The Non-Fungible Tokens Landscape

A Primer, Landscape, and Thesis | A New Class of Digital Assets: Non-Fungible Tokens. 


For the first time in human history, we have a technology that enables true ownership of unique digital goods. This is a big deal, as it deeply enables the concept of uniqueness, identity, and ownership of assets amidst a rapidly digitizing society where it becomes increasingly hard to understand true ownership of bits spread across the cloud. Ironically, for such a big innovation, it looks a bit like a toy in its current incarnation as many of the most interesting technologies do.

At first blush playing with non-fungible tokens (“NFTs”), such as crypto-collectibles like CryptoKitties, I thought they looked like Tamagotchi pets reincarnated on the blockchain (did I just date myself?). I thought to myself — has everyone lost their damn mind?! Why were people spending so much hard-earned crypto coin collecting and trading digital pets?!

Non-Fungible Tokens

As I dug in deeper, what I found was an entirely new class of digital assets. 

In short, for the first time in human history, we have technology that allows us to create provably unique digital assets that can be maintained without a centralized intermediary or authority other than the blockchain itself. Deeds, certifications, art, are all up for reinvention in a way that was not possible before because we could not represent uniqueness. 

To date, blockchains have given us the ability to create scarce digital assets, where ownership is maintained by a decentralized network of miners, but most of these assets are “fungible” in that they are able to be replaced interchangeably by another of the same. For example, my bitcoin is the same as your bitcoin. They are mutually interchangeable. These are particularly good as a medium of exchange or store of value, such as money, but they don’t represent uniqueness particularly well. 

Now a group of entrepreneurs, working with blockchain technology in a special way, is allowing us to represent uniqueness for the first time in human history as what we are currently calling “non-fungible” tokens, or assets that are not interchangeable. Building upon this, the following presents what I’ve learned exploring the space as a “Primer, Landscape, Thesis for A New Class of Digital Assets: Non-Fungible Tokens (NFTs)” and presents some ideas on where Underscore VC is focused on investing.