Blockchain: the way to digital uniqueness?

Introduction

In this article, we will focus on an aspect of blockchain that often takes a back seat to issues more closely related to the economic/monetary realm but is, in fact, the foundation of some of the most famous applications of the technology, notably NFTs.

The elusive concept of digital scarcity, introduced by the first blockchain in history, that of Bitcoin, is frequently discussed. This is indeed a fundamental theme for understanding the potential of the technology. However, today we will delve into something slightly different: not scarcity but digital uniqueness.

While scarcity aimed to replicate, in the digital realm, a real and physical phenomenon like the limitation of natural resources, when we talk about uniqueness, we naturally think of the world of art—the field where value, par excellence, derives from the fact that each work is unique.

But are we sure it is genuinely unique?

As far back as memory serves, humans have always tried to reproduce works of art, even with extreme effort (think of lithography and similar techniques).
It is worth mentioning the renowned essay by philosopher Walter Benjamin:

“The Work of Art in the Age of Mechanical Reproduction.”

In 1936, Benjamin highlighted how technological progress, in the industrial society of his time, had made it extremely easy to reproduce and make works of art accessible to everyone. Benjamin focused his reflection on the close link between technological advancement and the mass reproduction of works, but it still remained within the limits imposed by the physicality of the works.

The world has changed significantly since the ’30s, and the digital revolution we have experienced and are still experiencing has exponentially amplified Benjamin’s theses.

Yes, because, transitioning from the physical to the digital, the cost of reproducing a work becomes truly negligible, approaching zero.

Consider a painting, take Leonardo Da Vinci’s Mona Lisa as an example. Before the digital era, the only way to produce a copy of the work was to repaint it, trying to adhere as closely as possible to the original. Reproducing lithographic works of art was simpler, but it still involved a mechanized process that, in the case of a painting, was exclusively manual.

Now, let’s move to the digital realm: what is the cost of reproducing a digital work of art?

As we mentioned, none. It’s a digital file, a set of bytes. Just copy and paste, and you’ll have a perfect reproduction of the original. In addition to the extreme ease of the process, note that the copy obtained will be identical to the original, not just similar, unlike a reproduction of a painting.

If we add another characteristic of the digital world we live in—interconnection and speed guaranteed by the internet—we get the result that a digital work of art can be copied and distributed globally within seconds.

What does all this have to do with blockchain?

Blockchain is often, mistakenly, exclusively associated with cryptocurrencies, digital currencies that use it as infrastructure to conduct transactions. In reality, as demonstrated by a constantly growing and expanding market, there are many applications of blockchain technology, and its innovative scope is not limited to the economic-financial world.

To better understand the theme of digital uniqueness within this technology, we must introduce some technical terms.

The blockchain allows the creation of various types of digital assets, including, first and foremost, the aforementioned cryptocurrencies, which are usually referred to as primary assets. Cryptocurrencies are then accompanied by all those referred to traditionally as secondary assets, commonly known as “tokens.”

What is a token? Essentially, it is the digital representation of an asset (physical or digital), where, in the financial context, an asset refers to anything that can have monetary value. Practically everything, therefore, can be represented by a token on the blockchain: a painting, real estate, a digital work of art, and so on.

One of the characteristics by which these tokens are classified is the so-called fungibility, or interchangeability with units of the same type. Let’s take a physical world example: currency is a fungible asset. Two one-euro coins can be exchanged, as they have the same value. An example of a non-fungible asset is the aforementioned Mona Lisa by Leonardo. It is unique and not interchangeable.

The property of fungibility or non-fungibility of tokens leads to their subdivision into two large categories:

Fungible Tokens
Non-Fungible Tokens, the so-called NFTs

In this article, we are only interested in the second category, that of NFTs. As we mentioned, NFTs represent unique, non-interchangeable assets, and, adding another concept, they are also indivisible.

Unlike a one-euro coin, which can be divided into two 50-cent coins, the Mona Lisa has value in its entirety, as a unique work. We cannot cut it into two parts and think that each part has half the value of the entire work. Considering all these characteristics, we understand how NFTs are well-suited to the world of art.

We must think of NFTs as identifiers, registered on the blockchain, that uniquely represent a non-fungible asset and associate its ownership with an owner. In this sense, the blockchain, and especially NFTs, represent a real revolution, making digital uniqueness possible and programmable for the first time.

Returning to the theme of the intrinsic replicability of the digital medium, one of the most complex problems arising from this digital characteristic is establishing ownership with certainty in an increasingly digitized world.

If it was extremely difficult, if not impossible, to bring the uniqueness of the physical world into the digital realm before, now, using blockchain, the authenticity and ownership of any digital asset can be certified, with the extreme security guaranteed by the encryption that underlies this technology.

Obviously not; numerous open and yet-to-be-defined issues remain. Chief among them is the legal regulation of NFTs, as it involves a means of identifying ownership.

Despite all the challenges and unresolved issues, the innovative scope of blockchain in this area remains extremely important, as evidenced by the fact that markets around NFTs have generated millions of euros.