Stephen Caudill

I wrote recently about my experience with the first two iterations of the web. The TLDR there is that we did not succeed in creating a "civilization of the Mind in Cyberspace". What began as a diaspora of ideas across a wild and uncontrolled web, has slowly contracted into pockets of control. The Googles, Facebooks, and Twitters have centralized us into audiences, and we have yielded many of our freedoms to convenience. This isn't to say there is no value in those platforms, just an attempt to point out that what we settled into looked radically different than what many of us set out to build.

So imagine my surprise when, for the first time in years, I found myself feeling awe and hope over the changes that technology could bring to our world. It's not the sort of technological change that brings your car better integration with your phone, but rather the sort that makes it possible to resist censorship and promote equality in the world. This is the sort of technological change that could make it impossible to execute data breaches that expose your personal and financial information. So what exactly is this technological shift I'm rambling on about? JPEGs, oddly enough.

Fear, uncertainty, and doubt

The modest NFT, here frequently and affectionately referred to as JPEGs. I've gone from freaking out about NFTs to freaking out about NFTs. It's a spectrum, and the path from one end to the other is nuanced. We'll start where I started and end where I've ended up with them… and we'll kick it off with a joke:

A guy walks into a cyberspace and says "spacetender, I'll have an apathetic simian". The spacetender looks at him and says, "all I've got is this Bored Ape, and it'll cost you $250k".

You can wait a beat for the punchline, but that was the joke as far as I was concerned. At the time of this writing, the lowest price for any piece from the Bored Ape Yacht Club collection was nearly 70 ETH (roughly $265k USD). There are 10,000 JPEGs in the collection, putting its sum value in the billions. Similarly, as a civilian hearing about Beeple's nearly $70MM sale at Christie's, it seemed so difficult to explain how that price could possibly be justified, that it felt like NFTs were deserving of their place as the butt of so many jokes.

Right click, save as…

One of the first observations made by those of us watching from afar was something to the effect of:

But it's just a JPEG. I can right-click it and just save it to my desktop. Now I also own the $70MM Beeple.

Assuming that this is a good faith argument, let's follow that logic. Say that I search up The Starry Night, find a nice high-res image of it and I "right click, save as…". Does the fact that it's now a file on my computer imply that I own it? What happens if I buy a print? Do I then own The Starry Night? Imagine for a moment that Van Gogh had been able to make and sign prints and I purchased one of these. Could I be said to own The Starry Night? No, of course not, but I probably now own something of value. The key component of that value is that it was signed by the artist, making obvious implications about its scarcity. Before any valuation can be agreed upon, someone will likely need to attest to the signature's provenance, lest we find we ponied up for a forgery.

Here's where the application of some rigorous thought exposes what the real issue is. If the monetary value of a piece of art is a function of how the work impacts us (and potentially society), its scarcity, and its provable provenance, well then, what we're taking issue with isn't the mechanism of the NFT because it can fulfill those needs with a speed and alacrity that only computers and math can achieve. The problem isn't with the art or its provenance, but the mechanism of its delivery.

The pervasiveness of computers means that we all think first of how cheap and easy it is to reproduce and redistribute something once we have it in a digital format. It is the fact of its being in a digital format at all that causes us to lower our own perceived value of that object. Given the staggering amount of creation that takes shape digitally today, I don't think this is a point of view we can afford to continue to hold for long.

Some men just want to watch the world burn

The other looming argument against NFTs is one that it shares with all blockchain technologies: that the power consumption of "mining" is irresponsible and comes at the worst possible moment for the environment. I'm not going to spend much time on the fundamental premise because it probably deserves its own write-up and further, I feel sincerely and without judgement that it's an ill-informed point of view. If you're interested in understanding in more detail, this Harvard Business Review article does a good job of explaining why that's the case. To be clear: I am not asserting that it's not a problem at all, only that it's a talking point that's largely misunderstood.

What I do think is worth pointing out within the context of NFTs, though, is that "mining", or Proof of Work, is only one way to solve the consensus problem on blockchains. Ethereum, the blockchain most NFTs are created on is in the process of moving to a Proof of Stake model that requires negligible power consumption (roughly equivalent to viewing an email). Furthermore, PoS blockchains are currently estimated to make up almost 14% of the sector. I expect to see this and mixed consensus increase steadily in the future.

If this is a sincere area of concern for you, the Journal of Physics has a recent study looking at the energy consumption of Proof of Work, Proof of Stake and mixed consensus mechanisms.

It isn't just for breakfast anymore

Up until now, the majority of use cases for NFTs have focused on the display of imagery. This isn't surprising, since people have a tendency to enjoy aesthetically pleasing imagery. It's important to remember, though, that data underpins all of those NFTs, be they Bored Apes or commodities positions. While I'm no art critic, I do appreciate the uses of the underlying data itself. Provable uniqueness, provenance, and the ability to permanently store ad hoc data give you a surprisingly versatile tool. Here are just a few of the real-world use cases that NFTs could solve:

• Proof of Attendance: compliance-oriented applications without relying on trusted third parties
• Ticketing: events of all varieties, no forgeries, offline verification
• Digital Attestation (licensure): could apply to certifications for skills ranging from driving to an MCSE

This is just a tiny slice of what I think we'll see NFTs stepping up to take responsibility for over the coming years. Try to give our buddy the JPEG a bit more credit, regardless of what you think of its current uses. From here, it's only going to continue to become more important.