How NFT's Will Show Their True Potential

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We’re still at the v1 stage of NFTs.

This means we’re literally taking images and putting them on the blockchain.

To be fair, we’re milking a LOT of value from this one primitive.

This post outlines a bit of where this might go from here, and some broader implications.

NFT’s are Blockchain’s 3rd “magic moment” (After BTC and Defi).

They are bringing fundamental changes to our web experience, as fundamental as the 0 to 1 moment from the pre-internet to the internet era.

Corporate Inversion

Interoperability of value is the internet primitive that will invert Web 2.0 and bring us to Web 3.0

By invert, I mean it will deliver new power to the individual user over the corporate entity.

Companies will create exponential value by growing bottom-up more like Wild Gardens rather Walled Castles.

The individual can now port their individual assets and data across the web, making “wallet as the new login.”

This will fracture the moat of the previous user-lock-in that companies like Facebook have utilized so well.

Today, you can’t leave Facebook because you can’t leave all of the data you’ve created there, your photos, your friends, your posts, your messages…

However, as soon as you can exit Facebook with your data and import it all to new networks, the Facebook moat weakens and the user gains new power to exit as needed.

This moat destruction applies to IP businesses as well.

Disney exists in its entirety because it has built the most prolific set of Intellectual Property imaginable and has turned it into millions of skews of products, across categories like parks, movies, cruises, and action figures.

Disney creates the magic. Their employees do. Or they buy it. And by holding the rights to the IP, they can repackage and sell the new value that accrues to the Disney Corporation.

NFT’s will invert this as well. The next Disney or Marvel will instead build an ecosystem of bedrock intellectual property (Game characters, storylines, influencers) and instead allow anyone to create and sell with their IP in the market.

They will act as a platform for storytelling, and the treasury will take a cut, say 20% of all market transactions related to their IP.

This allows anyone to participate in the story and the value capture of its growth.

You can also imagine a world where this IP is composable. This means that you can remix the IP with other similar storylines. You could create a show or storyline where worlds collide, where Mickey Mouse is in an alternate world with Luke Skywalker.

IP companies of the future become ecosystems and platforms that create a secondary market that is multiple orders of magnitude larger.

A Wallet is a Bank Account and an Email Address Combined

Question: Why can’t you send money via email?

You can think of the consumer side of NFT’s through the lens of the wallet.

The standard Web3 wallet is like an email address except that it can also capture and store value. This creates a central place for users to hold and share value with others. It also allows for a single login across any application on the web that you choose to bring your assets and inventory to.

If you can store your assets and inventories in a wallet, games, websites, and logins are no longer “start from scratch.”

This means that you can bring history to an application.

In Web 2.0 every user is a new user, with new data that you need to create for the application for it to build its history with you.

In Web 3 users wallets provide their own version of provenance. A new user may have a blockchain history and data that

Another question: Why doesn’t Netflix *already* know my preferences and taste in movies?

This could be possible when the wallet is the dominant form of login.

Consumer Design Space Expansion in NFTs

Consumer apps, artists, and creators will quickly expand the horizon from the current “PFP” images to more utility and possibilities.

Here is a list of some possible dimensions of the NFT universe…

Utility gating + Private Access
-> Access a community or early product releases.

Provenance tracking token
-> Access a snapshot of who is in your audience + their history  

Liquidity Events on former trust/attention
-> "ICO for artists"

Evolution based NFTs
-> Dynamic NFTs that change as your game character grows and achieves.

Time locking
-> An NFT that is time-locked for future use 

Milestone + Achievement recognition 
-> Recognition of achievement (POP). Proof of attendance.

Inflation / deflation 
-> Make something more scarce or less over time 

Airdrops 
-> Airdrop mechanism for new features (akin to iOS updates)

What other mechanisms can NFT's provide?

I’m sure there are many others yet to come.

Again, we’re early days, so I am merely speculating about what is to come.

To close, at some point in the not-so-distant future, I expect NFT’s to…

  • Permeate into the background – our general use that it will be no different than other file formats like “.jpg” or “PDF”

  • Radically change corporate moats and consumer login and accounts.

  • Give us inventory-based wallets that we use to log in.

  • Gain complexity – if NFTs are “programmable jpgs.” then is no reason they can’t grow, evolve, or change based on usage. This makes them dynamic.

  • Become interoperable across blockchains– It’s only a matter of time before each chain has NFT’s as a primitive, not just Ethereum.

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As always, hit me up if I can help.

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xx David

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