The Weekly Waffle: Non-fungible Puberty

Mention the word NFT and silly pixelated creatures come to mind, the collapse of the Bored Apes empire perhaps, or the word “floor price”. Maybe, for the more serious fans of NFT art, the work of talented photographers like timmboslice.eth, and for geeks the magic number 721. 

Well, all of that is about to change. NFTs are finally growing up. They are hitting puberty. 

The ERC-721 standard was a good start, enough to enshrine the idea of ownership on-chain and make digital assets digital property. It is the standard by which all other standards are measured, and upon which all other chains try to improve. By now every generic blockchain out there has its own standard, some copycats, some real innovations. Chia Network stands out, as do Algorand Technologies 's solution, and Solana Foundation cheaper, super easy NFTs popular with young "artists", but by and large they all have one thing in common: they are in their infancy, incomplete, flawed, good for silly art and great photos, but unsuitable for hardcore real-life applications. You don't want your health data on a 721, believe me.

These infantile NFTs are the degen's pets, they are great for money laundering and drug trafficking or worse, human trafficking. They are wonderful instruments of wash trades, and if you were on top of this before the unwashed masses caught on, you probably made a fortune. Precisely because of all the criminal activity, tax evasion, cybersecurity weaknesses, and general ineptitude to serve as a tool for serious ownership, they need to change. 

Current chain-locked NFTs are akin to buying a house with a mortgage from a single bank, and the house is only yours as long as the bank exists. Banks do go under, I don’t have to tell you that, and chains fail or have generous outages (just think Solana). The fact that current NFT standards inherit all the technical properties of the mother chain is the greatest handicap — most chains have bridges, bridges are ridiculously easy to hack, and NFTs have been stolen in the hundreds of millions of dollars. You cannot have real-world property represented by a standard that is so limited and feeble. NFTs need to grow up.

And they are.

There is hope all-round, even for good old #Ethereum, the biggest, most popular network, but as it stands the most unsuitable for NFTs. It is no coincidence lots of companies go with #Polygon and #Solana instead. While several other projects offer far superior, cheaper, and more versatile NFTs and while #Bitcoin is rapidly getting stuffed with NFT-like Inscriptions, there are a few innovations coming to ETH NFTs that will make them useful. These are, in no particular order: 

• ERC-6551 is an Ethereum standard which allows ERC-721 tokens to have their own smart contract accounts (Non-fungible Token Bound Accounts). By having these token bound accounts, NFTs themselves now can actually own digital assets and interact with all kinds of applications. What’s better is that this system does not require any change to existing ERC-721 NFTs.
• ERC-5773 is a standard for Multi-Asset Tokens that allow for different outputs of information per individual NFT depending on context. For example, an NFT can have various formats, such as PDF, PNG, SVG or 3D model, which are displayed depending on how the token is viewed. The token owner can control the priority and availability of the different formats.
• ERC-6059 is a standard for Nestable Tokens that allow NFTs to be stored within other NFTs. This allows for the creation of complex structures of NFTs that can have different functions and relationships. For example, an NFT can represent a character in a game that owns other NFTs like weapons, armor, or pets.
• ERC-6220 is a standard for Equipable Tokens that allow NFTs to be attached to other NFTs. This allows for the modification or enhancement of an NFT's properties or appearance. For example, an NFT can be a jacket that can be equipped to another NFT like an avatar.
• ERC-6454 is a standard for Soulbound Tokens that allow NFTs to be bound to a specific address. This prevents the NFTs from being transferred by their owner. This can be used to represent personal achievements or immutable properties of an NFT.
• ERC-6381 is a standard for Emotable Tokens that allow for reactions to NFTs with Unicode emojis. This allows for adding an interactive and feedback-based dimension to the NFTs. For example, an NFT can gain more value or uniqueness if it has collected many positive emojis.

There are several more under construction.

As of now, like a teenager entering puberty, NFTs haven’t quite made up their mind about what they want to be. Adding the fact that Ethereum tries to be a universal operating system, I foresee a future with a variety of different NFT standards, simple & cheap for silly animals, a little more secure for photography and video, special standards for IP and patents, even more permanent and unhackable ones for property and real estate, and super-secure, free ones for health data, legal documents, and so on. 

And then there is the option of putting tokens into NFTs and making what is fungible non-fungible, like a dollar note that is attached to your jeans pocket and only valid $100 if it comes in your jeans. This concept of "personalize money" is intriguing, especially considering the fact that MiCA and other regulatory proposals specifically exclude NFTs. What if I put one Bitcoin in and NFT, call it "Doc's Bitcoin" -- am I then outside the regulatory framework? There is a project using NFTs to represent tradable baskets of tokens, like a mutual fund. These fNFTs (financial NFTs) haven't even registered with regulators yet, who can barely come to grips with apes and moonbabies.

So yes, exciting times ahead. Watching NFTs grow up will be as thrilling as a young person’s life as it unfolds, with all the joy and all the doubts, all the failures and wrong turns, all the wins and awards, with lots of dead ends and duds. And it will be about as challenging as raising a teenager in the age of social media. 

Welcome to puberty.