NFT is trending. It’s what everyone is talking about, as on Clubhouse, where the topic pretty much dominates all conversations. Is it the future of art commerce? Is it a cultural change? Or is it just a fad?
This is the first of a series of posts in which, here at Freeverse.io, we’d like to introduce the Living Asset, an evolved version of NFT that, we believe, will unleash the far greater potential that resides in this concept, and will power sustainable business models beyond the current hype.
The NFT 1.0 Boom: Digital Scarcity and Collectibles
Before considering the future, it’s worth reflecting on the reasons why the current generation of NFTs have emerged — which is all to do with the concept of digital scarcity. In the physical world, the logistical complexities of creating and trading goods organically create situations of scarcity, or even rarity, when demand greatly exceeds supply of a manufactured item. This, in turn, presents several business opportunities: many of us can remember the good old toys from our childhood, or rare trading cards from last century which, like popular unique art pieces, go up in value over the years. Pokémon cards, NBA cards, Baseball cards, Comic Books, Star Wars figures… it’s a thing. To the point that there is a vast speculative market for the activity, with several powerful entrepreneurs and venture capitalists notoriously engaged in it.
This scarcity, up until recently, was the missing component in the digital economy. Enter stage-left: Non-Fungible Tokens (NFTs), a.k.a. digital goods you can authenticate as originals.
Relying on Blockchain decentralization methods as a guarantee of ownership, digital items with unique properties and identities began to emerge a few years ago. It started with unique virtual pet cats, called CryptoKitties (edit: and a few weeks earlier, with CryptoPunks); and over the last few months, many other NFT stories have made the headlines, among which the popular story on everyone’s lips: NBA Top Shot. You can be the sole owner of a “moment in NBA History”, in video form, with authenticated and guaranteed ownership, through Dapper Labs’ Flow blockchain. With over 400M US$ in sales to date, initial demand is clearly proven. It has created the modern day equivalent of collecting Topps trading cards of NBA rookies, hoping they would become a hall of famer some day — thus increasing the value of the card over time.
The NBA Top Shot success story has made the headlines, and rightly so: it is the first mainstream example of digital goods being bought and sold as if they were real, physical items; its success has caused a rush into the space: not a week goes by without an artist, a digital creator or an IP-holder jumping into the pool with his or her own line-up of NFT offerings.
A legitimate question now though is this: will this be a passing hype (as ICOs were in 2017) and, if so, what will NFTs look like when we reach the ‘plateaux of productivity’?
Back in the physical world, businesses based on scarcity & collectibles actually represent only a small fraction of the economy. The vast majority of value is built instead upon items that can be used and changed. Likewise, we believe that the vast majority of mid/long-term solid-grounded businesses will be based upon NFTs that are not mere collectibles; NFTs that are valued well beyond their scarcity.
Indeed, due to their digital form, NFTs could be much more useful than their physical toys & cards equivalents, if they had the ability that all other digital assets have: to change over time. After all, once you’ve bought a watch, or a t-shirt, it’s kind of difficult to ‘upgrade’ it; whereas in a videogame, we’re used to ‘levelling up’ our characters and virtual items all the time. Many of us will also remember Tamagotchi, and how your little digital pet required attention, in order for it to survive. The future of NFTs, we believe, lies along this path: digital items that can be bought and sold as if they were physical items, but that also can change and evolve over time by engaging with them. NFTs should be living assets.
Living Assets: Tech & Contract
Building this vision for the future of NFTs has been our goal and dream at Freeverse.io since we started the company in early 2019.
On the one hand, Living Assets, aimed for the mainstream as they are, pose a technical challenge. Blockchains cannot readily support the countless millions of transactions required to not only create, but also constantly evolve, the NFTs required by, for example, the videogames industry. Consider the change required to move from current blockchain based applications, where minting one single asset can cost more than $100, to a paradigm where Fortnite or League of Legends not only assign multiple NFTs to every user, but also constantly evolve them according to how they are used in the game.
At Freeverse.io we’ve developed fraud-proof Layer-2-based technology, capable of being deployed on the main networks (e.g. Ethereum, Polkadot, TRON). We’ve made it as easy as possible to implement by third parties in their applications, and permit trading in FIAT too, without having to resort to an Exchange.
On the other hand, evolving assets requires a new, transparent, agreement between creators and users: the creator continues to give full ownership of the asset to the user, who can trade it freely as with any static NFT. However, the ability to evolve the asset’s state (e.g. to turn an axe into a ‘legendary’ axe) is retained by the asset creator, and can be activated by multiple triggers: its use in a game, the outcome of DAOs or other smart contracts, or even in response to real-world events.
In each case, with Living Assets we address a key issue of standard NFTs: the state of every asset at every point of time is certifiable on-chain, not via external links to private servers that can arbitrarily corrupt this agreement. For example, a buyer can acquire a weapon within World of Warcraft if, and only if, it has properties certified by Blizzard (the creator). We’ll be following up with more implementational details in future posts.
Living Assets: from Passive to Active NFTs
We are eager to help the industry explore the creative possibilities that are unleashed with Living Assets. We strongly believe that the current NFT boom is but the tip of a huge iceberg.
With Living Assets, the owners’ actions matter, as they return to the creating application to engage with the NFT, to follow the real-life person or object it represents, to play with it. Users do this because they know that their engagement directly affects their assets’ characteristics (and, by natural extension, value). NFTs become active and engaging, instead of passive and immutable.
Items could evolve based on embedded game mechanics, or how they age; or it could be a creator-authored evolution, or based on a real-life feed. Think virtual designer clothing you have to wash every day so they retain their quality and value (‘TamaGucci’!); or a famous musician’s virtual guitar evolving based on which concerts and events it was brought to; or an asset that increases level when reaching a number of retweets… once scaling is no longer an issue, possibilities are endless, and the only limit is the creators’ imagination.
So are NFTs just a fad? We don’t think so. We think that they represent a cultural change in the way we view and engage with digital ownership. If this rings true with you, check us out at Freeverse.io, or connect with us at LinkedIn. Join the Living Assets ecosystem.
And keep following us here as we dive further into our vision over the next few weeks: exploring the lower environmental impact of Living Assets; the creative possibilities, and the Layer 2 tech that makes it all possible.
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