This article is intended as an olive branch to two communities: 1) NFT insiders who are excited by the technology, and 2) very online, arts-related NFT outsiders who mostly see NFTs as scams, piracy, and wastefulness. I’ve straddled both worlds, and today, I think many well-meaning NFT-insiders are making mistakes about what matters, leaving outsiders with the depressing impression that NFTs are nothing but a giant, substanceless economic bubble.

I borrow from Anna Lowenhaupt Tsing in describing NFTs as a frontier: a resource-rich but unmapped and unregulated zone.

What are NFTs?

NFTs are easy-to-create digital watermarks – a way to pair a provable unique digital “stamp” with any data. Open infrastructure is being built around these stamps so that they can be bought, sold, used as keys to access forums and chat servers, and pretty much whatever else you’d like.

These stamps do not prove that the stamped data was created by the person who stamped it or grant any legal rights over the data, but infrastructure to do those things can be built around NFTs.

What’s the point of a stamp of uniqueness?

Marks of uniqueness are useful for a bunch of existing things, like:

Collectibles – Objects that gain value largely from their claims of originality or authenticity, like fine art or baseball cards. To create collectibles today you need to make physical objects (like paintings), mark them with something difficult to imitate (like a signature or watermark), put them in spaces where large numbers of people can interact with them (like galleries or web platforms), and package and ship them if someone buys one. There are also a few examples of pre-NFT digital collectibles like cards in Magic the Gathering: Online.

Sponsorships – Donations to organizations that are rewarded with public thanks of various kinds, like a donor’s name in a program note, a company’s name on a football stadium, or a patron in the top tier of a Patreon page. To create a sponsorship opportunity today, you need a system to track sponsors and a public platform to feature them. Patreon provides both these things (but takes fees and features non-transparent policies).

Intellectual property – Registrations in a database that guarantees no one else can register the same data and enforces some kind of protections over registered data. Examples include the U.S. patent office or music publishers like ASCAP or BMI that facilitate royalties payments. To claim intellectual property today, you have to interface with large, bureaucratic organizations like state governments and massive publishers.

How are NFTs new in a useful way?

NFTs, theoretically, make it easier and cheaper for people to do all these things, because they make it easier and cheaper to create a “stamp of uniqueness” and to interact with that stamp in various ways.

Much has been written about the slowness and costliness of blockchains. It’s true they are slow and costly compared to credit card payments and social networks, but they are fast and cheap compared to physical supply chains and state governments, which are the systems we’ve had to use to create widely available and credible marks of uniqueness before NFTs.

While NFTs at baseline only provide these marks, the blockchains they are built on also provide open-source infrastructure for giving NFTs more uses. The simplest use is buying, selling, and checking who owns NFTs, which blockchains can already do. With NFTs today, we can check which collectibles someone owns or see who currently owns a project’s sponsorship NFTs. Buying or selling requires a fee, but checking NFT ownership is permissionless and free (since it’s viewing data without changing anything).

In the future, we might build more functionality: NFT-based intellectual property systems, for example, in which anyone can register their work quickly and cheaply, and the systems can be used to broker author-approved reuse of the work. Because NFTs are relatively easy to create and nearly any open-source infrastructure can be built around them, NFT-based IP might be cheaper, faster, and fairer than legacy IP systems. That could be an important public good.

Why are there so many get-rich-quick NFT schemes?

NFT get-rich-quick schemes, whether you call them ponzis, scams, or spam, are everywhere right now. Is the tech of NFTs guilty by association? How can it be a net positive if so much bad is being done with it?

I think NFT get-rich-quick schemes are prevalent because NFTs are a “frontier”: a newly discovered place where access to an already-valuable resource is radically more open. The rush of people to a new frontier brings many people new wealth, but it can also create terrible suffering.

There are two claims here: 1) that NFTs do lower a barrier, and 2) that barrier was blocking something people already valued. The gold rush only happened because people valued gold already. The NFT rush is happening only because people already value stamps of uniqueness.  If you argue that stamps of uniqueness aren’t valuable, your argument probably isn’t with NFTs: it’s with the entire worlds of fine art, collectibles, sponsorships, and intellectual property.

What now?

The frontier behavior around NFTs is likely to continue for a long time before the chaos resolves. This is not a new story. Email spam did not stop email, and if NFTs can be useful, NFT spam won’t stop them either. But are there things we can do to speed the process, to excavate what’s useful and discard the pretenders?

If there’s one thing I want to leave NFT insiders with, it’s to ask yourselves this question: how can I encourage NFT utility while discouraging get-rich-quick schemes? A few guidelines I think can help:

• Don’t talk about NFTs as an artistic panacea.
• Don’t make rivalrous NFT systems.
• Don’t talk about getting rich. Only a small number of people go from rags to riches on frontiers, attention on the internet is severely unequally distributed, and advertising the space as a place anyone can make it big encourages more get-rich-quick schemes. If the rags-to-riches promise is the only thing NFTs offer, it’s a bad offer.
• Do use NFTs to enable non-rivalrous systems. Look at free-to-play games that feature exclusive but purely cosmetic skins.
• Do talk about the generic utility of what you’re working on. How does your project provide something other than the opportunity to speculate on assets?
• Do disclose investments in public statements. They probably aren’t that hard to find anyway, and you gain credibility if you’re up front about them (me: I hold some ETH, GTC, UNI, and MKR from air drops and past wages).

In an attempt to walk my talk, this article has been posted both on Medium and as an NFT on Mirror.

Interested in the good side of NFTs? I’ve just joined the Rarible DAO to work on it, so stop by to chat.

Interested in NFT IP systems? Swing by the Squad Games discord, where we’re working towards a more open + fair IP future.