We are the only beings on Earth that use art to represent ideas, information and value. Primitive humans transformed inanimate objects from purely utilitarian tools into mediums of expression. Imbued with aesthetic and social value, collectibles evolved into the first forms of money, laying the foundation for trade and the economy.
Collectibles have long served as markers of personal identity. Prehistoric necklaces, for instance, were symbols of status and beliefs — the equivalent of today’s engagement rings or religious iconography. Through artistic works and collectibles, humans expressed both their individuality and affinity to a shared belief system or community. These two elements define personal identity, a fundamental building block of civilisation.
Today, Credit Suisse estimates that collectibles worth US$1.2 trillion (RM5.03 trillion) sit in private hands. The market for personal identity swells when you consider the demand for apparel and beauty products. Just four players in this space — Hermes, L’Oréal, LVMH and Nike — have a combined market value of more than a trillion US dollars.
In the coming years, value will flow from physical identities to virtual ones. The average American adult spends eight hours a day consuming digital media, up from 2.7 hours in 2008, according to research firm eMarketer. The dawn of the metaverse — hyper-realistic, immersive virtual worlds — means this shift will only accelerate.
This explains why non-fungible tokens (NFTs) are having a mainstream moment. The most popular NFTs are fuelled by internet-native communities, such as the CryptoPunks or the Bored Ape Yacht Club. This month, OpenSea, the biggest NFT marketplace, raised funds at a US$13 billion valuation. For context, stock exchange operator Nasdaq has a market capitalisation of US$32 billion.
The narrative on NFTs has swirled around the stratospheric sums paid for some of these digital collectibles. But by conflating the technology with the valuations of digital art, many are missing the forest for the trees.
Securing the Metaverse
We may be living in the era of the metaverse, but this is also the era of artificial intelligence-enhanced deepfakes and scambots. Creating fake online identities costs nearly nothing today.
Meta Platforms has said it deactivates over a billion fake profiles every few months. Rising AI sentience means bots will grow even more convincingly humanlike. Furthermore, if the metaverse replaces physical interactions, how will we know who is real, and who is not?
As stores of social and financial capital, NFTs could serve as stewards of authentic metaverse identities. By design, NFTs sitting on a blockchain — the same technology used to secure Ethereum’s US$400 billion market cap — are impossible to fake. This transforms digital items into scarce assets.
Beyond digital art, NFTs can be used to represent crypto assets, physical property and even other NFTs. The fact that NFTs are “composable”, meaning they can be built upon and plugged into other applications, will amplify their value. For instance, NFTs integrate with highly liquid decentralised finance (DeFi) ecosystems, allowing them to be traded or lent against. Not every NFT will be worth millions of dollars, but those associated with a vibrant community will be valuable.
Hence, even if a metaverse user decides to part with his entire NFT inventory, the price alone will deter most scammers. Let’s say a person created an online identity with the name of Andrew01, and say, the person owns three Bored Ape NFTs worth US$100,000. A fraudster cannot impersonate Andrew01 without proving that he or she owns the equivalent Bored Ape NFTs priced at US$100,000. One reason that identity fraud is so rampant is because it is affordable.
Over time, users will accumulate NFTs across virtual and physical worlds. To impersonate a user in an NFT-driven metaverse, a fraudster may have to recreate the target’s entire NFT collection. But this would be impossible as all NFTs are one-offs. Social networks of the future may link with NFT inventories to verify user identities, something Twitter appears to be experimenting with.
A great reset
Internet users have invested billions of dollars in content and communities that live on centralised platforms. But these users actually own nothing. When platforms change the rules, shut accounts or go out of business, users stand to lose everything — including their digital identities.
Ironically, centralised platforms now appear best placed to build the metaverse. The tens of billions that Meta and other tech giants are investing in virtual worlds is not money out of thin air. It is value extracted from years of monetising users, while locking their data behind walled gardens.
“This metaverse is going to be far more pervasive and powerful than anything else,” Tim Sweeney, CEO of Fortnite developer Epic Games, warned in 2016. “If one central company gains control of this, they will become more powerful than any government and be a god on Earth.”
A decentralised metaverse is the best chance for a great reset. The ability to freely roam across virtual worlds, with possessions in tow, empowers users with choice and voice.
The importance of this has not been fully appreciated yet. But imagine waking up one day and seeing your face used by someone else. Will we own nothing in the metaverse? Only the future will tell.
Andrew Vong is chief future officer at EquitiesTracker Holdings Bhd.