The Simple Reason NFTs Aren’t Quite As Insane As You Think They Are

OK. I get it.

NFTs are insane. A deed to a property anyone can have and in all other senses own? Nuts. A technology to create artificial digital scarcity when information wants to be free? Perverse. A mega-bubble with unprecedented prices for JPEGs and a massive crowd of get-rich-quick types with apes and yachts and zombies? Unseemly.

As I said, I get it. And I agree.

But there is a scenario in which NFTs make perfect and logical and unassailable sense, and I chatted with the chief product officer of one of the biggest NFT marketplaces, Rarible, about exactly that on a recent episode of the TechFirst podcast.

Three PsychoKitty NFTs created by psychedelic artist Ugonzo. (Photo by JUSTIN TALLIS/AFP via Getty … [+] Images)

AFP via Getty Images

Because the reality is that increasingly, reality is virtual. Or at least digital. We consume digital entertainment via Netflix, digital music via Spotify; we engage in digital battles on Fortnite; we win virtual wars on our smartphones; we meet others digitally via Zoom; we work digitally on laptops in homes with Google Docs on virtual hard drives; we outsource our memories to search engines. Even when we work out our bodies in the physical meatspace world, digital trainers urge us to drop and give them 25, or push just a little harder, or stretch just a little more. In short, almost everything we do, we do digitally, or augmented by digital realities.

As this evolving metaverse grows up around us and our reality becomes even more digital, there is an increasing need to represent rights of access, rights of ownership, and rights of use. What can I use? What can I allow others to use? What do I own? What do others own? Importantly: how can I express all of those things digitally, programmatically, and contractually.

Well, guess what we have for all of that?

Winner winner chicken dinner: NFTs.

“Somebody said that [the] digital signature is one of the greatest inventions of the 20th century,” Alex Salnikov, Rarible chief product officer, told me recently. “And we actually see the aftermath of that, because all NFTs, everything that exists on the blockchain, it is attached to your private key and to your digital identity, to just to your digital signature that you created for yourself. And this is like you in the digital world. And before that, there was no ‘you’ in the digital world.”

Which is why Salnikov’s expressed hope and dream is that NFTs will come to represent all digital property rights on the internet. And why he thinks that’s a very realistic dream.

In reality, we already live in the metaverse, Salnikov says, echoing AR and VR pioneer Avi Bar-Zeev’s opinion. It’s just the digital universe we exist in every day that is rapidly replacing (arguably) or augmenting (also arguably) the physical universe we breath and eat and move in.

“The NFT and the whole blockchain revolution is about the attempt to rebuild that world, ground up, and to create the level of ownership that is detached from platforms — that you own your digital items directly on the blockchain, attached to your wallet,” Salnikov says. “This core concept of the freedom over the private property never existed in the internet. And now we have the private property that is free and open with NFTs, and that can represent ownership in anything.”

Sure, it started with JPEGs and GIFs (that’s hard G, by the way).

But it’s extensible to tickets. Or homes in virtual environments. Or Gucci bags that exist simultaneously, like Legolas and other elves in Tolkien’s Lord of the Rings, in both seen and unseen realms.

To Salnikov, private property is a “super core concept” of the physical economy, and introducing the same thing in the metaverse is a key step in the evolution of who we are, what we do, and how we act in digital spaces.

So even if the bubble burst and NFT sales are down 80% from the giddy, frothy heights of February 2022, and even if 80% of the NFTs created on Rarible competitor OpenSea’s NFT marketplace were fake or fraudulent, and even if 10,000 hucksters have come in and created a whole cadre of algorithmically-invented Bored (insert animal here) or (insert adjective here) Zombies, it doesn’t matter.

It just doesn’t matter.

Because every revolution and every evolution has a hype cycle and a boom phase and a trough of disillusionment, and NFTs are no different.

At least, if you buy this line.

“We are at the beginning of a Cambrian explosion of NFTs,” says Salnikov. “People are ideating. People create all sorts of NFTs — physical, digital, attached to this and this and this — and some of them will die, right? They won’t outcompete others, and some of those ideas will live.”

And the result?

In 2020, the NFT market hit $100 million. In 2021, it exploded to $24 billion, says Salnikov. And we’ve seen growth since then … as well as some contraction.

But if NFTs really become the decentralized foundation of property and access rights in the metaverse we’re rushing towards, perhaps the sky is the limit.

Alex Salnikov, Co-Founder and Head of Product at Rarible

Alex Salnikov

“I believe that by 2030, we will reach a trillion dollar market,” says Salnikov. “And they will represent all sorts of things …. half of e-commerce doesn’t make sense to be in physical. I mean, when you buy a Star Wars Lego toy, you buy it not because it has some physical characteristics, like a knife on the kitchen, right, but because it’s a character, it’s cute, you love it, from this universe. It has almost zero reasons to be physical. You can have it in AR and it will have all the same utility.”

“It will transfer to the digital world, it will be based on NFTs. It will live purely in the digital world like we are living in the digital world. And we are at like 0.1 stage of that.”

Brave new world?

Perhaps.

Subscribe to TechFirst, or get a full transcript of our conversation.

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