The year is 2032, America is holding it’s Presidential election and citizens cast their votes using a publicly administered blockchain. They can do this because their digital identity is secured and authenticated by the governments newly adopted system of non-fungible tokens (NFT). In this system, voters receive a unique NFT, minted at their birth, which represents an individually owned and publicly verifiable form of identity to conduct important business. Like casting a vote in an election.
At the moment, this is a fantasy. Blockchain technology has not advanced enough to allow such a complex act as remote voting. Although blockchain technology can’t yet support this fantasy, its worth your time to follow some of the blockchain projects underway.
Recent progress in community blockchain experiments have shown promising results. Combined with the expansion of societal comfort levels with digital interactions, it’s not a leap to believe that in 10 to 15 years, non-fungible tokens could play a major role in society.
Here are the details worth following and why they are important.
Society is Embracing Digital Interaction
The world is now digitally connected and people regularly transact with one another online. This is no longer exclusive to the exchange of information. It also includes increasingly complex peer to peer financial transactions using 3rd party intermediaries. As society conducts more work remotely, it stands to reason that digital assets will become increasingly important in the near future.
What will this mean for the mechanisms of exchange? How will we verify identity, the ownership of tradable assets, and ensure all parties act in good faith? Right now, that means sharing private information with trusted 3rd parties acting as guarantors of transactions.
But in the near future, we may not need 3rd parties to become involved in the exchange of digital assets. We’ve seen the rise of crypto assets, starting with the launch and relative global notoriety of Bitcoin. And while bitcoin represents a first look at the importance of decentralized computing power, it also shows a trend in the preferences of global digital commerce. Bitcoin functions as a currency and a “store of value” but there are other types of crypto assets with different functions. One such example is the creation of Non-Fungible Tokens (NFTs).
You should pay attention to blockchain backed non-fungible tokens. Although they currently cater to a niche community, the technologies that underpin the current tokens represent the frontier of what to expect in digital assets of the near future.
What is a Non-Fungible Token?
A non-fungible token is a digital representation of a unique, rare, and indivisible asset. As an asset class, it’s hard to replace any individual NFT. This scarcity is part of what creates the value for many non-fungible assets.
The fungibility of the asset relates directly to how easy it is to replicate or replace the asset. The most commonly used example by the crypto community of a fungible asset is money. As an example, a $1 bill is inherently no different from other $1 bills. Fungible assets are interchangeable without impacting their perceived value.
A non-fungible asset is not easy to replace. NFTs are rare and indivisible, they cannot be shared. A common example in the crypto community is a plane ticket or a trading card. An individual owns one plane ticket or one trading card. The plane ticket or card cannot be split in two.
The owner of the card or ticket possesses the value. The properties of the cards make them unique and not easily interchangeable.
Examples of Non-Fungible Tokens
The current blockchain based NFTs are not “sexy”. Most people won’t find much use for them. But they represent an experimentation with programable ownership and the public verification mechanisms available on blockchains. All future NFTs will be built on the foundations of the current lessons learned.
There are many current use cases, some are more interesting than others. Below are some of the key projects worth paying attention to.
- CryptoKitties – One of the first and most well known NFT experiments. Creating a market place to buy, sell, and interact with other owners on the Ethereum blockchain.
- Decentraland – An open world gaming environment that allows users to buy and own land, create art, and construct personal avatars. This is a experimental universe learning how to push the limits of what’s possible with digital asset ownership and exchange.
- Ethereum Naming Service – In short, it allows you to store information under an easily managed umbrella name. Instead of managing long strings of Ethereum or Bitcoin addresses, you could use ENS to create a simplified but secure web address. Another example of experimenting with decentralized ownership.
Iterative Nature of Technology
Games like card collecting and CryptoKitties don’t interest a majority of people. The audience they appeal to is very niche. BUT, these games are important to the wider possibilities of NFTs because of the iterative nature of technology. By creating early and small scale experiments through games, developers can iterate on the technology in real market settings. With real feedback from users.
Iteration allows for developers to work through bugs and establish standardized processes that scale. It allows them to work through functional problems with relatively low stakes. Mistakes could prove catastrophic in other use case scenarios with larger user bases like voting.
Key NFT Developments Worth Following
Why are these examples worth following?
NFTs as a concept have existed for a long time but digitizing them and incorporating blockchain governance creates a new and powerful method of protecting their value. They can now support improved liquidity and interoperability, or the ability to transfer value across different platforms.
Decentralized verification of ownership makes it more challenging for a platform of central authority to revoke ownership rights. As has happened recently with Twitter account suspensions. With NFTs of the future, an audience will be able to subscribe directly to the community organizer and no single platform will have the ability to “de-platform”.
This type of decentralized ownership also prevents government confiscation of assets through civil asset forfeiture.
NFT’s improve the ability to transfer ownership of an asset from one person or entity to another. All with built in public verification mechanisms. With the use of smart contracts, users will be able to rely on a programed escrow service as opposed to a trusted 3rd party like Wirecard.
It’s not a perfect system yet but the current examples of NFTs are the first step in iterating to an ideal outcome.
What Could Be Next for Non Fungible Tokens?
Blockchains provide an opportunity to develop uniform standards of operation that promote cross platform sharing. ie: if everyone uses the same type of technological standards, this promotes common best practices and common transfer standards or interoperability. It allows for 3rd party transactions to take place outside of a given central authority.
This opens the door for new financial services products that remove third party providers. Which means less fees and less opportunity to get frozen out of your assets.
It also means changes in how we establish and track digital identity. It opens the door for globalized digital passports, new methods of voting with conceivably more direct methods of democracy. NFT’s also create the ability to build and own pseudo anonymous profiles across multiple platforms. This can reduce preference falsification and improve open discourse among communities without fear of personal repercussions.
NFTs will impact the way contract law is handled, how land rights are assigned and verified, and how families transfer their estate assets from one generation to the next.
There are a lot of very important changes that will occur to society as non-fungible token technology improves. We are a long way off from these examples becoming reality but it certainly makes sense to track the progress closely.