Scarcity receives scarce praise. In today’s society, we celebrate abundance: a car in every garage, a chicken in every pot, a computer on every desk, and a smartphone in every pocket. Scarcity is a relic of the bad old days, and best forgotten. The internet has made it easier than ever before to discount scarcity; it’s premised on endless digital reproduction. A single copy of a print newspaper comfortably admits one reader at a time; the same paper’s homepage may have hundreds or thousands of simultaneous visitors. The internet’s effortless plenitude has transformed society, but more and more innovators have come to realize that scarcity has its advantages. Blockchain technology has introduced scarcity to the digital world, and online life will never be the same.
One fundamental inspiration of blockchain technology is the realization that there can be too much of a good thing. Take money: A country has every right to mint more, but central banks and reserves must balance the benefits of abundance against the risk of inflation. Because bitcoin’s pseudonymous creator Satoshi Nakamoto understood inflationary pressures, he set an upper limit on the amount of bitcoins that can exist: The twenty-one-millionth bitcoin mined will be the last bitcoin created. Because bitcoin cannot be copied or double-spent, it’s unlike any previous digital asset.
One unit of bitcoin or ether, regardless of when it was mined, is equivalent to any other unit of the same currency. Non-fungible Tokens (NFTs) employ blockchain to create digital assets that are unique and cannot be interchanged. While the phrase “Non-fungible Token” sounds as if it refers to something strictly defined and particular, in fact NFTs can represent just about anything, from shares in real estate to fractional ownership of a painting to full possession of a piece of digital-first artwork. Because a blockchain record is immutable, an NFT can accurately record — and make retrievable — proof of ownership. In a real estate context, NFTs could speed up the process of confirming ownership and transferring titles; in digital art, they could assure purchasers that a particular artwork was unique or part of a limited set, rather than something rendered valueless through endless reproduction.
What makes the NFT model so revolutionary? “File transfer” has always been a misnomer for what happens when we move data between and around our computers. If one person sends another an image or a music track or a PDF, they still retain possession of whatever they “relocated.” With a blockchain solution, ownership is transferred and verified. Blockchain moves information conveyance beyond the “copy-and-paste” paradigm that has predominated since the introduction of the personal computer more than four decades ago.
As Walter Benjamin asserted more than 80-years ago in “The Work of Art in the Age of Mechanical Reproduction,” “the presence of the original is the prerequisite to the concept of authenticity.” NFTs have the potential to bring the concept of authenticity online. How will this new ability change our understanding of twenty-first century culture and commerce? Just as the internet has transformed society, blockchain-enabled scarcity may transform the internet. Scarcity is not the same as poverty; on the internet, we may learn that it, not necessity, is the mother of invention.