what is nft 2.0?

"Nothing is More Powerful than an Idea Whose Time has Come"
Victor Hugo

The NFT2.0 dawn could be upon us! But, is this really the time for next generation NFTs? Are we witnessing decentralized ecosystems propelling NFTs into mainstream adoption and bringing about the Internet Of Goods ? This whitepaper, written in an unconventional style,  aims at answering one main question:  Why utility tokenization could possibly be the next big trigger of a global widespread of NFTs. In this whitepaper also, further details are provided explaining why Nftania could have stumbled upon the real NFT 2.0 ! And why utility is the new "rarity" in NFT2.0 systems? Also where to find and how to tokenize utility ? How fungibles play a central role in bringing mainstream adoption closer to the "early majority" ? What is exactly meant by utility ? And what technology could tokenize utility at scale and in a decentralized manner? Also many other questions are herein discussed and answered in greater detail.

Who knows, NFT2.0, is "Probably" Nothing !


NFT 1.0At Nftania, we like to think of NFTs as universal tokenizers that can create decentralized ecosystems by tokenizing virtually any asset attribute and not just rarity; these tokens thrive in an ecosystem that provides provenance and proof of "ownership" of these tokens to its members. In principle, these tokens could be tied to any value vector of an asset that NFTs are able to capture then propagate throughout the network. We use the term value-vector, because vectors specify a measure of value that has both a clear direction towards some metric and a magnitude of that metric.

If NFTs were viewed not only as tokens, but rather as ecosystems that can host  any set of common asset value vectors, then the value of that ecosystem as a whole will naturally stem from attracting certain users interacting via that specific type of value vectors of interest to those users within the ecosystem.

In that sense, think of the current generation of NFTs tokenizing the rarity-type value vectors , and now let's collectively call these vectors the NFT 1.0 ecosystem. NFT 1.0 is said to be an ecosystem that hosts interactions or token "transactions" based on, valued and governed by rarity.

As NFT 1.0 ecosystem members continue to tokenize rarity at unprecedented rates, its growth trajectory suggests that NFTs must be heading towards mainstream somewhere in 2022, as they are still in the early adopter stage that started forming between (2017-2021). Now, as we speak, multinationals are incorporating NFTs within their platforms, and this is great news for our community, but again does that achieve the kind of mainstream adoption we're looking for?

Well the answer really depends; if its only about "pumping" our bags, then yeah mate! This is a home run! On the other hand, these massive network effect platforms will mostly give NFTs unprecedented  exposure to a wider public who may have never heard about NFTs before, but probably the same won't be true for utility. These platforms are great at distribution and scaling but not at innovating, and this is why opportunities for all innovators out there to roll-up their sleeves and create killer dapps for NFTs which will skyrocket the need for more real utility more than ever.
WHY UTILITY ?Let us first dwell into the meaning of utility. Utility,  in economics, relates to  the total satisfaction received from consuming a good or service. This satisfaction stems at the core from value creation, its incorporation and exchange within a system through a product or a service between a producer and a consumer. For one, utility, also, cannot be synthesized, because it forms and gives value proposition (an offer of value) that is only seen and acknowledged through the eyes of customers; while rarity is a proclaimed "value proposition" and can be easily synthesized.

The ongoing commoditization of rarity in NFT 1.0 ecosystems is rapidly eroding its value and threatening rarity's position as a sustainable value vector. Today, the sheer amount of countless NFT collections that are failing due to absence of a real and value proposition "utility" is far more than those due to absence of rarity or rather the excess of "rarity".

In the absence of utility, any product becomes a "solution looking for a problem" instead of being a solution to an existing real problem. Maybe, in few months , or even sooner; the community reaches a point to kiss goodbye the hay days of disproportionate production incentives of NFT1.0 that no longer thrive or sustain based only on rarity, as these economies are having an explosive oversupply that is in order of magnitude of volume compared to genuine corresponding demand.

Here one may argue that every web3 creator "yearns" to incorporate utility, and its absence is merely because utility is so hard to create and incorporate. Good intentions alone are not enough! Product utility, involves putting the real work to create value that has yet to achieve a product market fit addressing a real customer problem; even then, many startups are still deemed to fail or has near impossible chances to succeed because of poorly posed value propositions of their proclaimed product utility. One can imagine what chances of success are left for startups and projects alike when such core element of their existence is such as utility all together absent !

For a new successor ecosystem to emerge as NFT2.0; its NFT 1.0 predecessor needs to evolve and give birth to the dire value vector. The new ecosystem to be born: namely generation 2.0, must represent a tokenizer of utility (i.e. the ability to tokenize tangible reasons to buy and own like verification and authenticity).

WHERE TO LOOK FOR UTILITY ?If utility is right now in a state of scarcity in existing NFT1.0 ecosystems, then how come one can imagine building an NFT2.0 ecosystem not based only utility, but furthermore on tokenizing utility attributes. Doesn't that imply that utility must first be in abundant quantities just like "synthesized" rarity was ! These realities are exactly what formed the guiding principles to know first where to look for meaningful and ample utility, then apply NFT to the utility value vector.

FUNGIBLES: THE NEW "NON-FUNGIBLES" !In retrospect, rarity would have only unveiled the 1-D aspect of the NFT space that is in reality a multidimensional space of the universal tokenizers NFTs are ! This confined 1-D perspective has also been entrenched long enough in NFTs as a result of being exclusively transfixed on the rewards of tokenizing rarity as niche.

Consequently, this has limited NFTs as tokenizers primarily of non-fungible assets where in reality they represented only the first generation "NFT1.0" that capitalized on rarity in non-fungibles who are by definition unique! In contrast to fungibles which are not unique by definition and "apparently" lack or poor in rarity attributes.

In hindsight, this [1-D] dimensional view of the NFT ecosystem in pursuit of rarity may have overlooked a wider asset class, that is: Fungibles, which is said to be by definition very rich in utility as opposed to most Non-Fungibles.

Just the thought of including fungibles as underlying assets for NFTs may sound contrarian at first to many! Because in general they lack rarity, but only one type of rarity; the one that relates to aesthetic and apparent rarity . But fungibles exhibit a rich spectrum of rare attributes due to their utility and its thereof usage!

For instance maybe a fungible asset was used by someone famous, it carries his/her autograph, or it has been used in an important event, or maybe it has an emotional value or holds some symbolic significance, or maybe it represents a limited product edition, a members only ticket or even has a historical value. For a never-complete list of use-case scenarios of various types of valuable rare utility attributes refer to below.

These are all examples on different rare attributes pertaining to the specific usage and provenance of the fungible asset itself, that require first to check that this asset is actually the authentic one at hand being tokenized, and that's why authenticity is the Holy Grail of the NFT2.0 ecosystem.

The inclusion of fungibles, projects the NFT space into a new 2D ecosystem where rarity and utility become both tokenizers of value embedded within the same NFT, where the claim of ownership become equal to the real ownership. The primary difference here between NFT1.0 and NFT2.0 is between the claim of ownership of an asset and between its real ownership.

The more we broaden our view of NFTs as universal tokenizers; the more we can appreciate that NFTs cater to much more than non-fungible asset types - and that the name NFT pertains to all attributes being tokenized more than it does to one attribute or trait like aesthetic rarity. Viewing NFTs as universal tokenizers will broaden the set of attributes it can tokenize.

Therefore, the moment an NFT ecosystem evolves beyond its genesis value vector or beyond a 1D dimensional to a mutli-dimension value space regardless of what this 1-D "genesis" value vector is, being that of rarity or something else, the NFT ecosystem can traverse to different generations going Gen 1.0 to Gen 2.0, while moving from it "looks rare" to it "feels rare" !

NFT 2.0 Technology A key question remains to be answered, what kind of technology in NFT2.0 is needed to make authenticity in fungibles tokenizable ?

Spoiler tipOf course, here we're not talking about tokenizing fungibles with ERC-1155 tokens, because they may suit semi-fungibles but cannot tell the difference between identical units of fungibles, but rather we're talking about an ERC-721 for identical fungibles. And no! We don't have a lunatic genius master plan to go out there QR-coding each and every fungible at sight! After all as will be discussed in this whitepaper, QR-codes, are by design, centralized, trust-needing and mutable asset tagging agents that belong to the web 2.0 era with no trustworthy provenance ledgers ! Well then, how is all that even possible without QR-codes ? That's where NFT2.0 becomes even more interesting ! See the section Utility Innovation Stack for more details on the NFT 2.0 fingerprinting technology.

fungibles: THE Trillion dollars marketThe discovery of the new source of new utility has roots in modern disruption theory. When applied using utility on NFTs, it will predicate that NFT2.0 has to be an adjacent or underserved parallel non consumption market that no one seems to be paying attention to, in our case : Fungibles. That's what Prof. Clayton's famous disruption theory depicted years ago!

Just take one use-case for the ability to tokenize the utility of only one attribute for which is an asset's authenticity from its NFT. Assets' authenticity attribute makes, alone, the case for a market solution to  global anti-counterfeiting market estimated to be annually around $2T !

We need to appreciate that most humanity's produce and consumption is in the form of fungibles; the total GDP of the world economy stands at $94T with art only standing at around $50B; that number more or less can be representative of nonfungible physical art. What this tells us, is that nearly 99.9% of our civilization is fungibles; those are services and products that obey economies of scale that incentivize sustainable value creation and production fueling everyday supply and demand in their respective markets.

As previously said Fungibles are defined by their utility and usage and that's why they create economies of scale at production, and that's the source of demand for such items. When someone consumes a fungible, they do so by acquiring the utilities these fungibles were made to deliver, and that's why NFT2.0 tokenizing the utility attributes of fungibles naturally inherits their corresponding inherit utility. For NFTs, fungibles could be the real gold mine of utility and growth!

With the application of the NFT market in mind and according to the understanding of Prof. Clayton theory, non-customers (non-NFT natives) join new markets when these new customers-to-be find in utility tokenization (NFT2.0s) new ways that make them do their jobs in a better, faster more fun and rewarding ways that they simply lacked before; when they used to consume products that were "non-tokenized" and in pure fungible form.

If this happens, and when fungibles become NFT tokenized; those same customers may very will become the new wave of members in the NFT 2.0 economy that can hit mainstream adoption, representing a new economy were each fungible has its own clone NFT2.0, and where customers ask for the NFT of their goods before even purchasing them! We may be very well on the verge on the Internet of Goods.

APPLICATIONS OF NFT2.0Examples of different forms and types of utility attributes NFT2.0 could bring from tokenizing fungibles are: creating limited edition product series, tokenize celebrities stuff to preserve their legacy, owning memorabilia, owning branded items, targeting marketing niche owners with promoted items, giving rewards, product giveaways, leasing and sharing of asset utility, members only items, discounted items, pledges, donations, gifts, IRL artwork, auction items, keeping records, ticketing, issuing certificates, KYC, tracking healthcare, preserving authenticity, indicating originality, verification, combating counterfeiting and lots more vectors of utility attached attributes.

UTILTIY INNOVATION STACKThe question that remains to be answered, what kind of innovation stack would enable and leverage the new NFT 2.0 ecosystem to function and tokenize identical fungible items with the ease someone creates an NFT for a digital asset or a jpg. Secondly, even if fungibles are possible to tokenize as such to become non-Fungibles at their own right, then how to tokenize fungibles in a scalable fashion? Answering those two questions is what has also led to the development of NFT 2.0 fingerprint technology.

There has to be an innovation stack to capture decentralized utility in fungibles and form the bedrock of NFT 2.0 the same way blockchain has been the bedrock for NFT1.0 enabling the effortless, trustless and decentralized capturing of rarity.

How any innovation stack that comes into play could tokenize fungibles ?After all; fungibles, by definition, are identical non-unique economic units that seem rationally un-tokenizable. Even when some innovations like QR codes could be attached to fungible products; QRs are not feasible to bring about NFT2.0. Its clearly impractical to go around QR-coding millions of items out there! And even if it was feasible to do so,  QR and their likes are fundamentally flawed for the mission!

All these "ID" tags are trust-needing centralized agents that are easily cloneable and still belong to the centralization era, as such QRs cannot serve as decentralized tokenization agents for utility. Therefore, the question remains still, how to probe fungibles to work at scale and operate in a trustless decentralized manner without someone's intervention just like blockchain operates.

FINGERPRINTS: THE PHYSICAL FABRIC NATURE'S BLOCKCHAINJust imagine an invisible QR code that is naturally occurring "trustless", and pervasive in nature not belonging to one entity "decentralized" is physically unclonable "immutable" can be found and probed on all asset whether fungible or not. Then this may very well be the discovery of nature's biggest natural physical blockchain. After all, what is a blockchain but a decentralized, trustless, immutable ledger that is both transparent and secure.

To fetch and see the "imaginary" naturally occurring invisible "QR codes", a journey descending to the depths of the macro-level world begins! Its sole purpose is to probe utility in all fungibles by identifying each fungible uniquely from these "invisible" markings and as such become uniquely and unmistakingly indefinable and, therefore, becomes non-fungible.

Because imagination proves many times to be more important than knowledge, it was not a surprise to discover that on all fungible surfaces there is found a 3D macrostructure that naturally and randomly exist not by any intervention of anyone and these 3D structures are also found everywhere in nearly all fungibles. These 3D structures were actually found and function like "fingerprints" of any objects, fingerprints happen to be near impossible to clone at macroscopic level - these are the DNA of all physical objects.  

The result was the discovery of the so called the decentralized physical fabric which is an information-theoretic weaved web of nodes (Fingerprints) each representing a fungible in the known universe that can be probed using a consumer-grade apparatus: a Smartphone Camera.

The next step in our mission was to design an algorithm that mines these micro-ornaments or fingerprints found at the macroscopic level of these fungibles' surfaces, and then create their unique IDs "fingerprints". With collaborators from a myriad of interdisciplinary sciences in computer vision, information theory, cryptography, machine learning and optics, the team was successful to generate a fingerprint for each fungible that has a very high Entropy (more than 500bits or more) with verification query times that are near real time!

The result was a patented algorithm that will has the vision to become on-chain to become totally decentralized for mining a fingerprints off any fungible, encrypting it and storing its hash inside its corresponding NFT 2.0 token.
FINGERPRINT AGINGSome may think that fingerprints should have a very long lifetime and should survive all kinds of circumstances since these fingerprints encode the authenticity of the object. If that is the case, then what about objects with short life span by virtue of their material composition or harsh usage environments? Truth is that each fingerprint lifetime is corresponding to its expected usage and its lifetime expectancy increases with the fungibles economic value.

Imagine you go to a shop buy a pair of sneakers you open up the box pull the sneakers out shoot with your smartphone the fingerprint denoted location, now what you get is a certificate of authenticity for the shoes in the form of NFT2.0 clearly showing the match of the fingerprint hash of the pairs at hand and the provenance to the original manufacturer who issued or minted the NFT2.0 token and included the shoes fingerprint, then finally you also get your shoes metaverse clone. That scenario played out as is shows how a fingerprint lifetime depends on the usage ranging from disposable, consumable till perpetual according to the below graph.

QR-CODES VS FINGERPRINT TECHNOLOGYDrawing out the main differences between a QR-code and a fingerprint can clearly demonstrate why QR-codes are not a solution to NFT2.0 fungible assets in order to tokenize their utility. The bottom line is that QR-codes cannot hold as a bulletproof method to testify fungibles authenticity and connection to that NFT2.0.

QR-codes, are by design, centralized, trust-needing and mutable asset tagging agents that belong to the web 2.0 era with no trustworthy provenance ledgers !

Few reasons can sum up the whole picture, the basis of any authentic "Certificate" is that it cannot be forged, in web 3 that is equivalent to being immutable or more accurately unclonable. The below table summaries why fingerprints are the next-generation version of "QR-codes" that are web 3.0 since they are said to be decentralized, trustless, unclonable and carry physical provenance when all these properties are married to a similarly characterized NFT token as in the NFT2.0 that carries the fingerprint then an unbreakable connection between the two worlds is established.
PHYSICAL PROVENANCEProvenance is one of the most powerful characteristics of NFTs, it shows who owns what, when and from whom one owner got that NFT from and for how much. Verifying the chain of ownership traced up till the original owner or minter of a digital asset in an immutable way is definitely the holy grail of ownership verification and proof of possession for digital assets. Likewise, assets in the real life are in even more need to have a similar "unbreakable" chain of ownership and immutable ledger.

All known counterfeiting technologies didn't stop faking knock-offs and selling near identical copycats. As previously explained in this whitepaper authenticity is the first cornerstone any buyer needs to check on before consuming the utility of the fungible product, and that same buying process is the same thought process that goes through when one needs to check the connection between an NFT2.0 that tokenizes, say, two pair of boxing gloves to be Everlast made or not, because the NFT2.0 token value comes now also from the provenance of that asset ownership descending in the chain of ownership in the physical world and not only in the virtual one as in the case of digital assets.

This is where fingerprinting technology comes in as the ultimate provenance proving anticounterfeiting technology in the world, that was adapted to serve as a tokenizer of physical assets in NFT2.0, just like SHA-256 hashes jpegs, Nftania's fingerprinting hashing algorithms hashes the 3D fingerprint topography off the fungible surface as if it is a DNA test ! And then it stores that hash inside the NFT  2.0 token, which could be offchain or onchain storage.

To better comprehend the power of fingerprints in tokenizing assets via making sure the NFTs and their fungible/non-fungible counterparts in physical reality are unbreakably connected contemplate with the following hypothetical example.

Think of two babies in a hospital who were just born to two mothers, now Eve's baby's hand tag having Eve's name could be easily swapped by removing the the name tag off her baby's hand and place it on Alice's baby's hand ! At that point, name tags are the only visible proof of the birth of certificate; just think of it for a second, if QR-codes are these tags; they simply cannot be entrusted to serve for ownership proof nor provenance at all!.

On the other hand if the birth certificates which resemble "NFTs", become DNA based then there is no way to swap the babies tags to swap their birth certificates! Fingerprints, serve as an embedded "DNA" for most physical objects they represent, and therefore, they can maintain the provenance record logged in the transaction of the respective NFT2.0 each time a different user acquires the same objects as its fingerprint moves accordingly across the blockchain, while in the physical world, a fingerprint, stands testament of the originality of the said tokenized asset and hence its provenance record being intact regardless of who the current owner ends up being the asset is always the same being checking only its NFT2.0 token.
"If I have seen further it is by standing on the shoulders of giants."
Sir Issac Newton

COMMUNITY DRIVEN Its true that the NFT 2.0 movement represents an inflection point in the market as a whole, but it cannot succeed without the community members who come first and foremost. Likewise, some of the most prominent NFT figures in our community must be at the forefront of this movement as well; those that have had significant impact and dedication to push the community, the market and the NFT technology forward. That's why $NFT2 airdrop compiles community members who participate in the Airdrop as the Movers & Shakers in an effort to recognize their activity within social media and reward that with early access to test drive the minting technology of NFT2.0 among other utilities, provide advise on the movement's direction and propagate the movement further to the mainstream space by advocating and inviting prominent IRL assets, players and exploring new market verticals.