Rest in peace, profile pictures. Long live NFTs!

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NFTs are not dead. Their potential is simply different from that embodied in the epic rise and collapse of the PFP market in 2021. Profile pictures, digital art, and collectibles are just a few key use cases for non-fungible tokens, a revolutionary form of digital asset. Unlike cryptocurrency tokens, each item is unique and generally cannot be seamlessly substituted for another.

Unfortunately, the concept of NFTs has been conflated with expensive JPEGs due to the 2021 NFT craze, which has not only done terrible damage to crypto in general and NFTs in particular, but is also extremely stupid. That’s why just one year after the initial boom, trading volumes dropped by more than 90%.

Runaway speculation on NFTs was a human problem, not a technological problem. This situation was similar to many precedents, such as collecting baseball cards in the 80s. By purchasing a pack or box at a time, you pay very little for a bunch of cards on a per-unit basis, and only a select few can be worth a significant amount of money in the long run.

Generally, collectibles such as sports cards, music albums, popular memorabilia begin their lives as “one product among many”; they all have low cost/value and no one can really predict which ones will have value in the future. .

Million dollar zoo animals

Naturally, in 2021, everyone got caught up in the excitement of the bull run and many lost their sense of proportion; paid inflated seven-figure sums for digital zoo animals. And of course, some degenerates and celebrities sought out expensive PFPs precisely because they were expensive and they wanted to flex. NFTs have quickly become a status symbol representing the (alleged) wealth of their owners.

The idea of ​​paying large sums for newly released digital collectibles in the hope that their value would increase was ludicrous. It’s no wonder that if you now tell a normal person that NFTs are useful and will form an important part of the digital economy of the future, they will probably laugh at you. All they remember is people paying stupid amounts of money for “art” that a kid could make in MS Paint.

destroy the foundations

The image of NFTs has been badly damaged in the eyes of the wider public and has failed to recover along with the broader market. This is a real shame because NFTs had real potential to attract new audiences to web3 as a means of digital ownership.

To appreciate the potential transformative power of NFTs, it is important to first ground your thinking.

NFT is a data structure for modeling data with unique properties.

People’s lives are increasingly shifting towards the digital sphere, so it should come as no surprise that the end result is digitally native products that people want to own.

modern property

It is pointless to own anything digital in the Web2 world because it is so easily copied and/or shared. (Looking at you, memelords consuming the ‘save as’ shortcut on your keyboards.) To mitigate this, content owners will often use common web2 digital rights management barriers such as paywalls, encryption, or simply restrict access. But ultimately, this added friction makes it more difficult for a creator to share with their audience and capture their attention.

This is where NFTs come into play. The use cases are endless; It is used not only to create digital representations of physical things (real world entities), but also to express ownership of digitally native things.

However, it is important to understand what rights are actually granted to the NFT owner. Is your NFT a digital representation of your ownership of a physical Picasso painting? Does your NFT only give you the right to display the digital art itself? How about the right to print t-shirts with artwork on them and receive royalties from sales? This is an area that requires a lot of thought to reach the right conclusion. If NFTs start coming with ten-page detailed licensing agreements, that will definitely take the fun out of them.

Benefit beyond PFPs

Beyond solving the issue of digital ownership, NFTs can also be endowed with all kinds of benefits: exclusive access to members-only events, guarantees for loans, DAO voting rights, representation of positions in DEX Liquidity Pools, etc. A powerful tool for creators. These uses may have absolutely nothing to do with art, and NFTs may operate as vital components powering complex protocols in the background.

All too often, non-cryptocurrencies fail to distinguish technology from asset, leaving blockchain to bear the blame for people’s stupidity or nefarious behavior. Whatever the rock bottom prices of famous PFP collectibles, NFTs are not dead at all; their innovations are simply ignored. In fact, you might be surprised at how much NFTs underpin the RWA revolution currently taking place in the blockchain industry.

Aaron Evans

Aaron Evans is head of core operations at Moonbeam Foundation, a smart contract platform for building connected applications that can access users, assets, and services on any chain. Aaron has over 25 years of experience in the technology industry and a background in software engineering. Prior to Moonbeam Foundation, Aaron was senior vice president of Fuze, a unified communications platform, where he helped bring the company to $100 million annually.