Are NFTs the future of our economy?
Joshua Doner, an original CryptoPunk and one of the first people in the world to purchase an NFT, says the digital-assets network is settling trillions of dollars of economic value and enabling innovation right around the world.
What is an NFT?
Fungible tokens are things like Bitcoin or Ethereum – it’s the underlying technology that enables these token systems to work, which is on the Ethereum blockchain or Bitcoin blockchain or any other number of blockchains. The non-fungible part is a concept around not every token being the same.
So here’s a great example. Say you have a stack of $100 bills. If you add another $100 bill to that stack and then pull out a different $100 bill, it wouldn’t matter because they’re all worth the same amount. Whereas if you had a stack of Pokémon cards and you added a Charizard to that stack, you would want to get a Pikachu or an equivalent-rarity Pokémon back, or else you would lose value on that trade.
A non-fungible token (NFT) is the concept of each individual token being a unique asset – that could be both a physical-world asset, like real estate or different investment contracts, or it could be a digital asset, such as a collectible like CryptoPunks or Cool Cats.
Where are we today in terms of the technology?
I think we’re in the early stages of NFTs being used for things in supply chains and real estate and all sorts of different applications. How it started, though, was from digital collectibles. Like anything in the crypto world, why didn’t blockchains for supply chains take off? Well, it’s most likely because the killer use case was securing digital assets. For NFTs, the killer use case is securing unique digital assets, and what a great way to represent that as digital media.
Look at how many people like cat videos on YouTube, or who shared the ‘Overly Attached Girlfriend’ meme on Twitter, or who watched the iconic ‘Charlie Bit My Finger’ video, which was the first viral video on YouTube. Those are unique digital properties that can be tokenised as an NFT and be tradable. If you remember back to LimeWire or BearShare in the early days of the internet, those creators got nothing out of it. In this new world, the ownership receipt of digital media can be tokenised and then traded. It can be turned into a financial product that then has the ability to have free-market discovery. That’s a big innovation to the internet.
What are your thoughts about the security posture of the industry right now, both in terms of its current state and what needs to happen in order to protect the users?
Cybersecurity is a tough approach. So long as there’s an economic incentive that is more than the effort put in to have a certain outcome, you will have security vulnerabilities. In crypto, you have a massive financial incentive for people to go and exploit those systems.
It’s important to understand two things. On the blockchain side, Bitcoin has never been compromised. Ten years later and it’s still worth a lot of money – almost a trillion dollars. So the base technology of the blockchain cannot be broken, and there’s been a huge financial incentive to do so. Many people have tried, but what often is compromised is what holds these assets, so things like wallets. What scammers are doing is they’re phishing for people’s private keys. Maybe a person clicks a bad link that connects their wallet to something that is a phishing site. Overall, the posture is not great, and these funds are going back to places that America and some other countries don’t want those funds to go. There’s a financial incentive to do so.
I think we need the government to regulate the space and take it extremely seriously because it is a national security concern. I think as an industry we want to see common sense and good regulation that allows for innovation to thrive while also protecting consumers.
What are your thoughts on digital identity and how people are representing themselves, especially in terms of status?
It’s human nature to want to show that you are either successful or unique. People dress a certain way because it shows a bit about who they are and their identity – that doesn’t end when you go online. Gamers have been doing this for years, having skins and whatnot. Why do people own Rolexes? Why do people own Lamborghinis? A Toyota Corolla will get you from A to B just fine, but when you show up with a Lambo it says you’ve got money.
The CryptoPunks and Bored Apes are what we’re seeing. Justin Bieber bought a ‘Bored Ape’ for 500 ETH and everyone’s going crazy. Why would Justin Bieber buy a Bored Ape for 500 ETH? He’s got money. That’s what he wants to do to flex and he wants to join the community. It’s an exclusive club. This was never possible before, and the reason is because the IP, the underlying property, was never an asset. It was always just a JPEG that you could copy and paste.
This digital flexing isn’t going anywhere. And it’s people like Snoop Dogg, Jay Z and Jason Derulo who are helping these avatars get out into the world. Take CryptoPunks, which is a collection of 10,000. Well, Jason Derulo reaches 300 million people. So now 300 million people know what CrytoPunks are because they see his avatar. It’s great when I see these celebrities flexing because it raises the valuation of my own collection.
Where does this all end up?
I think crypto is the greatest opportunity of our generation. The world has been run by other generations during the great World Wars and throughout the era of the ’60s and ’70s with different cultural movements. It’s time for our generation to build an economy that we believe in, and that’s what we’re doing.
In the next five to 10 years, you are going to see an explosion of value in this space. ARK Invest is predicting that Ethereum will have a $20 trillion market cap in the next five to 10 years. So you’re going to see this massive value creation. And I’m not just talking about a certain stock or asset within the index. I’m talking about the whole space is going to grow that big. That means there will be tons of opportunities to create wealth and invest in things.
The analogy that ‘a rising tide raises all boats’ fits with crypto. It’s very exciting.
Want more insight into the world of security, identity access management, biometrics and more? Get your fix with the IDentity Today podcast, hosted by Daltrey CEO Blair Crawford. Listen via Apple Podcasts, Spotify or your favourite podcast app.