Whenever I open my “real life” Twitter account, there is someone hating on web3 and NFTs – why should I buy ugly monkey pictures? Why is a QR code as a conference ticket not enough? Why would anyone care if some number is stored on blockchain over a database in the cloud?
Then I open my “crypto” Twitter account and the sentiment is very different. Obviously, two different social bubbles coming in with completely different contexts.
Let me be clear upfront – I strongly disagree with the title, but let’s start from that premise and try to unpack if NFTs can be explained simply and made useful.
We can attempt to explain NFTs on multiple levels – social, technical or commercial.
NFTs for social engagement
One of our crucial needs in life is to belong, to be part of some group – family, club, company, tribe, you name it. Since forever we had ways of showing that we belong to a group using flags, clothes, hair styles, badges. We live in a very distributed and global world now. Members of many groups are not co-located and a lot of the interactions happen online.
This is actually where, I believe, lies the main use case of NFTs right now. You buy a Bored Ape and suddenly you are a member of an exclusive club. You can find other members and interact with them.
Of course, people still buy these NFTs for speculation, but we are seeing DAOs being formed around NFT collections and new NFT collections to be used to show you are a part of an organization or a group of people in general.
I am anticipating major groups in our society to jump on board as the tooling becomes easier and more accessible – carnivores, vegans, vintage car lovers, pilots and so on.
The reason why NFTs make sense for this use case is that NFT represents a proof. An undisputable proof that you care about a specific group. A badge. A global online flag. We love badges, pins and stickers and we love to show our affiliation. NFTs done right cannot be changed or taken away from you, which is a major improvement over any virtual representation of group affiliation we had so far.
What is an NFT on technical level?
Speaking in software engineering terms, NFT is simply an identifier or object in a global distributed database with functions and metadata attached. Anyone can read the metadata and anyone can call the functions (although some will fail if you are not authorized). That’s it. There is no fancy magic.
On technical level an NFT is by no means a profile picture or a club membership badge. It is simply a way to map an entity (user, organisation, wallet) to some data – on-chain or off-chain.
People will argue about why this should be simply an entry in a cloud based database. In most cases, that is a perfectly fitting solution, but again we live in a distributed global world and hence sometimes it is worth to consider using a distributed global database – blockchain.
The smart contracts used to build NFTs are also still evolving and the complexity is growing as the transaction or gas fees lower due to various scaling solutions.
You might be hesitant to put any relatively serious data and/or computation on Ethereum chain, but you will be probably much more fine with doing that on Avalanche or Polygon.
Why do we keep seeing rather simple contracts just to represent art and not something more fancy or complex? Well, one answer would be that we are still early. Another one is that there are some really cool and crazy contracts, but as they do not have a large community around them or have not made the headlines (yet?), they are not that well known. You can look at the list in this repository to get an idea of what is possible and what is ahead of us.
One key aspect of NFTs on public blockchains is the openness, interoperability and composablity. Look at Meta, Twitter, Reddit and others allowing users to use NFTs in their profiles. This is unprecedented. But keep in mind – these are not just images – NFTs can bear much more utility, features and meaning. Now that major platforms allow you to integrate something they do not own (the public blockchain infrastructure) to their platforms, it opens door for many other use cases that we cannot even comprehend yet.
Can NFTs help commercial space?
To answer simply, I think so. I am an avid coffee lover and I try to support my favourite coffee shops and roasteries. Many of them have some sort of loyalty program – usually a piece of paper with stamps. It is a simple and cheap solution, but it does not play into the social engagement nature of human beings.
Building a loyalty program platform is not easy or cheap. Building an NFT loyalty platform is not easy or cheap either, but the tools are getting there. If you are a small business, NFTs give you a ton of benefits – visibility, community, opportunity and potentially funds.
Since your NFTs could be used for both a loyalty program and social engagement, your customers can use them as their affiliation badges on their social profiles. They can interact with other members of the community – especially with decentralized and open social graphs like Lens Protocol popping up.
You as the business owner have an opportunity to even come up with a partnership or collaboration with other businesses or artists with the NFTs being open and composable.
I keep talking about loyalty programs, but to be fair, that is just one part of the story. All the other parts of how owners would usually attract and retain customers apply – exclusivity, discounts, special offers, memberships, events. All of these can be enabled by interactions with NFTs. Even more so – one NFT can potentially give you access to many different perks. It can even give you access to different perks at different brands – whether the brand approves it or not, their NFT collection can be leveraged by other brands to attract customers. In theory, this is a positive sum game – collaboration and openness usually have overall positive impact.
Useful and Comprehensible NFTS
How do we make NFTs comprehensible and useful though? I believe the only way is by building tools that will abstract the complexity of blockchain and make it very simple for ordinary humans to produce these ownable identifiers. The usefulness comes with adoption by established entities – social groups, companies and others, who can leverage them to deepen the engagement between the community members.
This is what we at Rubix believe. Commoditize access to NFT creation and management, add high value use cases for the real and virtual world and help users of all kinds to engage and be able to prove this engagement.
If you want to join us on our mission to build a global earning network. Reach out to one of us personally via LinkedIn, or email at email@example.com.