Four perspectives on NFTs

Consider this question:

What is a Non-Fungible Token for?

There are a lot of answers what an NFT is, and while the technical reality of NFTs is quite easy to explain, there seems to be no real consensus on what NFTs represent and what they should be used for.

For a long time I wasn’t able to makes sense of all the different answers. I tried to approach them as investments, but didn’t think it was a good idea. I also think NFTs as transferrable gaming objects are a bad idea. The prime use case seems to be fraud, scams and speculation (maybe supported by wash trading).

Then again, some of the proponents of NFTs remind me of a Tumblr subculture: An optimistic group of people running wild in their own fanfiction-like fantasy of the Metaverse as a better, more hopeful, more just version of the current world.

And somewhere in between there are people working on similar things, not even interested in joining the discussion.

I couldn’t get all this aligned in my head until I heard John Egan casually state the following provocation during a panel at the Enter the Metaverse conference:

“I foresee a shift between the Crypto Maxis and the NFT Maxis.”

In his view the individualistic digital libertarianism of the “Crypto Maxis” will clash with the utilitarian, community-based visions of the “NFT Maxis”:

“Philosophically they are fundamentally different. There is no indication that a Crypto Maxi has any interest in the Metaverse. And Metaverse and NFT Maxis don’t want to subscribe to a lot of the rules that crypto-people want them to abide by.”

It’s HODL vs. USAGE. It’s investment vs. commodity. It’s Web3 and the “Internet of scarcity and ownership” vs. Metaverse and the “3D Internet of open standards and free use”.

Things started coming together. Or rather: Four distinct perspectives emerged in my head what an NFT is for and why.

NFTs as property

Crypto Maxis view NFTs as an extension of cryptocurrencies, which have their roots in right-wing libertarianism and come with a deep distrust towards “The State” and “The Financial Institutions” (aka Jews).

Cryptocurrencies were supposed to replace money (which they failed at) and now NFTs are tokens that represent a digital or physical object. In the mind of the libertarian: Property.

And as the true Crypto Maxi does not trust the government to uphold property and ownership, they are viewing NFTs as the new way to “show once and for all who owns a thing” — Not your keys, not your object!

Crypto Maxis use uniqueness as an artificial form of property. The goal is to assign every digital and physical object to a unique owner.

And extending the principle you end up at Web3, a “fundamentally fresh start” — an apocalyptic event ending the current internet and indeed socio-political models and replace it with something far more simpler, individualistic, where ownership is clear, my keys are my property, and if you enter my property I will shoot you. A world where they got rid of the ultimate middleman: The banks and governments.

Socially, Web3 is a libertarian power fantasy and technically it’s just absurd.

Within this community there is a need to evangelize their cause, because for some reason the world isn’t ending, there is no civil unrest and there is no hyperinflation, regardless of what is discussed as inevitable in libertarian Discord groups, so they NEED HELP! To end the tyranny of governments and financial institutions! Environmental and social impact be damned, because FREEDOM!

NFTs as investments

Profit Maxis view NFTs as an extension of cryptocurrencies as well. They see crypto as an unregulated financial speculative asset, fueled by a lack of other investment opportunities and low interests. In other words: An opportunity to repeat all the reasons we created rules & regulations around finance (like pyramid schemes, wash trading, securities fraud and so on), only this time in the disguise of a “revolutionary new technology”.

Now they also have a token that represents an object and that is by definition unique and thus scarce and thus special. For them, NFTs transcend cryptocurrencies as they combine the FOMO of being early enough to be on top of the pyramid with the completionism mechanics of collectibles. Now every single coin is different and desirable. They made cocaine into crack. Gotta catch them all.

So the Profit Maxis bend over backwards to create comparisons to other markets, for example the art market and how NFTs will empower artists, while happily stealing the artworks to create their NFTs with. This got so rampant that DeviantArt is now notifying their users if somebody made an NFT out of their work.

True, not every Profit Maxi is a scam artist, but all of them are opportunistic. To this group, NFTs are a speculative asset to buy & sell with the intention of making money. What matters is the value of the token, not necessarily the object it represents. It also doesn’t matter that ownership of the token is disconnected from copyright or even usage rights — it’s an abstracted thing, used as a financial asset.

Within this perspective, NFTs are obviously securities.

Profit Maxis use uniqueness as an artificial form of scarcity. The goal is to make as much money as possible.

This group is also very vocal about the “greatness of NFTs” because they are financially incentivized to do so. To make money as an NFT investor, they fundamentally need to convince other people that NFTs are worth something. Ideally way more than they paid for the NFT themselves. So they bang the drums, wash trade and pump because number must go up before the dump.

They also love Web3 as it brings a new narrative and legitimacy to the space: “See, not everything is about money, we are reinventing the Internet! Now buy this token because this Dapp is going to the moon.. uh, I mean, it’s going to replace Discord somehow!”

NFTs as communities

Metaverse Maxis view NFTs as a representation and thus proof for the existence of the Metaverse. For them this “Metaverse” is an utopian future vision where people are more equal (every digital avatar has equal rights, regardless who is behind it) and there are less boundaries to information and technology (a decentralized network without gatekeepers and thus free).

This vision is largely disconnected from any concrete technical or social approach how this is achieved, which is why there is no consensus within that group what the Metaverse actually is. But if NFTs are digital representations of objects, sitting in a public database, then these surely must be the building blocks of a Metaverse. “An NFT for a chair is a chair and I should be able to take it with me when I move around in this digital world”. The symbol is the referent.

So NFTs become objects similar to community pins: Not really worth anything in general, but they hold value within a specific community as a way to prove membership and participation. They are worn, shown, gifted, traded, handed around and collected. In other words: used.

They don’t actually care that the NFT is rare, unique or expensive. The important bit is the family of objects it belongs to. The Bored Ape Yacht Club is an actual place for them to hang out with friends, talk, listen to music and have a good time. They believe in the community, not the individual object. It’s a commodity, not an investment.

That said, they appreciate the uniqueness of an NFT as a way to authenticate an item. When somebody has a pin in their wallet that was given out during an event, the person is “in that club”.

Metaverse Maxis use uniqueness to validate authenticity. The goal is belonging.

This group isn’t very vocal. Or rather: Their message of a better, more hopeful version of the internet and world is taken over by the former two groups, who adapt it for their purposes. That’s why you hear Crypto Maxis talk about Web3 as “the perfect basis for the Metaverse” (replacing the optimism with their libertarian power fantasy) and Profit Maxis about pay-to-earn NFT Metaverse games (replacing the community with their form of a cash-grab). Crypto and Profit Maxis seize the Metaverse term to amplify their own messages, while the Metaverse Maxis have little to defend themselves without consensus what the Metaverse actually is and what their goals are.

But there are strong indications that this group wants a system that works and scales and Blockchains don’t do that. They don’t care about the Crypto Maxi libertarian form of decentralization, just about openness and access. They don’t care about a weird Potemkin village of a crypto architecture, just about working platforms. They want things to last. And not destroy the environment in the process.

All that makes it likely that Metaverse Maxis are heading towards a hard split from the other two, breaking ties with Cryptocurrencies, Blockchains, Smart Contracts, conspiracy theories, pumps, dumps and scams. Number does not need to go up if you want a better world.

NFTs as literal objects

If I had to give this group a name, they would be Technology Maxis. They don’t care about an ideology, but rather about making things work. Their view of NFTs is a literal one:

An NFT is a unique entry in a database, associated with one specific digital or physical object.

Let’s say you want to bring physical things and processes into the digital realm and virtual objects and capabilities into the real. How would you do it? Well, you need to identify a specific real world object and assign a unique digital ID to it so it can be addressed by a digital process. This specific light bulb for example. Or map the real world and drag it into the digital space by driving around with cars and scanning it. As soon as you create Digital Twins of real objects or people — or real representations of virtual things or systems — you pretty much have such an entry in a database.

There is no difference on a conceptual level or in terms of technical requirements. If an NFT is indeed a token that represent an object in the digital or physical realm, then every Digital Twin already is an NFT. Every item in an online game is an NFT. Every tag on Google Maps is an NFT. Even every social profile of you on the web is an NFT.

Technology Maxis use uniqueness as identifiers. The goal is to bridge the digital and physical realm.

Feel free to come up with arbitrary reasons for why those aren’t NFTs, for example that it has to be on a Blockchain, that it has to be ERC-721. You can argue about the required openness of these databases. But, why would you? The only reason would be to defend ideological and financial interests. The principle is fundamentally identical.

The Technology Maxis don’t care about a specific technology, instead they think in requirements like performance, robustness, scalability and so on. Especially when dealing with real world consequences, there is a need to make sure that systems are safe, that data isn’t breached, that nobody can tap into home systems to cut off power, lights, heat — or worse. This disqualifies the current stack that Crypto or Profit Maxis are pushing for.

Crypto Maxis for example point out the “trustlessness” approach of a Blockchain, but they actually mean: “I don’t trust anybody, especially not the government.” It’s ideological, not technical. The technical concept of “zero trust” might sound similar to “trustless”, but just means that each layer assumes that the layers above it have been completely breached by an attacker. Technology Maxis don’t care about a questionable solution for the Byzantine Generals problem to pretend they can let everybody have write access and destroy the environment in the process — they just apply proper security, which always includes a network of trust, for a fraction of the complexity and cost. And by the way, decentralization is a term about architecture topologies, not a synonym for democratization.

And so the Technology Maxis have already implemented world scale digital infrastructures holding millions of Digital Twins or in-game items or mirror world tags, with instances processing millions of telemetry data points per second, requiring minimal energy expenditure and computing resources. Because databases have been globally distributed, decentralized, multi-master, multi-model for decades — Bitcoin didn’t really add anything here. Need a ledger? Sure, stick one on the side. And by the way, the web has always been decentralized. Blockchain as a technology just can’t compete on raw technical requirements — only on ideological ones.

But if this group is already pushing the boundaries of what NFTs are and how they are used at scale, how come we don’t hear about them? Well, this group doesn’t really care to be associated with the term NFT. Which is convenient, since they are despised by Crypto Maxis and Profit Maxis for exposing their bullshit (I’m sorry, spreading FUD). So the few that do speak up get drowned out in the noise.

Summary

So you end up with this view, differentiating between the driver (ideology or pragmatism) and the desired availability & use (limited or broad):

And this encapsulates the mixed messaging:

• Crypto Maxis need to evangelize the virtue of right-wing libertarian ideology, pushing a technology they believe will make it come true
• Profit Maxis need to evangelize the value of (incidentally the same) technology to effectively find greater fools in a yet unregulated hot market
• Metaverse Maxis want to evangelize their utopian vision, however get roped into the same technology by the above to legitimize someone else’s messaging
• Technology Maxis don’t care about the technologies and ideologies above and do their thing to create a digital-physical world at scale

And it is becoming clear where the fault lines are. John, I salute you. That provocation was spot on.

But I also feel there is a missed opportunity here, since Metaverse Maxis and Technology Maxis might actually make a good pair. One group wants to create a better, most just and open world and the other group is already working on a version of a digital + physical world. Maybe the Technology Maxis could use some pointers how to make it more inclusive, more transparent and more fair. And in return they could give the Metaverse Maxis more clarity on how to get there, strengthening their voice?

Sounds like a good deal to me.

So maybe not everything will be bad.