How Can NFTs Change The Face Of A Country's Economy?

Non-fungible tokens (NFTs) are now trending hotter than pogs, with tens of thousands of articles written on the issue in the previous few weeks. So apologies are in order at the beginning, but the underappreciated potential of token economies is simply too crucial to miss.

NFTs are only a minor element of a much wider trend in the finance capital industry. What has some scratching their heads and giggling might, within a decade, dramatically change the investment paradigm that has existed since Silicon Valley's birth.

Non-fungible what?

NFTs have taken an unusual first step into the spotlight, providing money to a tiny number of individuals while leaving the majority of people bewildered. Before dismissing NFTs as a trend, it's important to remember that they were never intended to be used in traditional investing frameworks.

It's difficult to predict how this will all play out, but the contours of the new economy are already poking through the dried-up shell of the old model.

A horse-and-buggy driver putting a miniature nuclear reactor to the roof of the cab and exclaiming, "This is an atomic buggy!" As the horse continues to chug along, doing all the work is equivalent to an auction house selling a $69 million JPEG. Bystanders will notice you, but nothing has really changed here.

Each of the recent headline-grabbing NFT sales is an example of this type of backward thinking. Bystanders who criticize the buggy driver and remark "nuclear reactors are hype" are either unaware of the long-term consequences or simply dislike horses.

Whales, dogs, and unicorns

The whole cosmology of financial capital has remained an elite sport, from early concepts of investing as a method to support transoceanic ship expeditions to the birth of venture capital as we know it today. This is due to the existing model's reliance on large investors reaping large profits.

Almost the entire world of finance capital is built on mythological creatures like enormous whales and unicorns, which we mortals feel lucky to have seen. The word "structured" was selected with caution since the "big-dog" capital theory is essentially founded on powerful intermediaries that help these top investors achieve their goals.

The invention of bitcoin was a watershed moment in the history of finance. Bitcoin has become just another power play, but the technical tremors it has left in its wake are beginning to emerge as the actual game-changers. Distributed ledger technologies (DLTs), of which blockchain is only one example, are a game-changer on par with being able to transmit a message to someone on the other side of the planet in real-time. The invention of bitcoin was a watershed moment in the history of finance. Bitcoin has become just another power play, but the technical tremors it has left in its wake are beginning to emerge as the actual game-changers. Distributed ledger technologies (DLTs), of which blockchain is only one example, are a game-changer on par with being able to transmit a message to someone on the other side of the planet in real-time.

Finance capital no longer needs powerful intermediaries — or intermediaries of any type — thanks to DLTs. For parties to create confidence in transactions, trade contracts, or investments, middlemen are today highly important. For major corporations and rich people, paying for the services of these intermediaries may be written off as a cost of doing business, but these costs remain exorbitant for many.

Because trust is formed by and incorporated into the network's design, DLTs tear through these boundaries. Anyone with an internet connection may conduct big-dog business dealings at whatever level they can afford using DLTs, and these deals are conducted using tokens.

Token economies will be transformative

All of the major investment players will adopt DLT economies in the coming years because the benefits of decentralizing investment are too numerous to overlook: lower transaction friction due to automation, much faster (real-time) results and analysis of market conditions, greater security through transparency, and a higher level of customization for financial products and services. Major players adopting decentralized finance will have a net beneficial influence on everyone else.

Non-fungible tokens are one sort of token, and they constitute the lifeblood of this new system. Payment tokens that act like money, security tokens that act like stocks, utility tokens that give services like space or bandwidth, and hybrid tokens that combine various tokens into new forms are all part of this evolving concept. It's understandable if it seems perplexing and intriguing.

The most important thing to take away from this is that tokens will eventually replace not only stocks and other investment products, but also the entire concept of having a middleman between you and your purchases, whether that middleman is an investment broker, a credit card company, a platform provider, or a bank. The decentralized economy will be a far more open and direct marketplace.

The rubber hits the road like this

It's difficult to predict how this will all play out, but the contours of this new economy are already poking through the dried-out shell of the old model. These protrusions are most noticeable where economic reality does not make sense.

Consider the developing gig economy, in which no one appears to have regular employment and every one of us is a professional mercenary going from gig to gig. Consider the massive amount of subscriptions that the majority of us carry about like millstones around our necks. Consider the perplexingly difficult connection between musicians and streaming services, or between artists and galleries. Consider how much poverty still exists on our globe.

These are all examples of new ways of living and working that do not fit into existing paradigms. We can all sense that some areas of our life aren't working as well as they should, but we don't know why, and we certainly don't know what the remedy could be. Decentralized, tokenized economies can eliminate all of these pain points, contradictions, and kludges in favor of something far more simple and beautiful.

Some of the characteristics of this new reality are simple to imagine: Instead of paying for nine separate memberships, you can just pay for the material you want, when you want it. Artists no longer give up half of their revenues to galleries, and musicians no longer give up all of their earnings to streaming platforms; instead, they accept direct payment for their work through fluid networks developed by and for this sort of material. Instead of paying brokers to handle your investments, you may now invest directly in the businesses that interest you, including previously inaccessible industries such as real estate investing. Instead of crushing poverty and strongly guarded class boundaries, we knock down barriers and provide equal access to the value.

Many additional advances in a token economy have yet to be envisioned, and this is most likely the most interesting element of all. When we disperse the economy internationally in such a manner that everybody with an internet connection can engage and contribute meaningfully, we unleash the potential of untapped assets worth billions of dollars. So, what's holding us back and how can we get there as fast as possible?

The work ahead is very clear

The most difficult element of unlocking this new economy has already been accomplished: we now have a technological grasp of how to disseminate and decentralize a consensus system that works in tandem with a system of digitizing assets for trade and investment.

The remaining work required to bring this system online is very straightforward — first and foremost, we must examine the ecological implications that this new system has had in its early stages. We should either prohibit mining farms or impose stringent limitations on how much of their electricity originates from nonrenewable sources. If the backbone of this new economy is harming the world, we must halt it before it expands. The system needs to be ecologically sustainable.

The second most pressing problem is that there are presently no standards, no common network, on which the various cryptocurrencies and tokens can agree. It's surprising and extremely upsetting that the various cryptos aren't even discussing this.

It's as if a slew of various firms are not only designing the light bulb but also their light sockets and wiring protocols, and each one is adamant that they are the best and will triumph in the end. Light bulbs are wonderful, but could we please agree on a single socket? This wonderful new economy will never take off until we establish a neutral, interoperable network that is both free and scalable.

The final direct source of worry is legislation and legal frameworks. There are just too many individuals in crypto who have an anarchist's death wish to be fully shut out, and this is not benefiting our groups' long-term aims.

I'm all for removing middlemen from the value chain, but it doesn't necessitate the creation of a never-never zone where no regulatory agencies are welcome. Legal frameworks for decentralized economies are consistent with our values of open-source, community-building, and transparency. We must all be champions for careful and exact control of our fledgling technology.

With ecology, interoperability, and regulation as our watchwords, we can begin work on developing the real apps and infrastructure that will enable consumers to harness the potential of a new economy. The applications are many, ranging from selling extra electricity to your regional smart power grid to investing in your favorite artists' network, taking direct payment for your own labor, and, yes, purchasing NFTs, which will make a lot more sense in the new economy.

Disclaimer: This blog has opinionated information which does not make us liable for anything.