This is the second of three series of articles on cryptocurrencies, NFTs, Metaverse, and an evolving Africa.
NFTs or Non-Fungible Tokens
NFT stands for Non-Fungible Token. To understand this we need to first understand what fungible means. We previously stated that money needed to be fungible as a requirement for it to be money. What this means is that money should be replaceable. A ₦1,000 note is not unique, it can be replaced with any other ₦1,000 note and still retains its value. That means it’s fungible, i.e replaceable. Thus, fungible = replaceable.
NFTs are the opposite of this, they are unique and cannot be replaced, if you have an NFT it means you have something unique, and it’s not replaceable with anything else. But what items fit into this? Well for something to be unique we need to first have a way to identify its uniqueness You could easily say, well it can have a tag, an authority must be in charge of that tagging and we have learned well not to rely on central authorities where transparency is little or non-existent. This leaves us with only one choice; the product should have a digital signature recorded in a trusted ledger that cannot be altered so as to guarantee its uniqueness, ownership, and immutability. And yes, you guessed right, the blockchain serves that need. The digital existence of this asset, which can take any form such as a tweet; Jack Dorsey co-founder of Twitter sold his first tweet as an NFT or a cypherpunk jpeg, music, videos, artworks, etc, explains the word ‘token’ in NFT, a digital representation sitting on the blockchain.
Now that we know what NFT means, we can now explore what gives it, its “value”. What is value? In an attempt to tie the concept of value to the explanation of NFTs, I will draw on a quote by Friedrich Nietzsche;
“The value of a thing sometimes lies not in what one attains with it, but in what one pays for it — what it costs us.”
Value is usually meant to be the usefulness of something or what it allows us to attain. However, some persons have always seen value from a different light, and artists are one of the masters of this. Artworks really are not that valuable if we all believe it has no value, same can be said for money, but the government authorizes it. For crypto, value is created by the participants in the network. Historical paintings and other relics have been auctioned for stupendous amounts to a group of elites who dictate its worth by what they are willing to pay for them. Are they really worth so much, and what really do we attain with them? Of course, there’s a lot we can attain, but usually, the value lies not in what we attain with them but what they cost, as Nietzsche wrote.
The case of NFTs is not any different from this. Since the rise of this digital forms of art, asset creation and collecting, stupendous amounts have been spent in acquiring a lot of them, e.g the Jack Dorsey tweet sold for $2.9m, a group of cypherpunk collections have sold for even higher prices and others for hundreds of dollars. This is not to say there aren’t cheap NFTs out there, it is to say that just like artworks where there are relatively cheap ones, others are selling at outrageous prices.
Several NFT marketplaces that allow creating and uploading NFTs, collections, tradings are now trending. This is by no means a mere project. Forbes recently published the funding round of OpenSea, as NFTs makes its first billionaires; the co-founders of OpenSea the world’s leading NFT marketplace, and many more exchanges are rolling out their own NFT marketplaces while world-leading brands have either released NFTs or are planning to do so. The buzz is alive and it’s booming!
But is it a bubble and will it burst?
Similar to the dot-com bubble or boom when the world wide web and the power of the internet became invoked, investors went crazy over companies that were internet-based and had a website with the .com suffix. Investors valued these companies outrageously, and the fever spread. But sadly, the bubble burst! And stocks that went high at a time rapidly crashed leaving many companies with huge losses that took them out of business. Are NFTs similar to this or are they even in a phase we can liken to a bubble? In my opinion, I would say yes, NFTs are in a bubble phase already or are entering that phase, and if indeed they are, the fever will soon leave the market, and sanity will be restored, and what goes up, in this case, will surely come down!
Metaverse: A Brave New World?
The metaverse is a virtual world that would focus more on social connections, recreating everyday experiences in a virtual space such as virtual offices, meet-ups, homes, cities, parties, etc. This virtual world is a strong manifestation of the internet and its limitless powers. The metaverse has been science fiction for a while now, but not anymore. The future is here! Several world-leading companies have either stated their interest in the metaverse and ways they can explore this new world, while others are simply in awe.
Facebook’s parent company Meta was created to reflect its commitment to bringing the metaverse to life. Microsoft has been working on the Hololens, VR headsets, virtual office spaces; the Microsoft Mesh which aims to create virtual realities and experiences that will disrupt everyday workspace. Imagine working from home with the capabilities to collaborate with your team in a virtual office space using your avatars, virtual meetings will be more realistic, creating the sense of a shared space, and lots more. With Facebook VR/AR, Horizon Homes, Workrooms, etc, Microsoft’s Mesh is not alone in bringing an embodied experience to the internet. Since the breakout of the COVID19 pandemic, working from home has become a norm, and a lot of companies now embrace remote hires, but there have been a lot of drawbacks in collaborations, even virtual Zoom calls can’t make up for physical meetings where presence and proximity is left-out. With the metaverse, this can change for the better.
Imagine visiting your home, and getting that feel and comfort it gives you, the only difference is that in reality, you are miles away from home. We can extend the use cases to visiting museums, the great pyramids of Egypt, etc without ever leaving your current location. The stuff of science fiction!
Accessing this new world will need special devices that facilitate the experience, such as VR/AR headset, special gloves made for metaverse projects that wish to include hands in the virtual world and create that experience, some projects are interested in using avatars, while others are a combination of all.
An all-encompassing experience may be years away, the economical value of such projects is questionable if the equipment required for a user to participate in a metaverse project is expensive, this will result in a situation where only the wealthy will have access to such projects.
NFTs meets Metaverse
NFTs or Non-Fungible-Tokens are non-replaceable items or assets with a digital representation on the blockchain. While a lot of persons have seen NFTs as collectibles with no real use, this may not be the case. Previously, I used Friedrich Nietzsche’s quote on the meaning of value to explain why the value attributed to NFTs may go beyond what one attains from it but what it costs us. This may not always be true, NFTs could actually be more useful than we previously thought. The metaverse which is a virtual reality seeks to offer all sorts of promising projects, and NFTs may find use in some of these projects due to their uniqueness and immutability (an attribute they possess as a result of sitting on the blockchain).
Imagine a metaverse experience that allows ticketing in NFTs to access certain metaverse experiences, such as parties, excursions, etc. Since the uniqueness of NFTs ensures they cannot be counterfeited, when tickets are issued as NFTs, we are sure that there is only one ticket of its kind assigned to one invitee, and no duplication is possible. There could be cases where certain projects can allow users to own digital assets in a metaverse with a digital representation of that asset’s ownership sitting on the blockchain. Such assets could be built into the experience of the virtual world to give it more usability and foster adoption.
It is still very early to see entirely how NFTs will play a role in the metaverse, but one thing is sure, the metaverse is a huge project and one of its key features is interoperability; which is allowing different worlds to operate together, and users can opt into different realities. Similarly, we can expect successful interoperability between some NFT projects and the metaverse.