Abacus: Bitcoin, NFTs and How the Blockchain Changes Digital Assets
Andriy Onufriyenko
Last October, the digital payment giant PayPal, and its subsidiary Venmo began accepting cryptocurrency for online payments. While PayPal will not allow users to withdraw their coin balance in cash, meaning that users own the right to use the bitcoin and not the coins themselves, this deviation makes sure that PayPal is not operating as a bank for bitcoin, as fluctuations in the price could result in mass withdraw or PayPal simply not having the cash to fulfill orders, which helps avoid the same fate as crypto-exchanges such as Mt.Gox. Not only does this move allow more than 26 million merchant accounts registered with PayPal to begin accepting Bitcoin, but it also speaks to the mainstream cultural moment bitcoin, blockchain and digital goods are having throughout the world.
Bitcoin, while possessing the decentralized and secure nature of blockchain along with all the traits that make it work as a true currency, is in many ways no different than these more traditional digital assets. Until Bitcoin is accepted in mass by the general population, a dream that some doubt could ever come to fruition, its value as a true currency is dubious. That said, many see the adoption of Bitcoin by large platforms like PayPal as a sign of things to come. The general population seems to be drawn to the Bitcoin dream, not because of the economic and ideological dogma of the currencies creator, the pseudonym Satoshi Nakamoto, but instead because of the promises of profit of their early investment. This has led to a craze for not just Bitcoin but blockchain tech generally.
When the first Bitcoin was mined in 2009, carrying with it the message, “The Times Jan/03/2009 Chancellor on brink of second bailout for banks” a singular vision of decentralized paperless transactions was summited. Since then, more than 200 different cryptocurrencies have been developed and are traded. A once singular vision has been divided among too many coin options to count. This diversification has made plenty of people lots of money, but likely at the cost of ever creating a singular cryptocurrency that decentralizes peer-to-peer transactions in the way some once imagined. The currency that was supposed to undercut something like PayPal is now just running through it. This redefining of the Bitcoin dream goes beyond big tech using it to diversify their portfolios, the entire world of digital assets is now changed. In many ways for the better.
The acceptance of a new kind of ownership, where the right to use something is seen to be just as valuable as actually holding, trading, or lending a good or service physically, is a dynamic that not only gives over power to big tech, such as times purchased books were deleted off Kindles for example but devalues what it means to be a consumer. While the dream of a truly decentralized currency and payment system may be hard to imagine in the current crypto environment, the blockchain has forever changed how digital assets can be moved.
Think about the value of something like domain names, from the beginning, there has been value in owning something digitally even if it is not a tangible asset. Videogames are a great explainer of this idea, people everywhere throughout the last 15 years have been willing to pay high prices for in-game currencies or items. As something like Fortnight took over the world’s collective consciousness in the last 4 years, they have been able to generate 2.4 billion dollars in revenue just by selling costumes that players can wear in-game. The larger emergence of markets for digital goods such as these skins has come in tandem with the mainstream appeal of the digital asset market and the emergence of the blockchain. Suddenly, within the last 4 years specifically, we now have what is known as non-fungible tokens which have helped to correct this era of pseudo-ownership.
Basically, a non-fungible token is a digital asset that can be traded and verified through the blockchain. Making a digital good an NFT makes it completely unique, verifiably unique at that. Imagine trying to sell a picture you took with a digital camera on eBay. Even if you were a famous photographer, convincing someone to pay hundreds of dollars for what is effectively a file for your computer is a tough sell. But if the picture was verifiably unique, 1/1, and tradeable over the internet, you suddenly have something of real value. The problem with streaming and much of the digital market for goods and services is the inability to sell or trade what is purchased. Even if I bought a movie on the iTunes store, for example, I have no right to sell it or lend it to a friend. NFTs fix this. A popular use of NFTs has been the digital art market, as auction house Christie’s recently sold a digital-only NFT piece for 69 million dollars, but new players have entered the market, including the NBA which has been selling highlight clips as NFT’s including one of Lebron James that sold for $100,000.
While the NFT market so far has been plagued by the same forces that made the crypto market a gold rush instead of a real social movement, there is so much potential for this technology to be implemented in all sorts of digital assets from video game items, online movies, concert tickets, art, music and more. While the Bitcoin dream is far from fruition at this point, even as PayPal creates the environment for everyone to get on the bandwagon, the blockchain has created a digital marketplace where owning something comes closer to what we are used to. Check out something like the infamous “Million Dollar Homepage”, and it becomes clear that digital assets, even just a pixel, has value in our minds, but Bitcoin, the blockchain, and the NFT’s that are built out from it might just make that ownership feel that tiny bit more real.
