The Digitization of Ownership
The NFT art craze hints at a new framework for ownership in general
A friend recently asked me how NFT digital art could be worth any value when an image could be copied and distributed widely on the internet. It’s a common misunderstanding of art created as non-fungible tokens; when you’re used to seeing memes shared on multiple social accounts, how could you see the value in assigning ownership over such a thing? If I buy some digital art, what stops the rest of the world from copying my image and claiming they own it?
I came up with a thought experiment: can you show me the deed to your home? What about the contract you have signed with your cell phone provider? Or the document stating your ownership of gold in a foreign Swiss bank? If you show me the deed to your house and validate it with your banker, then voila: verifiability. The same goes for a digital image; something with a verifiable address determining ownership etched into the blockchain works the same way. A trusted source displays publicly that I own this, and anything that is trying to mimic my property is rather easy to identify.
Consider the advantages of having the deed to your house, or any other non-fungible item, on a blockchain. The deed becomes automatically verifiable from an immutable source of trust. Since it is digital, there’s no risk of losing a physical copy (although you’ll have to remember your password and keys). Perhaps the best feature, you won’t need to pay a lawyer a fee for anything since the only expense you’ll incur is the blockchain's gas fee.
The original question came up as we were discussing my first NFT art purchase. It’s an ominous digital drawing by an artist known as Bit Error that I bid $175 for. Once the bid was accepted, the piece's blockchain address now included that purchase history and my ownership. Sure, the image could be copied with a screenshot, but how would someone benefit from that? You could recreate an exact replica of the Mona Lisa, but that does not mean you own it. There are people whose job is to verify that items of cultural value are not fake. Just like the certificate of authenticity for a painting, the certificate for a digital art piece is an ERC-721 token on the ethereum blockchain. Essentially, the blockchain is now just doing the authentication work for us, and since others determine there is value in my digital ownership of the piece on the network, it thus has value.
Frankly, it seems narrow-minded to assume that all non-fungible items in the world won’t eventually be ascribed ownership on a blockchain. You can already buy tweets and basketball highlights, just like you could a Honus Wagner baseball card. The only difference is now there is a way to digitally prove who owns what, and so it starts to make sense that any type of contract will eventually transition to this more efficient framework. This is one of the core ideas of ethereum that many misunderstand because they are primarily concerned with the price of Ether and care less for what the ecosystem of the technology can produce. In the case of NFTs, yes, it might just look like I am just buying a JPEG. But the technological advance here is that the network determines my ownership of something, and therefore others deem it has worth.
As the world continues to embrace decentralized finance, the digitization of ownership is a likely reality. Ethereum’s ability to support such a framework has enormous implications for society and the way we contract going forward. It means modernizing antiquated institutions, such as the way we conduct business and law. It means new markets for creativity that hold enormous value. Ultimately, it further progresses the digitization of the modern world in a simple way that is long overdue since the inception of the internet.
Cryptocurrencies, as commodities, are certainly disruptive to the idea of money. Smart contracts, however, are disruptive to so many institutions and industries outside of just finance. As ethereum becomes more stable, scalable, and environmentally sound, the network’s ability to enable us to digitize contracts has perhaps the most disruptive potential of any technology in this space. If you divorce this idea from the speculative nature of cryptocurrency prices, all that’s left to see is a technological advance so impactful that it truly does seem like an internet 2.0.