Odds are if you are seeing this you know something about NFTs, but let’s break it down real quick: NFTs are unique digital claims to assets: a form of receipt or deed. Most things we own are not interchangeable (non-fungible). They are very specific. To own a share of a company is as good as any other share of that company, but to own a car is to own a very specific car. We carry a claim, physical or perceived, to almost everything in our lives.
An NFT is a superior receipt. It provides both origin and activity for the life of the item it represents, and can be designed to live for a very long time. Some items can live entirely within the NFT itself. A fully onchain piece of digital art, while uncommon, can exist fully within the NFT and be extremely resistant to long term digital rot.
What is digital rot, you ask? It is the process of links, pictures, and assets associated with NFTs (or anything on the internet for that matter) breaking down and disappearing. Solutions to harden the reference point are being developed rapidly, but we will lose thousands of today's NFTs due to digital rot from DNS expiry and other reasons that are a result of reference point fragility.
Most NFTs are not themselves the desirable good, but offer primarily receipt characteristics:
- They offer a point of reference to where the item actually lives
- They provide proof of origin (provenance)
- They provide a traceable ledger of activity over time.
NFTs do not stop with art.
NFTs as digital art is the ideal landscape around which to build a proof of concept for NFTs. Limited regulatory requirements, excellent product market fit, willing participants on both the creation and collection ends, and other reasons make it an incredible industry to build this technological toolset with. But art is just an entrance point for the technology of NFTs.
Think back to where we started. NFTs are superior receipts. Once we reframe our understanding of the tech, we create a new world of possibilities with its application.
At Flip, we believe that NFTs will represent proof of ownership for most digital and physical goods that benefit from such receipts or verification: event tickets, music, real estate, game items, physical and digital collectibles, and even public records. NFT driven authenticity verification is superior to alternate methods in nearly every way.
Additionally, NFT representation of item ownership establishes standards for many other tools to utilize, including creating fungibility from non-fungibility. Many revolutionary financial instruments are already utilizing NFTs in full or in part of their designs, including fractionalization of an NFT, receipts for a Liquidity Provider position, and representation of an option’s position. Defi's usage of NFTs in protocol design is just beginning.
Anything that can be represented via NFT can therefore inherit many of the tooling innovations designed around it. Greater composability unleashes stronger standards, better user experience, enhanced liquidity for historically illiquid objects, and more benefits.
Where are NFTs going?
Ethereum Layer 1 dominates NFT trading volume today. Due to high transaction costs and other reasons, it limits what makes sense to transact as an NFT. The future is multichain and multilayer. This fragmentation of the market allows for users to maintain greater flexibility of where they store their assets and how they interact with the larger ecosystem as a whole.
As Ethereum L2s (and alternate L1s) develop further, we will see the elimination of the bulk of gas cost (cost to trade or create NFTs) that will allow cheaper, more accessible NFT projects to flourish.
Flip is building tools and experiences for the vast world of NFTs for years to come. For now, that is best represented by art and collectibles, and that’s what our (soon to launch) public beta is for; it’s a platform for discovering, researching, and tracking NFTs in a delightful and powerful way. We aim to help you receive actionable intelligence around the art-centric NFT ecosystem, and also use it as your daily hub to better track and understand your NFT portfolio, or the NFT portfolios you follow.
We are just beginning. We know what we're building, we are building fast, and we are having fun. As we prepare the public beta, we have enabled username sign-ups for all. Don’t forget to register your username. And if you’re excited about what we’re doing, help us spread the word!
Thanks for joining us on this journey.
Brian, Sam, Jennifer, and the entire Flip team