We’re amidst a crossroads in human technology and evolution. Today, we have the tools that we’ve learned from nature herself to shape our lives for the better. Hence, there are more things called ‘unnatural’ than usual. This is because humanity is changing from one year to the next. Likewise, so is the internet changing. From its earliest origins as a medium of communication between researchers. NFTs and blockchain technology represent the evolution of the third internet, Web 3.0.
Today, many skeptics and pessimists dismiss NFTs as a ‘bubble waiting to burst. There is reason to believe as if NFTs are worthless images of monkeys and other animals. Second, scams, theft, and plagiarism in the NFT space don’t help matters.
The underlying blockchain technology will operate Web 3.0. NFTs hold unique ownership of the network. In this way, Web 3.0 is about a person owning pieces of the internet itself. How is this not revolutionary? For the first time in history, we can make a replica of the physical world and all its assets, put them on the blockchain. This is equality of ownership in the genuine sense. Let’s understand the basics.
What are NFTs?
Non-fungible tokens or NFTs are pieces of data stored on the blockchain. Data can be anything, an image, audio, a video or anything that’s imaginable. We can make scarcity inherent on the internet. That means anyone can own anything they want on the internet. Since the internet is global in scale and reach, anyone in the world can own assets anywhere in the world. Likewise, you may think about the physical world. What about the significance of physical assets? Aren’t they more valuable than NFTs or digital assets? Let’s find out.
What are Physical Assets?
Anything that we see in the physical world is a physical asset. For instance, a home, a place of living. It is an asset because it has monetary value. The point of owning a house is two-fold. First, it’s a safe place to raise a family and provide shelter from the environment. Second, its monetary value may rise if it is in an upcoming area of development and progress. For the last century, the best way of creating generational was land ownership. Hence, physical land is the best example of a physical asset.
Likewise, a truck is a physical asset. Hence, a farm is an asset since it gets used to grow food and sell the surplus in open markets. Likewise, think about mines, oil fields, sea beds, and other examples of physical assets. The physical world’s growth gets exhausted because actors have monopolized all land. Hence, where can we find new avenues for growth? We can build digital economies that are independent of physical asset ownership. In fact, using blockchain, we can encode physical assets on the blockchain itself.
NFTs May be Physical Assets and Vice versa
Money and value are social technologies.
Historian Yuval Noah Harari’s book, Sapiens, made the case. Money is the greatest human story ever told. For thousands of years to organize society and give it a sense of order. Digital technologies have become common owing to internet-enabled9ik smart devices. Hence, it is prudent to reason, humans have ascribed social value to digital goods. This is exactly how we use our eyes to ascribe value to physical assets.
Social value is about the greatest number of people who believe in a certain thing. If two people agree on a price for something, then that’s the latest price for the next transaction as an anchor. Likewise, a community believes that something has value. Then other members of the community will gravitate towards that. In time, the bigger the community, the better the price discovery. For this reason, NFTs are as valuable as physical assets. It depends on the social value, the utility and community strength. Hence, this is how physical assets get valued in the real world.
Below are 5 Reasons Why NFTs are Just as Valuable as Physical Assets
Economic value depends on the supply and demand of physical factors and self-interest. Modern financial markets based on physical land ownership and top-down economics based on central bank and government controlled debt creation, was good for the 20th century. Hence, for the 21st century, we need new growth drivers.
The digital revolution took place from the 2000s to the beginnings of the covid pandemic. It has given the signal that digital economies are the way to coordinate across the world. There is a huge social demand for digital assets. It is the platform of human economic exchange for the new digital world. This means NFTs are the core layer of a digital world.
Use of a Database
The physical world works on databases. Our world does. The art of accounting ledgers and writing invented in medieval Mesopotamia. We still do. The work of governments is about building databases of information about their people. This is so that we could decide how much food we needed every year for everyone and distribute to everyone else. Once food was self-sufficient, attention shifted to other databases of the economy. Like making clothes, weapons, steel, cement and houses.
It’s the same in the digital world. Except for one thing. The internet made data monopolies. As in, the concentration of vast amounts of data in too few hands. The blockchain will act as the decentralized database layer of the world. It is tamper proof and hence, maintains the rights of everyone to claim what is theirs no matter where they are. This is the foundation of the digital world. A government controlled by no one, called the blockchain.
Today, Physical is Digital and Digital is Physical
There has never been a greater need for digital technologies. Yet, there is a lack of sense from an experiential level, what it means to become a digital world. The meaning of a digital world means the creation of a network of machines who can talk to each other. Think about what artificial intelligence is, from this point of view. That’s how we can become clear with computer science concepts without being a writer of code.
Likewise, our digital world is the interface of our real world. Why is that? Because it is cheaper and easier to coordinate what happens in the physical world, online. And how does the internet do this? We do this by making software for people and enterprises to collaborate with each other. In fact, artificial intelligence is about using our data to make machines like us. Hence, the physical world is the digital world and vice-verse. There is no longer any difference between the two.
The Value of Scarcity
Why is gold valuable in the eyes of the world’s people? And has been so for thousands for years?
Gold cannot get eaten or drunk. Plants can. It can’t get used to make clothes. Plants can. It can’t get used as medicine, except in very minor amounts and that too for very specific diseases. Plants can and are. So, why is gold so valuable?
It’s about scarcity and social status. It also looks good once it’s converted into shapes and objects. If something is too abundant, it’s taken for granted. Is something is scarce and its production is finite, its valuable and used as a store of wealth. Gold is valuable and is the store of wealth for the economy based on physical land and assets.
NFTs and digital assets are the store of value for the digital world. This is because the blockchain can make any digital item scarce.
Foundation of a New Economy
Hence, the blockchain and NFTs have created the perfect storm. We can start building a new digital world. This is happening as we speak and write.. This is the main reason for the hype we see for buzzwords like the Metaverse and NFTs or non-fungible tokens. There is every reason to believe that we’re on the cusp of making history. The blockchain and NFTs will create new ways and types of working and earning in the digital world. All rooting from the decentralized blockchain as the database.
NFTs are changing the world as we know it. As explained in the previous sections, we are the beginning of a multi-year trend. The Metaverse beckons all of us. There are lots of problems to be solved in the world. Hence, the blockchain and NFTs have the potential to solve many of it.
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