NFT market is much bigger than we think!
There is a lot of hype around NFTs or non fungible tokens. With my reputation as quasi crypto expert, I am often asked to give my perspective on NFTs. NFTs are a simple concept but very profound at the same time. In this blog, let me attempt to cover various aspects of NFTs.
What is Fungible?
Fungibility is famously known as one of the traits of any medium of exchange. Other traits are divisibility, being limited, portability etc. Fungibility essentially means that a given quantity of a material is exactly exchange with another instance of same material with same quantity. 1 ounce of gold is exactly like another ounce of gold and you would not care which one you got. In reality, no two things are same in nature including atoms but here fungibility is specific as medium of exchange.
Non-fungible as definition suggest means that two apparently same pieces are not really same. Two painting of Picasso are not same. Even if it’s same design being painted, only one of them can be original.
The double spend problem - reloaded
One of the reasons bitcoin was so revolutionary was that it was able to solve the double spend problem. The basis premise is that anything created digitally can be copied. Bitcoin solves this problem with temper-proof provenance provided by blockchain. This problem still exists for other digital assets like images, videos etc.
The partial solution
The image copy problem was partially solved by image stock websites by controlling the resolution of display images. As part of catalog, low-resolution image is shown and you can buy a high resolution image. This solves the problem of images being stolen from their catalog without paying for it but does not solve the problem of someone copying it from the website of the person who bought these images.
This is not a big issue due to self-discipline exercised by established companies as it would be a hassle for them to get a cease-and-desist letter for something so minor.
Democratization of artist and art
Today on one extreme the art galleries and auction houses only keep paintings of famous painters. Most of the customers of these auction houses are ultra-rich. This made sense when the definition of both artist and art collectors was confined.
What if every citizen is a potential artist and art collector. What if there is a broad definition of art which can be paintings, digital images, digital videos, code libraries, songs, composition. Everything under the sun. This is the market NFTs are designed to cater to.
My Prediction: The new file formats
Let’s say Bob buys an image as NFT. He proudly puts this image on social media. Joe can simply copy this image and also post it on his social media. What is stopping him from doing it?
Today it may be possible. There are some limitation like image resolution which we discussed in previous section. My conjecture is that slowly new media formats will emerge which will only support blockchain validated copies of an art.