Do NFTs Dream of ERC721 Sheep?

NFTs outside the JPEG

Hold on to your teacups, we’re about to go down a rabbit hole, folks:

At this point you’ve probably heard about these things called NFTs (non-fungible tokens). Lately the news has cycled between cryptocurrencies, deregulated finance, and million dollar JPEGs, all of which have been pronounced “dead” at the slightest dip in value. If you’re like me and have been dabbling in digital currency since 2012 you understand the basic concept of the blockchain, buying the dip, and things heading “to the moon.” But to explain it in a way that my grandmother could understand, I have to get a bit more creative. 

Let’s say I have a charm bracelet. There is the main chain, in this case it would be made of Ethereum, and all the little charms we attach to the bracelet would be the Non Fungible Tokens. The charms/tokens in this case all have a unique ID that distinguishes my cat charm from someone else's cat charm, even if they look the same. 

The trouble with this is the charm itself isn’t always actually attached to the chain, the majority of the time the assets/images are stored off chain in a database that can pull up the information that corresponds to the unique token ID. This is where the nature of a decentralized and public blockchain comes into play. Anyone can look on the blockchain and see the charms I’ve collected in my wallet. They can also see who I bought my charms from, who I’ve sold them to, and who created the charms. There is a phrase used for this sort of provenance; “You can’t hide on the blockchain.”  If you manage to scam someone out of their tokens or coins, one can look at the tokens history and see the person you stole it from and the wallet you’re holding it in. The history of the token is publicly available on the blockchain.  

This works well for things like music or images and the same system can be used for other things like certificates or event tickets. As long as the item can be verified with the matching ID on the blockchain you have proof of ownership. So where does that kind of technology play into the world of literature, especially when text can be copy/pasted just as easily as a JPEG? 

Let’s look at your eBook collection, hell, even your audiobook collection. Where is it stored? Who has ownership of it? Unless you’re well versed in Calibre and stripping files of DRM it's highly likely your eBooks are being held hostage by Amazon. This is because Amazon is not only the marketplace for the book files but also the platform for the files. You’re downloading the book from Amazon’s servers to Amazon’s apps and devices. We know this is extremely risky since if an eBook goes out of publication there really isn’t a way to get a copy of it again. The nature of digital file sales as it is right now doesn’t lend itself to allowing owners of the files to resell them on a third party market, or even Amazon’s market. With physical books this isn’t a problem, we can buy a copy online or in a new or used bookshop. But with digital media there is no secondary market for used book files. Why would there be?

This is where NFTs can step in to fill that space. Currently, the NFT market is designed to assign value to rare items or one of a kind pieces that flourish in a secondary market. I can sell my cat JPEG for five times what I bought it for because someone else would like that specific cat JPEG. This drives a culture of investment in buying/selling/holding artwork that was once completely out of reach of most people. But with books and poetry these are no longer 1/1 exclusive works. We want a wide range of people to read a story, we don’t want the scarcity that would ultimately give the work value. Files are inherently worthless when they can be freely copied and distributed. I can write a story and email it to fifty people who then email it to fifty people who email it to fifty people forever for free. So how do you make money off of your work? Ads nobody clicks on? Expensive physical book sales? 

How many copies of a single book are normally printed? For a best seller that can be in the millions, but according to publishers most books won’t sell more than 1,000 copies in their lifetime. That might sound small but when you take into consideration that many NFT projects cap out at 10k pieces, producing a valuable book NFT isn’t out of the question whatsoever.

So let’s say we spool up a project and allow folks to buy one of 1000 copies of our latest book: Crab Women from Mars. In a hypothetical NFT book reader program, the owners of our book could open up their copy, read it, and when finished store it in their blockchain bookshelf or list the book for sale in the secondary market. Now someone else who wants to read Crab Women from Mars can choose to buy a new copy from the NFT Bookshop or buy my used copy for less. (Or more if the book is sold out.)

What keeps someone from right-clicking and hitting save-as on the text? I could easily buy an ePub file and give it away to friends and family making it worthless in a secondary market. Obviously, as we have seen in the art community, this scenario doesn’t play out that way. Example: Below is a real live NFT I have personally paid money for. 

Literally, nothing can stop you from saving this image to your own computer or phone. But here is the kicker, according to the blockchain I am the owner of this image which means I set the price or value for the image which is currently set around 6 ETH or 18 thousand dollars at the time of this writing. Did I pay that much for it? No, I paid around 2 ETH after selling a few other images. (You can even see this on Etherscan if you wish to look it up.) So, what happens if you try to mint this image and sell it?

Well, without your copy being on the verified collection’s chain location the value is now what it literally is, nothing. My copy of the JPEG is worth more than your copy of the JPEG because of proof of ownership on the blockchain. If you try to mint your copy to the blockchain and sell it you can be flagged as a scam and have it frozen (unable to sell or transfer it within that marketplace). Trust me, people try to clone collections to scam people every day. It’s not the image that is valuable, the verification is. 

Even now, people pirate eBooks. You can easily find a virus riddled website to download sketchy files from and read for free. But that’s not what we do is it? When it’s so easy to go to Amazon and pay a few bucks to have a clean file delivered straight to our device, it’s so much safer to not pirate. Having your computer compromised in 2005 is not the same as it is now, with so much of our personal data, photos, bank accounts, and such on our devices most people can’t risk it over something that costs a dollar to legitimately download. 

How great would it be if you went to Amazon or Barnes and Noble and bought an eBook that went to your digital bookshelf that you personally owned, with files linked to the blockchain as opposed to DRM. You could sell your used book when finished on a used book marketplace. You might also think that the big publishers would never let that happen because once they sell the book it’s out of their hands. Wrong, because of the chain of ownership that follows a token as its moved from owner to owner a link always exists to the original creator. This is how artists make money selling NFTs, when they mint an image and sell it, any time the image is bought and sold later a percentage of secondary sales goes back to the creator’s wallet.

When I sell my JPEGs about 10% of the price goes to the person or group who created it, another 2–5% goes to the marketplace that you used to buy/sell the item from. Because of this, eBooks published by Amazon would generate revenue for them every time the book is resold. Ebooks published by indie presses would generate revenue every time the book is sold. Chapbooks published on your iPad would generate revenue every time one is resold. 

While this technology is still in it’s wild west days with monkey JPEGs being the butt of financial jokes, there is a real substantial use case for buying and selling items this way. NFTs would allow writers and authors to not only easily make initial sales but to continue making money from the secondary market.

Oh and there is the energy usage bit. So this tech is still energy heavy at the time of this writing. Until Ethereum moves off proof of work to proof of stake this won’t be viable for the grand masses of millions of people buying 99 cent eBooks just yet. Aside from the environmental impacts of mining coins, there is also a cost of doing the work itself. When you make any sort of transaction on the blockchain work must be done, and that work is paid to the miners as a fee known as gas. When demand goes up the fee goes up. Moving $50 worth of ETH can cost you $50–$200 at any point in the day. That’s just not going to cut it for things we are trying to sell for under ten bucks. 

So yes, we’re all still early on this. Once the novelty of fine art JPEGs cools off and Ethereum becomes cheaper to use, and more environmentally friendly, I wouldn’t be surprised to see a more widespread adoption of the technology as we move further into a digital world. 

To learn more about how tokens and such are created in a more code-heavy format, check out these links: