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!