What a world, my dog ran across my keyboard and I can pass it off as a title for a blog post. As if Crypto wasn’t divisive enough, NFT’s have split users into two opposite camps: “NFT’s are tulip mania, 2021 edition” and “NFT’s are a revolutionary form of immutable ownership”. It feels like an important note here that google’s SUGGESTED result when I searched “tulip mania” was “tulip mania NFT”. With the least controversial take of all time, I posit that the truth lies somewhere in-between these two camps.

The most credible defense of the “Non-fungible-tulip” ideology (I don’t think this is a real term because I just made it up, but non-fungible tulips are a literal thing) is that the metadata associated with NFT’s is not always stored “on-chain”. NFT metadata is each characteristic and quality that makes it (visually) unique, every graphical layer, vector, accessory etc. If the metadata for an NFT is not stored on chain, it means that the smart contract that is etched in stone on the blockchain would not be associated with the actual characteristics of the NFT. In this case all your NFT would represent is that you own a “thing” which is defined at [https://external-pointer.com/\] which you have no control, or ownership over. That domain could be hosted on AWS, or hosted by a company that shuts down next week - in which case you, as the owner of your NFT would “own” a 404 error.

As a direct response to this problem, Protocol Labs launched IPFS, or the “interplanetary file system” - a distributed network dedicated to hosting NFT metadata, hoping to set a data storage standard and prevent the aforementioned scenario. While this represents an improvement, there are still issues of impermanence within IPFS. If a node stops hosting your data, that same 404 error rears its ugly head. FileCoin is a sister project of IPFS attempting to solve these issues of impermanence. Other notable solutions actively being developed are arweave, and Pinata (the details of these solutions are beyond the scope of this article, but you can think of them as an Ethereum style trustless network for file hosting). Even worse than IPFS’ imperfect solution, many projects (such as mutant ape yacht club) still store their NFT metadata off-chain. The biggest headwind for NFT’s currently is the rate at which the general population begins to understand these standards for data storage have to exist, and the issues of impermanence amongst nodes for dedicated file hosting need to be solved.

Looking at google trend data, over the past year search volume for NFT’s has barely seen its velocity slow, and the disparity between the Crypto and NFT’s related google searches has continued to widen.

It’s quite hard to argue against team “Non-Fungible Tulips” by the numbers. There are not enough current tangible use cases for non-fungible tokens to justify valuations today, and many signs points towards an unsustainable speculative bubble. Does that mean I believe no NFT doubles as an incredibly cool piece of art? No. Does that mean that I don’t think a ton of amazing communities have been created, centered around different NFT’s? Absolutely not. I don’t have an opinion on what NFT’s should be worth, I think that there is absolutely value being created in both of these scenario’s, but I do not feel that today’s eye popping valuations, combined with the velocity at which they are being achieved is sustainable.

To date (as of 1/25/2022), there has been $28 Billion in total NFT sales volume. The top 5 fan owned football teams in the UK have a market cap of $47 Billion. In the current state of the world you would be hard pressed to demonstrate that the sum of the total value provided in every NFT project is equivalent to 60% of the combined value of PSG, Madrid, Juventus, FC Barcelona, and AC Milan.

But also, they kind of have. I can’t explain to you why people have transacted over $28 Billion worth of NFT’s, but does that mean I can decisively say that they aren’t worth that? Pretty concretely, the answer to that is no. An excellent framing of this is done in Nick Tomiano’s article on the ability of NFT’s to turn “stories” into scarce goods. The more people believe, engage, and want to take part in your story, the more they would be willing to pay to own a piece of it. Nick posits that this idea ties back into Renè Girard’s theory of mimetic desire:

“humans are imitative by nature, and all human desire is based on the desires of others.”

Applying this model to the current environment implies that long term value can be created, and sustained, as long as NFT’s are created with authentic stories inspiring mimetic desire. This lends itself to the creation of user owned platforms, where each NFT represents participation in an economy of value to the user. Examples of this type of NFT ownership are access to community parties on a yacht, or streaming royalties for your favorite artists songs.

The most made fun of web 3 platitude that “the best use cases haven’t been discovered yet”, is off the mark. In 1999 David Bowie explained that the internet’s primary revolution is “the grey space in the middle” this grey space referred to the interaction between creators, and their respective communities. Bowie believed that this new frontier was going to revolutionize the music and creative industries. David Bowie discovered this incredible use case prior to the advent of the internet as we know it today. I believe that NFT communities operate and provide newly unlocked value (on both sides of the aisle) in that grey space in the middle of creators and consumers.

Without a doubt there are infrastructure issues that exist, poor data hosting standards that need to be improved (in many cases implemented in the first place), but writing off NFT’s as a tulip-esque fad misses the forest from within the trees.

What a world, my dog ran across my keyboard and I can pass it off as a title for a blog post. As if Crypto wasn’t divisive enough, NFT’s have split users into two opposite camps: “NFT’s are tulip mania, 2021 edition” and “NFT’s are a revolutionary form of immutable ownership”. It feels like an important note here that google’s SUGGESTED result when I searched “tulip mania” was “tulip mania NFT”. With the least controversial take of all time, I posit that the truth lies somewhere in-between these two camps.

The most credible defense of the “Non-fungible-tulip” ideology (I don’t think this is a real term because I just made it up, but non-fungible tulips are a literal thing) is that the metadata associated with NFT’s is not always stored “on-chain”. NFT metadata is each characteristic and quality that makes it (visually) unique, every graphical layer, vector, accessory etc. If the metadata for an NFT is not stored on chain, it means that the smart contract that is etched in stone on the blockchain would not be associated with the actual characteristics of the NFT. In this case all your NFT would represent is that you own a “thing” which is defined at [https://external-pointer.com/\] which you have no control, or ownership over. That domain could be hosted on AWS, or hosted by a company that shuts down next week - in which case you, as the owner of your NFT would “own” a 404 error.

As a direct response to this problem, Protocol Labs launched IPFS, or the “interplanetary file system” - a distributed network dedicated to hosting NFT metadata, hoping to set a data storage standard and prevent the aforementioned scenario. While this represents an improvement, there are still issues of impermanence within IPFS. If a node stops hosting your data, that same 404 error rears its ugly head. FileCoin is a sister project of IPFS attempting to solve these issues of impermanence. Other notable solutions actively being developed are arweave, and Pinata (the details of these solutions are beyond the scope of this article, but you can think of them as an Ethereum style trustless network for file hosting). Even worse than IPFS’ imperfect solution, many projects (such as mutant ape yacht club) still store their NFT metadata off-chain. The biggest headwind for NFT’s currently is the rate at which the general population begins to understand these standards for data storage have to exist, and the issues of impermanence amongst nodes for dedicated file hosting need to be solved.

Looking at google trend data, over the past year search volume for NFT’s has barely seen its velocity slow, and the disparity between the Crypto and NFT’s related google searches has continued to widen.

It’s quite hard to argue against team “Non-Fungible Tulips” by the numbers. There are not enough current tangible use cases for non-fungible tokens to justify valuations today, and many signs points towards an unsustainable speculative bubble. Does that mean I believe no NFT doubles as an incredibly cool piece of art? No. Does that mean that I don’t think a ton of amazing communities have been created, centered around different NFT’s? Absolutely not. I don’t have an opinion on what NFT’s should be worth, I think that there is absolutely value being created in both of these scenario’s, but I do not feel that today’s eye popping valuations, combined with the velocity at which they are being achieved is sustainable.

To date (as of 1/25/2022), there has been $28 Billion in total NFT sales volume. The top 5 fan owned football teams in the UK have a market cap of $47 Billion. In the current state of the world you would be hard pressed to demonstrate that the sum of the total value provided in every NFT project is equivalent to 60% of the combined value of PSG, Madrid, Juventus, FC Barcelona, and AC Milan.

But also, they kind of have. I can’t explain to you why people have transacted over $28 Billion worth of NFT’s, but does that mean I can decisively say that they aren’t worth that? Pretty concretely, the answer to that is no. An excellent framing of this is done in Nick Tomiano’s article on the ability of NFT’s to turn “stories” into scarce goods. The more people believe, engage, and want to take part in your story, the more they would be willing to pay to own a piece of it. Nick posits that this idea ties back into Renè Girard’s theory of mimetic desire:

“humans are imitative by nature, and all human desire is based on the desires of others.”

Applying this model to the current environment implies that long term value can be created, and sustained, as long as NFT’s are created with authentic stories inspiring mimetic desire. This lends itself to the creation of user owned platforms, where each NFT represents participation in an economy of value to the user. Examples of this type of NFT ownership are access to community parties on a yacht, or streaming royalties for your favorite artists songs.

The most made fun of web 3 platitude that “the best use cases haven’t been discovered yet”, is off the mark. In 1999 David Bowie explained that the internet’s primary revolution is “the grey space in the middle” this grey space referred to the interaction between creators, and their respective communities. Bowie believed that this new frontier was going to revolutionize the music and creative industries. David Bowie discovered this incredible use case prior to the advent of the internet as we know it today. I believe that NFT communities operate and provide newly unlocked value (on both sides of the aisle) in that grey space in the middle of creators and consumers.

Without a doubt there are infrastructure issues that exist, poor data hosting standards that need to be improved (in many cases implemented in the first place), but writing off NFT’s as a tulip-esque fad misses the forest from within the trees.