Written by Jan Denecke founder and CEO of RYDE platform
The current hype around non-fungible tokens (NFTs) is quite understandable. This is what’s up: after many pivots, blockchain technology has now discovered an area for itself that allows its full power to unfold.
One of the biggest problems of the digital age is that intellectual property has not been given any protection in the Internet’s depths. Every effort of legislation and jurisprudence has failed, it can be said, because of the ever-growing strength and speed of the Internet.
Okay, but what are NFTs?
A non-fungible token is a unit of data stored on a digital record representing a unique digital item, and it’s not interchangeable. But more important than understanding what it literally means is to understand its impact.
This is what NFTs can do: simultaneously certify the legitimacy of a particular digital object’s ownership position to its owner (proprietor) and of its authenticity to the associated rights holder, all by storing the NFT uniquely and tamper-proof on the blockchain.
In simple terms, it means that in addition to providing proof of ownership, an NFT also serves as proof of authenticity for any digital file. Different content formats can have a certificate of authenticity created by blockchain technology, such as drawing, animation, music, photo, or video.
This certified virtual creative object, which is actually a computer file, can be exchanged or sold with its certificate. NFTs are thus different from fungible tokens, which regularly live on their interchangeability only to identify the owner. NFTs are not identical to each other but are unique in their forms and contents like a fingerprint.
Bitcoin is the best-known example of a fungible token since it can be exchanged among its users at will, like a 100-dollar bill (only more valuable). The NFT is precisely the opposite: you don’t want an exchangeability because it holds the respective rights stored on it in their exact form. And this is exactly what has been missing in the world of intellectual property in the digital age.
What does it mean for creators?
It was (and still is) almost impossible for the rights holders to trace the use of their works by third parties. The users, in their turn, could prove the legality of the use with quite some difficulty, having to find old papers, contracts, e-mails, or invoices. But now, there is a more manageable solution: one can embed his or her rights in an NFT.
Digital collectibles are probably the best (and simpler) examples. Here, a certain amount of unique content is programmed into a token. Then, this is brought into a market with all the basic requirements for a collector’s universe – gaming, sports, art, among others – already set.
For instance, in the various content-producing industries such as music, film, or literature, this is all very groundbreaking. Artists are now able to sell “true digital originals” and track this closely, monitor their sharing, control billing, and participate transparently in payments from sales.
Especially in photographic art, this can have enormous positive consequences for photographers and rights exploiters. The photographer, provided he has the technical knowledge, can now relatively quickly distribute his works in a fixed edition, “embedded” in an NFT. That means that only the person who owns the token is the legal owner of one of these “prints,” avoiding the illegal (but common) third-party sharing since the content can no longer be acquired or stolen arbitrarily on the net as before. Besides that, it increases the value of the token (the print) for its exclusivity aspect. Nevertheless, in the future, the challenge will be to monitor the usage of NFTs and ensure that all third-party rights associated with the NFT are lawfully cleared.
And boy, is the market and demand for content immense! Every day, 1.8 billion images are uploaded online. In 80% of them, third-party rights are infringed. Where there is such a strong demand, the need to produce or provide good content is vast. Currently, only a few content providers are involved in the NFT market or deal with it at the required pace.
Even though blockchain as a technology has already penetrated further into the general public, it is far from being “mainstream.” The user groups are nevertheless already so large and the liquidity so strong, especially in the younger age ones. Thanks to the recent months’ crypto-boom, there is a great need for (high-quality) content. Once again, it will be a case of content being the trump card in the future.
The Next Steps
To quickly produce content for this huge market, it will be necessary to convince the large rights holders, such as labels or photography agencies with their tremendous back catalogs, to get to grips with the scene and the technology quickly. That is a crucial move not to miss another train that is already about to leave the station and occupy this market with tailor-made products. In addition to the content, agility and risk-taking are essential to hold one’s own in the fast-growing market.
One thing is sure: the competencies are clearly divided. What comes from the world of Blockchain & Co. doesn’t necessarily have its origins in the world in which content is created. That is why it is essential to connect these worlds to achieve precisely the necessary momentum. For this to happen, market participants who can take on this “producer role” are vital.
The band Kings of Leon is the first to release an album as NFT recently. They have shown that it is possible to promptly enter an innovative market as an “early adopter” by bundling your competencies with the right partners and reaching rapid success.