NFTs, Web3, and The Blockchain Have Their Place…Maybe

3 minute read | Last updated 6-Feb-2022 |  Risk, Security, Ship30for30

If you manage to push the hype to the side for a minute, you might be able to glimpse the start of a useful set of technologies.

The negative blowback hitting NFTs and this space right now (and rightfully so) is often due to a combination of misunderstand the technology and a misapplication of the technology.

Early Blockchain

In the earliest days of the blockchain, the hype claimed it would solve all of our problems. On top of the multitude of failed projects, there were scams left, right, and center.

But as a technology, blockchains have their place.

The core value a blockchain provides is distributed, publicly verifiable ledge of transactions.

In simpler terms, the technology makes it easier to make sure that no one entity controls the records of transactions and those transactions are much easier to verify.

These aspects are what make it appealing (but not perfect) for digital currencies. The technology is also an excellent solution to challenges where voting is required or in use cases like supply chain verification.

Web3 Principles

Thinking about the blockchain, lead to the core ideas of Web3. This group of technologies isn’t formed yet but they are starting to come together in some experiments.

Web3 aims to deliver a distributed and robust system for building applications and distributing information. This system would also have a native ability for financial transactions.

A big push behind Web3 is to break up the titans of tech powering today’s internet. This movement takes aim at Facebook/Meta, Google, Apple, Amazon, and more.

The biggest challenge with the current direction is that it ignores many of the simple economic realities of the modern web. There is an unbelievable amount of resources that power the sites and services we use everyday.

In order to justify the use of those resources, some type of business model is required. I don’t agree with the methods or assumptions behind adtech but it certainly has powered some amazing innovation.

Web3 has a long way to go and it’s too early to know if it’ll pan out.

NFT Challenges

That brings the last of the big three of these technologies; NFTs.

Casey Newton has a great run down of two major communities—gaming and music—with very different reactions to the technology.

This demonstrates the conflicted nature of NFTs. We know that they are simply data files that point to something online. Anyone can verify who issued them and who currently owns them.

This is a useful thing to be able to prove but it required other structures—like copyright, property laws, and licensing agreements—to actually work.

Right now, NFTs are being tried out in any number of scenarios. Some will work, others will fail. Some require the efficiencies of centralization which runs counter to the Web3 ethos.

One Truth

The one undeniable truth of blockchain, Web3, and NFTs is that these technologies are still in their early days.

We need more experimentation. More thought. And more discussion around how they are best used.