Is Digital Scarcity A Good Thing?

TL:DR - yes.

The notion of fungibility in economics refers to the quality or commodity's individual units being largely interchangeable and each of whose components is unidentifiable from another component. An NFT is defined by the non-fungibility of its properties as a tokenized object stored on the blockchain.

The NFT is distinct (akin to a rare coin or stamp) in contrast to a dollar bill or a gold bar, which are recognized as fungible. Non-Fungible assets, such as digital baseball and football cards, digital artwork, and in-game content can all be represented by NFTs that may be bought, sold, traded, used for fantasy competitions, burned, or used to bring digital collectibles to life.

Digital Non-Fungibility creates digital scarcity, which makes it an incredibly valuable technology. It has the potential to create entirely new markets, drive mass adoption of blockchain technology, and provide novel economic incentives. All types of digital scarcity are powered by NFTs, including economic scarcity (infinite supply but not infinite demand) and consumptive scarcity (artwork).

Let's pretend you're a graphic designer who uses a computer to produce your work. As a result, your work is saved in a digital format. Because your artwork is digital, it can be reproduced indefinitely. When you create a Non-Fungible version of your work, the process for doing so transforms the digital file into something akin to a material, ownable object.

When that digital artwork is owned, it's now also scarce. It can't be infinitely reproduced. This proves both economic and consumptive scarcity is possible with NFTs through tokenization on the blockchain.

Is there value in non-tokenized digital work?

Of course there is.

But it’s rarely monetary value.

You could try to mass-market your artwork - sell the raw digital file. Great. Even if you copyright it, someone will make it widely available to people who haven't paid you.

But there's a difference between an NFT and a digital work of art. Although some people might physically own the real version of the artwork, they don't actually "own" it unless they have the keys to the kingdom - meaning that if you can prove you're its owner, then no one else can legally use it without your permission.

An NFT is like selling your original painting (assuming you had the coordination to paint rather than use a computer, which I absolutely don’t). You could create multiple NFTs, which would be like selling a numbered run of prints of a painting. In the concrete world, the ownership of the artwork is based on rarity - there's only one original work, only so many prints, etc. In the digital world, it’s based on smart contracts.

NFTs can be transmitted, stored, and sold in simple, open, and transparent transactions, proving and supporting provenance. They can also be locked for various durations, whether indefinitely or temporarily.

If you want the digital asset to have long-term value or appreciate in value over time, digital scarcity has to be a good thing; A "non-fungible" item is not interchangeable with anything else by definition.

A digital song is pretty fungible. If there is no inherent - or tokenized - scarcity, then the item is freely interchangeable with any other copy of that file.

If a song is worth a dollar at a given time and you buy it for a dollar, then someone else can buy that exact same copy from you for a dollar as well - or they can just repurchase the song for one dollar. If you're concerned about what your digital asset is worth, then it's essential to realize that its value is based on market forces and inherent scarcity/fungibility.

There are obvious reasons why NFTs will be the future of art and digital objects.

For one thing, they give artists control over their work/product. They allow artists to continue to be compensated as their work is sold in future years. They allow artists to control and verify that their work is used as intended.

Similarly, NFTs enable customers to have complete control over the products they buy. They also provide access to incentives that creators make available to a dedicated, verifiable audience.

Non-fungible tokens (NFTs) might attract individuals who are uninterested in art or digital property trade. This can bring together individuals who create NFTs as a pastime with those who do so professionally and create a vibrant ecosystem of creators, traders, buyers, and experimenters, augmented by a growing mainstream adoption that gives longevity to the paradigm of digital ownership.

As a result, the ability to securely collect and distribute these constructions will be more critical than ever before. NFT provides that framework.

Not everyone is convinced that the technology will be as successful as many believe - even though there's a lot of buzz surrounding NFTs and what they can accomplish, and a huge amount of interest and monetary value - people think NFTs have been overhyped and overvalued. This happens to all new ideas and concepts.

Will the palpable enthusiasm die down? Probably. Will we see a crash? Possibly. Will we survive? Absolutely. The dot-com crash didn’t kill the internet.

The value of art is intangible, and the values associated with art are determined by several factors. What is really being translated here is that scarcity is more valuable than fungibility, which makes sense. Scarcity alone - even when there's no "reason" to be rare from a technological point of view - does make an object valuable.

Some people are worried about the connection between art and digital entertainment since it's challenging to think of these things being intertwined. Just because something is definitively art doesn't mean that it can't also be a limited edition digital product with collectible items or traded on the blockchain.

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