NFTs Can Not Work
What can you do with a label?
A primitive cloakroom
It’s raining, you take off you’re soaking wet coat as you enter the conference building, there’s a cloakroom to your right.
The clerk takes two matching labels, gives you one, and ties the other one to your coat. Now you can be identified as the owner of the coat.
You probably figured out that NFT is the label, and the coat can be any item that you own. Why is it a primitive version of a cloakroom then? because NFT is JUST one label.
You cannot tie a second label to the coat. there is no clerk! just a label! A non-forgeable, blockchain-protected label.
What can you do with a label?
The argument against NFT’s
- Claim 1: All* NFT use cases depend on a centralized entity that has to be trusted. (the clerk)
- Claim 2: We have other good encryption and authentication algorithm that works well.
- Conclusion: All* NFT use-cases can be achieved without NFT. (And the NFT solution does not outperform the non-NFT)
- By ‘All’ I mean: currently suggested use cases that can be implemented in the near future (more on that at the bottom of this article)
With that argument in mind, let us review some common suggestions of NFT use cases.
NFT use-cases (and why they fail)
Gaming
… a multi-billion dollar gaming industry that could tap into NFTs
- Trading in-game items
Your favorite legendary sword is for sale as an NFT. You want to buy it, but then you realize: the NFT is the label, and the sword is the coat.
The only way the item will functionally be yours is if the game servers will contain data that links between the sword and the NFT.
But What’s the big deal? So the game server will contain this data, so what?
That means the game developers can implement the same mechanism without NFT.
The whole point of NFT is to be decentralized, without it, NFT has no advantage. On the contrary, It deeply complicates things.
In-depth explanation:
The sword is a piece of data within the game. You hold an NFT.
The NFT does not contain instruction on what the sword looks like, how strong it is, and so on. The properties of the sword are separate from the NFT, which is truly just a label.
Therefore, something has to tell the game that your NFT is connected to the sword.
2. Using items from one game in another game
In this instance we encounter the same issue, only now two games have to link your NFT with the sword.
Digital real estate
The coat is now the “real estate”.
The metaverse-app creators have to link your NFT with the virtual space, otherwise — you got nothing.
This is the same issue once again
Real-world assets
Again we are completely dependent on some managing party to manage the actual real-life asset and acknowledge our NFT.
Collectible NFTs
Much has been written on the fact that you can copy-and-paste the ‘rare’ JPEG you bought on OpenSea. Yet again we’ll need a centralized authority that guarantees the actual ownership.
Solid NFT Use-cases
NFT can work over a pure blockchain ecosystem, managed by Dapps.
In this case, there is a clerk and a second label in the form of smart contracts.
But here, the link between the NFT and the asset doesn’t break the decentralization. Finally, sensible usage of NFT.
This brings us to an important conclusion.
What NFT actually is
NFT is The mechanism of handling ownership in a decentralized environment.
It is not a “digital ownership” in general. And has no point outside of a decentralized process.
If a platform is decentrelized, it can utilize NFT.
If it's centralized, it can’t.
Disclaimer
I am NO expert. I’m simply a software developer with a basic understanding of cybersecurity concepts.
My NFT knowledge is limited and I’m always happy to correct my views. Please do comment and engage with me on this subject.
