My Take on NFTs, Ethereum, and True Innovation in the Metaverse
By: William King, Co-Founder at Subspace
I don’t really care about non-fungible tokens (NFTs) or Ethereum, not because they’re not interesting, but because they don’t solve the problems that I like to solve. They also won’t in and of themselves solve the digital ownership problem we’re collectively choosing to live with. True innovation will come when that is solved for. Let me explain, one chunk at a time:
NFTs and Chain of Ownership
There are a lot of places, especially on digital, where ownership is not super clear, nor does it seem to be important to people. If you buy a movie from Amazon Prime, you don’t own that movie. The concept I like about NFTs is that with the right standards, perhaps you could migrate that movie from Amazon Prime to some other service. Better, what if you could simply prove you OWN that license, and then could access it from multiple services?
NFTs are somewhat unique commodities. I think about it as a small brick of silver or gold, or even way more interesting, how about a unit of electrical power?
What if the value of an NFT were the amount of solar energy generated on someone’s rooftop, in a given interval? Whatever that amount of energy is, there’s a fixed value to that. Commodities could be applied to NFTs as well. Wind futures for example, might be able to correlate with a value set of NFTs.
As soon as NFTs become transferable from one commodity/content/abstract type to another, that’s when things are going to get really interesting, and when wide adoption of NFTs might take place.
Ethereum and Smart Contracts… Meet Real World Value
Ethereum is the same way for me. I don’t know, or really care, about Ethereum in particular. It’s a commodity as well. The smart contracts feature, on the other hand, I like. Given a set of instructions, you can have some 3rd party system go through and do this very powerful mechanic in a trusted way, and I see potential for that being very close to the type of innovation we need.
But looking forward, I would hope that somebody would say “This is how we’re going to put these pieces together”, which hasn’t fully happened yet.
In order to be adopted widely, smart contracts will probably have to adopt an escrow/title standard of some type, which can translate into real, commoditized value. When someone puts that real-world scenario to the test, they’re going to find gaps. Once you start solving those gaps with automation, that is when the innovation really starts. People start getting serious about federating and standardizing on systems like that.
Digging Underneath the Virtual Layer of the Metaverse
Let’s take it one step deeper. What are some of the tactical techniques and mechanics that need to be in place for a real, federated Metaverse to spring up? The type of Metaverse that Matthew Ball and Mark Zuckerberg are talking about?
Look at the credit card in your pocket as a great example. It’s a lot more sophisticated than it was 15, or even 7 years ago. These types of federated systems have existing use cases for upgrading to new standards, and those systems do not typically jump on board until the cost of the upgrade would be worth the additional transactional revenue that would result! System and feature upgrades are a capital business investment, and certain mainstream adoption standards must be met.
NFTs and Ethereum have solved a component of what I’m talking about. The true Metaverse would benefit from somebody taking a really close look under the covers, and asking “What if?”:
- What if you bought music with an NFT, and could get media rights anywhere?
- What if you turned your extra electrical power into NFTs instead of taking a cut-rate for feeding the grid with your solar power?
- What if you could buy the digital rights to a game, and play it on any platform?
- What if there was a standard that would open all of these up at the same time?
Major innovation takes place when existing, solved use cases see the value to migrate, and new usages end up changing and deprecating old workflows. I haven’t seen that we’re there yet, but I’m on the lookout for early indications.