Gooooooooooooooooo N.F.T.!
A clarion rally cry from the wacky world of crypto.
Gordon has been around the block(chain) more than a couple of times, but it's fascinating when an industry as brand-new as crypto can transform, re-form, grow, and re-create itself so incredibly fast. It's like innovation itself is on a course for exponential growth. By the way, my next post is going to be specifically about exponential growth. I haven't written about it this year and it's about time.
Specifically, in a short time I've watched the very concept of NFT's change, and their current version is an absolute explosion. The things that people collect, and thus place value upon, is fascinating if not irrational. A big fat "WOW" is in order.
An NFT is defined as a non-fungible token. This is one of those posts that, as a thought piece, is not a valid reference point for things that we in the crypto community pay close attention to (another wow goes to pitiful grammar... but Gordon don't care... it's just us, right?). I could polish this baby up with references, links, pictures 'n' all that stuff, but I'm just here to chat... using words, and you're here to grab my thoughts and do a quick ponder and move about your day.
If there is an NFT, then there must be an FT as well, correct? Yes. A Fungible token, by its very nature, is one that can essentially be exchanged for another within its same classification. The most popular explanation, and if I understand it correctly, the origin of the concept in crypto is the ERC20. It is the fungibility, or the transferability of a token in a network that gives it a majority of its value.
In many ways, crypto is programmable money. One of the things that Ether has brought to the table, is the protocol of programming that most are using. Most cryptocurrencies on the market are ERC20 tokens built on Ethereum's protocols. It's like Satoshi used the best of theoretical math when making Bitcoin, and Vitalik and friends created the formulas to take that math and build it into a network for others to use, piggy-backing the expertise of rules, code-chunks and principles that seem to work.
If fungibility brings value to the marketplace, then why non-fungibility? Because people like to collect things that are unique. That's the ticket. NFT prior to 2021, was almost exclusively about the token itself, and most of the market was that way, too. But, there was this annoyingly successful prototype of the future of NFT's as something more than token projects, called CryptoKitties, and since the first one auctioned for $1 Million, the industry knew it was on to something. People seek out value in collectibles, and in many ways choosing which coin a person wants to HODL, takes on a greater, wider range of interest, and captures more attention, when there is personality, talent, artistry or collectibility and tradability involved. Thinking of artful Asian card-trading games, expensive in-game items everywhere from World of Warcraft to... well once again, CryptoKitties, the idea of valuables is now merging with the idea of a new kind of currency. This is getting cool, weird, and for some, just plain bizarre.
Does anyone think that 2020/1 is a year in which it is logical for someone to pay $69 Million for a jpeg? Isn't it crazy? But, it means that there is a respect for the artist, for the concept or idea, and one sees the value in instant provable ownership. This gets to the center of SO many things that just became newly innovative. The craze, I'm not sure is good or rational. We shall see. But, the underlying technology and societal shift towards the seemingly intangible, is fascinating and culture-altering in a permanent, yet constantly fung-ing, errr, changing way. NFT's can keep changing, morphing into new things at the blink of an eye.
The idea of collectibles has been around forever. The idea of money has been around forever. The idea of exchanging money for collectibles has been around forever. You get the formula. But, merging the collectible into money, that is a revolution. And again, I'm not entirely convinced it is a good one. In this case, an original Beeple may be a great purchase if the goal is to see it up its value until sold for a fat future profit, while enjoying ownership along the way. But, if a person pays an irrational amount of money for it, is it a mistake, and in some ways showing the same fragility to knowing a good thing in real life as much as in the pseudo imaginary?
I've said for quite some time now, that in addition to being programmable money, that cryptocurrency changes the very definition of money itself. Money in the form of fiat is not 100% evil as much of the crypto world might paint it. It has origins in necessity. Like anything with an intended purpose, it falls into the hands of evil men, but it still serves the underlying purpose, or it would die at market because no one would use it. Fiat, which by nature has evolved into a form of money that most people use, and most people trust, while simultaneously distrusting those behind it, is based on someone, in this case governments, setting a standard for others to follow. Now, we have money that can be re-defined as anything that a network of people believe in as a representation of value. It is very possible that some NFT's in the form of collectible trading cards, for instance, could become a stable staple, so to speak, for a community that find value in such things. For others, the idea of a virtual world, be it a game or second life type scenario, could represent the real world values they believe in on numerous levels, meaning that in-game investments are traded for ease and profit more than the real world example, again based upon the quality of the platform being created.
NFT, in its origin, has always provided the idea that a piece of digital art, or a digital representation of anything in file-form, even a Tweet for goodness sakes, could be represented by a single issued token. But, with the emphasis that anything worth collecting can now BE money- that is huge. It's massive, in fact! I've seen it coming. I've presented to groups about the topic. But, it doesn't mean that I'm anything short of blown away, how high a value people do place on such things. I thought it was wacky when people paid $700 to have the purple hat in a casual game as opposed to the freely-issued green hat, but you know, I'm still thinking in terms of paying my bills when I think of anything bigger than a $20. Call me the super hero of savings! lol.
So, NFT's are probably not a fad, but the mainstream awareness as such will likely boom then fade a bit, while this does what humans tend to do; it will average into something more reasonable, widely repeatable and adoptable, and we will start to see real price discovery to understand the market value people place on rarity. Specific artists will become the digital Picasso's people pay a high dollar for, while Time Magazine will cash in on their old school rep, famous sports images will make a cool million on NFT'ing something only one person can own, and the list will go on, while the collectible trading card range of NFT goodies will likely form a low middle-class status.
It will be fascinating to watch, interesting to measure, and exciting for the few gems that forever change the financial lives of people who are currently unknown. That is exciting, if like life, it may be but a vapor. We shall see, what value people place on virtual eternity.
And for now, Crypto Gordon Freeman, a true NFT one-off himself, out.
