NFTs are about more than art

March 25, 2021

I'm slightly adjusting an email response I wrote earlier this week and posting it here. This was a relatively quick one, which I don't usually do, so I apologize for sloppier writing than usual.

I thought this tweet by Reggie was to the point, and maybe the whole thread is interesting to peek at.

Basically, NFTs are about proven ownership of something digital, and what that unlocks for the owner. Right now, we're in a phase where the main thing people "unlock" by owning an NFT is simply the clout or recognition of ownership. So everyone is scrambling to figure out what it might be valuable to own from this point of view: art, tweets, essays, etc. (and who knows, maybe a lot of that is actually right).

My main point is: I think where things will get interesting is when ownership of an NFT unlocks abilities besides just recognition or resale value to the owner. Of course, recognition and resale value will always be part of owning an NFT, but I don't think it's the full picture.

I like in-game items as an example because it's a clear example of an NFT "unlocking" some new ability for the owner. In the case of in-game items, we can get out of the "NFT as canonical media instance" world and into a true digital object metaphor. For example, you can have a digital object in your wallet whose metadata contains not just a link to a JPEG, but rather a 3D object file plus some game-relevant attributes like attack power, defense power, etc. This means that any individual game you play could look in your wallet, import that object into its world, and use those attributes within its own combat system.

You could even imagine scanning your crypto wallet into something like Gather, and then being able to place special items from your wallet inside your digital office. I think these concepts have been well covered by the "metaverse" crowd and sci-fi like Ready Player One, so I'll move on.

Then there's also the non-game, non-skeuomorphic versions of NFTs unlocking abilities, where owning an NFT gives you access or permissions in an app that you couldn't otherwise have.

e.g. Can a dev tools startup mint a lifetime API key as an NFT? It's very possible from a technical standpoint: just periodically use the owner's wallet to sign a message in exchange for a temporary access token that gets sent with each API request. If the NFT ever changes hands, only the owner of that wallet would have this ability.

And if that's possible, can an API company earn more than the average LTV of a customer by just auctioning off these NFTs and collecting 10% on every resale, instead of doing a monthly subscription? To be seen.

Several years from now, I think it's going to feel pretty insane to think that we could never own something digital until recently (Wilson said this to me recently and it stuck). The implications of digital ownership are really wide, and I think right now, the general population is overly-indexed on the vision of NFTs as canonical instances of creative work, vs. these more general ideas. I'm not at all a disbeliever in the NFT-as-art vision, I just think it's a small sliver of what will end up happening.

I still believe creativity is a main constraint with this technology (CryptoPunks didn't come out until 2017, though it was possible from day one of Ethereum), and I think having this more open framework for thinking about NFTs can open up a much wider idea space for creative experimentation.