows, services, etc. We never really own them but that’s okay because it’s convenient and it makes sense. In fact, the companies that offer these assets to us very often don’t own them themselves. Netflix may buy an expiring license for a movie to get the rights to share it on its platform therefore never really owning the movie in the first place.
Last but not least, there’s a lack of ownership on just about anything anyone enters on any application. That receipt you’ve uploaded to your accounting software, that image you posted on Instagram, that Facebook status, you get the picture.
The gist here is, that most of the data we generate or consume never really belongs to us.
Does it matter?
More often than not, the answer is no. Whilst data is powering large corporations, at an individual level, it rarely affects us and it’s often too convenient to care. I will also add that I am not one of these individuals that value privacy above all. I am willing to pay away a reasonable amount of privacy when it makes my life more convenient.
Thus we might not have data ownership but we usually have (or at least should have) enough data privacy that it doesn’t matter.
Okay so if we’re (mostly) happy with the way things are, why do we want to change things? Why do we need crypto for data ownership? Why does this even matter?
I don’t see crypto as a replacement or an enhancement of the technology we currently have (at least not in the near future), but as an additional tool we can leverage to unlock new ways of owning things that, ironically, mimic the way we used to own them physically.
It opens up new opportunities in the digital world that (whether we like it or not) represents a big part of the human species, and that’s why I think it matters.
It started with digital art
In my opinion, NFTs are the primary reason crypto gained so much traction over the past few years. Whilst the concept of Non-Fungible Tokens is not new, it is its application to the digital art market that made its concept known worldwide. All of the sudden, you could sell a digital asset to someone and give them irrevocable proof that they (and only they) owned it. What could only be done physically by going to an art gallery and purchasing a physical piece, could now be done with any asset, made by anyone, anywhere in the world.
Yes, you could argue that a digital asset cannot be hung on the wall for your guests to see but the reality is most people value their social walls far more than their physical ones. Sadly, the former tend to be visited a lot more.
NfTS aRe A sCaM
I hear this a lot so I’d like to touch on that a little bit. Yes, it is possible (in any blockchain) for anyone to upload someone else’s work and sell it to someone who has no clue what they are buying.
But how does that differ from someone buying a fake painting whilst thinking it was the original one? Yes, there are experts and certificates to prevent that but these are also prone to human errors and maliciousness.
On the other hand, with NFTs, the artist signs their art using cryptography before selling it. That means anyone can verify that a piece of digital art was indeed offered by the original artist and nothing can be done to alter that. An ill-informed user can still be scammed by not knowing how to ensure the NFT is an original but this is something we should aim to improve by educating buyers instead of scaring them with “all NFTs are scams”.
NFTs are also very volatile. You can buy a piece of digital art for thousands of dollars from a verified artist and it could be worth nothing the very next day. But again so is physical art. Hype and FOMO are not new and certainly not specific to NFTs. Hype can scale to new orders of magnitude through social media but that’s what progress looks like. We should be careful, make informed purchases, help each other out, but gatekeeping will gets us nowhere.
On that note, let’s move on to another industry currently affected by this new way of owning data.
Gaming is another good use case for decentralised ownership of data because it allows players to own and exchange in-game items in real-life marketplaces.
This is huge. If you’ve ever played games such as MMORPGs that have their own in-game marketplace with their own in-game currency, you might have noticed how clever these economic bubbles can be and how players really enjoy coming up with new creative ways of making the game work in their favour. Imagine this same level of entertainment but the money you make in-game translates to real money.
Additionally, games can create loyalty and scarcity by releasing limited edition assets such as skins, special packs, levels, potions, spells, etc. These can even help the game creators fund themselves to make the game free and accessible to everyone.
Another great advantage of having decentralised assets is that they are not locked in a specific game. Other games can also leverage them in ways that benefit the owners of these assets. Say Fortnite releases a skin as an NFT, nothing stops Mario Kart to unlock a new matching skin in their game for the owner of that NFT. This will create exciting gaming ecosystems where even massive corporations and indie developers can have synergies together.
I could talk about NFT and gaming for hours so I’ll stop here but hopefully, you can see why I’m excited about this topic.
And that’s not it
The excitement doesn’t stop here. Digital art and gaming are the first organic use cases of NFTs but ultimately, all an NFT is, is a secure proof that someone owns a digital asset.
That digital asset can be anything and so it opens up a whole new era of data ownership where the only limit is our imagination. Let’s have a look at some examples.
NFTs for loyalty programs
A company could release a limited amount of NFTs that gives its owners special offers on their products. Imagine a Sephora NFT giving you 10% off on all their product or a Prada NFT that only allows NFT owners to purchase certain clothes. The cool thing is because NFTs can have secondary sales royalties, businesses can make up for the given discounts and even adjust that discount accordingly. Say, if lots of people are exchanging their Sephora NFTs then the discount goes up to 15%.
NFTs for membership programs
Owning an NFT could make you a full member of an organisation (decentralised or not). Depending on the type of membership, this could grant you special access to things, moderation rights, admin rights, etc. In fact, an organisation could offer multiple types of NFTs based on the permission level they want to offer. Note that because NFTs are exchangeable, someone with lots of money could buy all the admin-permission NFTs and take complete control of the organisation (I guess we could compare that to shares in a company). That’s why Decentralised Autonomous Organisations (DAO) adopt different models instead such as using voting tokens that need to be staked for some time to get voting power.
NFTs as digital subscriptions
That’s similar to the point above but only focuses on granting the NFT owners access to special resources. For instance, you could fund your blog by releasing say 1000 NFTs granting access to special articles. You could even make a decent passive income through secondary sales royalties.
NFTs for accounting
This one might not please everyone but some accounting data could live on the blockchain, giving us a source of truth that cannot be toyed with. One example of accounting data as NFTs could be invoices and receipts. As a business A, you could create an NFT that represents an invoice another business B has to pay for your services. The price of the NFT would equal the total amount of the invoice. Business B would then purchase that NFT, paying the invoice and using their NFT as proof of payment, i.e. a receipt. As it is possible to break down NFTs into multiple shares using vaults, Business B could even pay in multiple payments and the NFT would only unlock once 100% of the invoice has been paid. There would be a lot of things to sort out legal-wise but again, our imagination is the real limit here.
NFTs for social media
There is so much synergy between web3 and social media that I’m just going to focus on one example. Imagine you post a picture of your holiday in the Bahamas and mint that as an NFT. Now you literally own that life event on the blockchain as a souvenir. You can even share that NFT with friends using a vault or using what we call “Semi-Fungible Tokens” which allow more than one owner for a given NFT. Now you’re probably thinking, who would buy that? To which I’d reply, who would buy that NFT you minted yesterday in a month? 😅 Just kidding, my point being, maybe the value of an NFT isn’t always to sell it later. Maybe having an asset in your wallet and being a proud owner of it is enough. Especially with some of the new virtual environments that allow people to showcase their NFTs to the world. That being said, some of these life events or statuses would actually have a monetary value. If a famous influencer wanted to sell the souvenir of their holidays in the Bahamas as an NFT, rest assured that followers would fight for it. The only caveat I will add here is that there is a tremendous amount of data in social media and if a significant portion of it would end up being stored on any blockchain, it could damage that blockchain. Not so much because of the traffic but because of how big the blockchain state will become for the nodes to maintain. Nevertheless, nothing progress can’t improve.
NFTs for wills
Okay, that one is a bit weird but hear me out. You could, for instance, give 50% of your total net worth to a limited amount of NFT owners in your will. Then you’d give one NFT to each member of your family (or people you care about). And just like that they can sort things out on their own and exchange them with one another if they need the money right now. For very rich individuals, this could even become a way to stock trade on the net worth of a person rather than a company where people speculate on the amount of money you’ll be worth when you pass away. Slightly morbid I’ll give you that. 😅
Hopefully, some of the examples I provided resonated with you and you can see why I think NFTs are a new shift in our technology.
Should everything become an NFT? Of course not. But we now have this new tool on our belt that unlocks a new way of owning data and therefore unlocks new applications that could have never been done before.
Anyway, that’s one of the reasons why I’m excited about web3 and I hope I managed to share some of my enthusiasm with you.
In a follow-up article, I will focus on how we can achieve all of this in the Solana blockchain at a high level — no code but lots of diagrams.
See you there. 👋