Only 2% of the world understands the value of Bitcoin and Ethereum. Only 1% of individuals interested with cryptocurrency understand how NFTs would transform our life. That’s how early it is. However, this is rapidly changing. The pace of adoption is rising exponentially rather than linearly.
The main upheaval in the global economy that NFTs will bring will not be in the art world, which is undergoing a transformation of its own.
In a few years, you won’t need to visit mortgage offices, notaries, or real estate brokers to sell a home. You will be able to convert your home’s title into NFT, which will be sold over the blockchain network.
The transfer will automatically inform the tax office, the mortgage offices and generally all those involved in the transfer.
All data would be stored on a blockchain, where no one could meddle or alter with the transaction. It is public information easily accessible to anyone.
As a result, no independent and trustworthy third party is necessary to maintain integrity. Control will be handed over to the users. This is the NFT revolution. Not the CryptoPunks’ or the Bored Ape Yacht Club’s drawings.
NFT technology is nothing more than a digital or physical confirmation of ownership. Clarity about an asset’s ownership increases value to it. You can’t exploit it if the ownership is messed up, if you can’t sell it or mortgage it to get a loan. It’s the same as having nothing.
Similarly, an object languishing in a warehouse ignored and neglected is worthless. It may even have a negative value since it is expensive to keep or maintain. However, if you picture it, explain it, and list it for sale on a worldwide sales network, it gains value. It will be sought for by someone.
Digital Transformation Generates Value
Here’s how digital transformation and interconnectedness generate value where none previously existed. They essentially add value to items that did not previously exist. That is the benefit of the digital era.
The digitalization of all assets is the next major milestone for the global economy. Anything of value that someone want to exchange in the not-too-distant future will be digitized. The value created and the economic activity generated will be at such a high level that it cannot be quantified. That is how large it is.
In the old world, when you wanted to sell oil, you traded barrels. With the futures contracts that came out to protect the producer from unpredictable price fluctuations, each barrel of gas by the time it reached its destination had been sold and bought 10 to 200 times.
In the form of a paper at first and electronically later. There was a 10 to 200 times increase in GDP compared to the past.
Similarly, any object, any asset, can be moved tens or hundreds of times digitally, has changed hands countless times without having moved from its place.
What could that be? Anything from entire properties to the shoes of a football player who has played in a major game. Property rights moving at the speed that futures move today.
A New GDP
A new GDP will be created on top of the old one. And this time the rate of growth will be impressive. The digital world does not have the physical constraints of the real world. Cars cannot sprout wings and quickly transport us to the real world. In the digital one they can.
It’s a GDP added to the old one, except that the growth rate will be unimaginable by today’s standards. The growth rate of cryptocurrencies, perhaps, gives us a measure of what to expect.
How has GDP been calculated so far? By the sale of goods and services purchased with fiat currency. But when I put €10 in cryptocurrency to play a game and after endless hours of work it has become €1,000, is that what is counted? Apparently not, because the government doesn’t bother. It’s too complex and too small to tax. Small now. But it’s only a matter of time before it becomes huge.
There will be many platforms of economic activity, whole worlds. Let’s take the Apple economy for example. Apple is not just a company. Many people are included in the Apple ecosystem and many of them are already active in the digital world. Its GDP exceeds the GDP of most countries.
But here we have a serious example of a GDP that is growing at a very good rate, even though rising productivity is driving down prices. Everything Apple touches after a while gets better, cheaper, technologically improves production, becomes mass produced, more efficient, more user friendly.
When you download an app, you’re not buying or using anything tangible. It doesn’t mean it has no value. Nor, of course, does it mean that no value can be added from something that is essentially electrons. The target market is global. If an application is truly successful, there are none of the physical barriers to production and distribution found in real world businesses.
The change in the economic model is structural. In such an environment you don’t mind deflation. You don’t need the injection of additional inflationary money to foster growth. Quite the contrary. You seek conditions of creative destruction in order to free up resources to grow.
The Old World is Fading
Old-style businesses will be destroyed, old-style buildings will be devalued. Economic activity resets when you meet someone at the zoom. When you are not travelling, getting on planes, staying in hotels, eating in restaurants, hiring taxis. Therefore the utility, and therefore the value of offices, declines. Not everyone needs to be in the building all the time. Maybe never. Operating costs go down.
In this sector, economic activity is shrinking. But it’s not disappearing. It’s just being moved elsewhere. That’s how country houses gain value. Why live in the city if you can do your work in a more pleasant environment, in nature, with lower living costs? Even in another state with natural beauty.
If there was no zoom or something like zoom, the cost of meetings between partners would be much higher. Work hours lost, gasoline, car wear and tear. Maybe even astronomical if one is on another continent. It’s a digital place that creates value. A place where digital forms are found interacting with each other.
What’s more, through digital communication and social networking platforms, people come together who would never know each other. Communities are created and communities create value. It changes the efficiency of capital. It is transformed.
An economic and technological tidal wave has risen that will sweep everything away. We are fortunate to live in this exciting time. At least those who are aware of the changes that are coming have the opportunity to learn about the new world that is emerging and take advantage of them. Are we more optimistic than is realistically warranted? It may turn out to be so after all. Yet how many happy, wealthy pessimists have you met in your life?