In a chat that went far too long, Chia Jeng Yang and I wanted to experiment in sharing our thoughts on NFT’s through a conversational format although what you might come to realise, is one where it feels like I’m interviewing him.
(Tip for bloggers out there, this format actually takes more work than writing an actual essay, but if you were to go with this, pre-set your questions instead of letting it go free-flow)
For readability, we’ve decided to split the conversation into 3 parts and some of the sentences have been edited for clarity
In this conversation, we cover:
What are NFT’s?
Are NFT’s going to be like ICOs?
Do physical NFT’s make sense?
The tokenisation of funds
Are NFT’s a global or localised play
NFT’s and trust
What are NFTs
“Non-fungible” more or less means that it’s unique and can’t be replaced with something else. For example, a bitcoin is fungible — trade one for another bitcoin, and you’ll have exactly the same thing. A one-of-a-kind trading card, however, is non-fungible. If you traded it for a different card, you’d have something completely different. You gave up a Squirtle, and got a 1909 T206 Honus Wagner, which StadiumTalkcalls “the Mona Lisa of baseball cards.” - The Verge
Zishuang: Okay maybe let us just talk of a bit first about what you think about NFT and what the value of NFTs would be
Jeng Yang Chia: Yeah. I think it is really interesting. I come from a background where I've always been really bullish on virtual goods. I love how virtual goods, especially in the context of video games were super popular. So I always understood the emotional job to be done and the attachment to virtual limited quality products. So I do see a lot of value in virtual goods and I see some value in the verification of virtual goods. At the moment, it is very centralized. If I wanted to, for example, own a party hat from RuneScape, the only party that can verify that is a genuine party hat from RuneScape is the RuneScape platform itself and so verification authority is trapped in that ecosystem. I see some value in being able to decentralize that verification authority across multiple ecosystems so that item owners are able to have more control over that while sharing that economics to the creator in the proper way.
What I am concerned with is what is the fundamental job to be done for a lot of the NFTs on an emotional level. I think that at this moment, it resembles the beginning of the creation of an asset class, which is more like a mad rush with less concern over the creators and the emotional job to be done and more concern over how fast we can make money from this asset class.
Zishuang: Yes, completely agree. But can you just clarify a bit about the job to be done?
Jeng Yang Chia: Yeah. virtual goods are a lot like art and art in the physical and virtual sense. That indeed is valuable even if it is up to subjective interpretation. I admire virtual goods because maybe it looks pretty to me or I admire it because there's a lot of cultural context surrounding this creation. For example, it's very historical. It belonged to some King or whatever. I valued this and it's very my subjective interpretation of value. And so, when we did move into a more virtual foundation for assets, like limited edition products in video games, I understood that value proposition and emotional job to be done really well. Maybe it is less understood by anyone who's not a gamer but if you’re the gamer, you've spent a lot of time in that ecosystem. You have a lot of affinity for those video game items, even if that affinity is only for you, and not anyone who's not spent time in that ecosystem. What I think has been a lot of what has been thrown at us, which is you can put this random thing make this an NFT, and therefore it is immediately valuable which actually bypasses the whole emotional journey and job to be done of those items.
Zishuang: To add on to that, I think anything about NFTs, and you're right, it's not anything that's limited edition, that's going to be of value. That item has to be truly unique. It has to be able to capture a moment of time and has to be something fundamentally what people want, which actually leads me on to the next point and you're saying that in terms of art, it has to capture contextual moments but what if you look at Modern Art , that one is mostly marketing. I think we're gonna see a lot of NFT’s made in the same way, just to what extent. I mean Beeple stuff is pretty cool, but why do people like people all the Damian Hirts? It's because art is about hype. It's no different from sneakers where a team markets a shoe which causes the public to want that shoe or item because everybody else wants it at the end of the day and that's why the value goes up. What were your thoughts on that one? When it comes to NFT and the value being driven up at this point in time.
Jeng Yang Chia: I think that's fine. Art and collectibles are one of those things where value is very subjective. And very many times very personal. As you said, it is very narrative driven and I don't think there's anything bad about that. I think what annoys me a little bit is that NFTs have the power to amplify the genuinely artistic talents, and the market is being co-mingled with people who are frankly just in it for a lot of money and I feel just like how the initial crypto crowd who were in it for decentralisation got overtaken by people who were using ICOs to really just scam people. So I do think there are fundamentals in the mix of all of the noise which I frankly just think is very distracting. But maybe I'm also being very idealistic and that you do need noise and greed to drive an ecosystem.
Summary points
There’s an emotional job to be done, which is that the emotional attachment to these virtual goods is what derives the value of the good
Looking like the creation of a new asset class
There is a cultural context surrounding the creation which adds to the value of the NFT
Are NFT’s going to be like ICOs
Zishuang: You probably do, but at the same time since we're talking about the value of NFTs, do you think NFTs are gonna end up more like Bitcoin or is it gonna end up more like ICO's?
Jeng Yang Chia: I think it's going to end up more like ICOs because you know, by definition a lot of these ICO projects were attempting to derive their value from a particular activity or ecosystem that they were creating and the value of those tokens obviously drops when the entire ecosystem drops. I think you know Bitcoin and ETH are different both in terms of scale both in terms of institutionalisation and centralisation and so it is quite different in that sense. Further, almost by definition, the market for a single NFT can never be as big as the entire Bitcoin asset class.
Zishuang: I guess what I'm trying to say it's like, you know, more like do you think NFTs are going to be like ICOs in the sense, there'll be a mad rush before everyone figures it’s a scam, and you just go kapoot, or do you think it'll have the longevity of Bitcoin in the sense that if you believe fundamentally in crypto blockchain that this thing will be here to stay.
Jeng Yang Chia: I think that the concept is here to stay. I think that infrastructure players are providing platforms and liquidity is the other state. I think that there are a lot of NFTs that are being minted right now that will go away and shouldn't exist. And I think that there should be more discussion and more of an understanding. I wish for a better understanding of how NFTs can genuinely enrich the artistic community. and The collector community rather than how everyone can just make money from someone else.
Zishuang: Agreed.
Jeng Yang Chia: I'll give a specific example. One of the things that I really appreciated NFTs for was the ability for the artist to embed a smart contract that collects a specific percentage of every subsequent sale. For me, that's actually a great concept because that means that the creators get a little bit of the uplift every time the art gets resold. This is great because, as you know, at the moment artists, the artist community is very bifurcated. There's a small amount of people who can make a lot of money and then everyone else's basically, you know...
Zishuang: struggling artists.
Jeng Yang Chia: Exactly. So I love it if you can use Tech and finance and incentives to bring together something that benefits you and specific under-rewarded segments of the community, right? So I do see a role. I do wish that we were maybe looking at it from a more fundamental perspective of which I do believe NFTs have some value.
Zishuang: Okay, yeah, I fully agree on that one and to your point on how NFTs are gonna enrich the artistic community, I think what we're gonna see is an explosion, maybe not explosion, maybe a gradual uptick of digital art. So, traditionally digital art has always been seen. As I'm not sure how you describe it. Maybe second class, you know, not something, as legit, as a physical piece of art because you don't get that tactile feeling, and you can't see and feel that emotion. But I think the beauty about digital art, which I'm starting to realise, when you see all these things It's a different art form, you can add music and a lot of different elements to it where the human mind is the only limit to creativity. And it will be something totally different from a sculpture or painting. And I think we're going to see a whole new class of artists come out. And if you do think that, we're gonna live our life, digitally more and more and more, I think it only makes sense that you're gonna get a lot more digital art, that's gonna exist and right now. And if he's done it, artists are going to be rewarded financially for their work and that means you're probably gonna see a lot more artists come on board and it would be, you might see a lot more artists existing and in the future. What do you think?
Jeng Yang Chia: I think that's a great point. I think that makes a lot of sense. I definitely agree especially if you know incentives are structured correctly which is fundamentally one of my fears. That we are again just like the beginning of any single asset class, there is a rearranging of power dynamics, and there's an opportunity for those who deserve to earn to position themselves appropriately. So my open question would be, you know where is the creative class, the producers, the creators fundamentally in all of this after this reshuffling of incentives. So as an example, and I think I've never actually said this to anyone before, so this is an exclusive, but one of the things that I actually really enjoyed as a kid until today, actually, it's like a 10 year project, is that I collect wallpapers.
Zishuang: Oh like on your screen, kind of wallpapers.
Jeng Yang Chia: Yeah, exactly, and the wallpaper changes every single day and I've a collection of, I think thousands of wallpapers which have been collected over the course of a decade where I have a lot of pride in my collection. I think it's beautiful. I think it amplifies my life and if there was a more straightforward way to reward the artists involved who made those wallpapers, that makes sense. That is something that I think deserves compensation in some way. As you said, I think utilisation of Art has always struggled to channel compensation appropriately and so that's what NFT can solve. But only if it's used in the correct way. We've seen for example when we look at music, we've seen how Tech initially actually destroyed a lot of the incentives involved for creators rather than empower them. So Tech is not a one-way street of pure benefits and NFTs can equally be non-beneficial. I think we have the potential to build something better for creators and I love it if you could build something that's sustainable for existing and emerging creators
Zishuang: That's a very good point, to your wallpaper example, I'm thinking about it right now and I think if you really wanted you could track down the artist and find a way to pay the person money. But it's just that, I don't think we should be relying on the goodwill of human beings but setting the incentives that are correct. You want to set up a system where incentives are aligned. So in this new world, what's going to happen is that this artist has turned his or her wallpaper into an NFT and you probably go into a virtual gallery, you look at it and maybe you bid at a virtual Christie's, or maybe just buy straight off the person's gallery and you can view previous transactions, and find out that Elon Musk used to own this wallpaper. Now I'm willing to pay a little bit more money for it. There's a way to put value into this NFT and your rights when it comes to royalties, when you buy it, or maybe when I buy it off you the art is gonna be rewarded further and that'll be a viable income and probably a more vibrant sort of community, and actually that's the case. Maybe digital art, might just outstrip physical art.
Jeng Yang Chia: Yeah, exactly, I completely agree. I think the potential is definitely here to change how we buy and create content. So I think from that perspective I'm super hopeful.
Summary Points:
NFT’s will be like ICOs in that they derive their value from an ecosystem and the value will drop when that ecosystem drops
The concept will be here to stay if NFTs prove to provide long-term value to artists
I have an interest in all things tech but with a particular interest in Social, The Creator Economy, and the Metaverse. If you’re working in the space or starting something new, I’d love to chat, my email is zishuang.cheng@gmail.com
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