ThinkTWENTY20

By Eric E. Cohen, CPA

George Parker, William McCloundy, Joseph Weil, and Henry Gondorf are all names associated with conmen who found marks and then “sold” the Brooklyn Bridge to gullible people. Mae West’s character “Peaches O’Day” attempted the same in the 1937 film “Every Day’s a Holiday.” So I’d be interested in knowing if you would like to buy an NFT? How about an NFT of the Brooklyn Bridge?

The Collins Dictionary's "word" of the year 2021 is “NFT”, short for non-fungible token. I am surprised that it counts as a "word" according to Collins, but it does. I am nonetheless concerned about the dictionary’s NFT definition, which speaks to "ownership" of a digital asset.

Everyone Wants a Piece of the Action
The way everyone is jumping into the NFT craze, you'd think it stood for "Next Funding Trick" rather than non-fungible token. The catalyst for my thoughts in this blog entry is a recent Marriott PR piece with the headline "Marriott Bonvoy Logs into the Metaverse with Debut of Travel-Inspired NFTs", which explains "NFTs are one-of-a-kind digital collectibles that can be traded on the blockchain, often referred to as the ‘key’ to the metaverse. "

I have a lot of emotional capital tied up in the Marriott brand, due to spending almost as much time in Marriott properties as I did at home during my non-pandemic XBRL years, earning lifetime Adamantium status (or whatever it is called now). Having my Lifetime Adamantium Elite card as an NFT instead of the two-kilo, metal monstrosity (ok, it's only 28 grams) might make it easier to have at hand, although less satisfying to clunk down at check in.

The proof of the pudding of Marriott’s news is in the reality of their deliverable, yet to be seen, and yes – of course – I want Marriott NFTs; a collection of all the properties I have visited would be amazing. Like badges or pins or collectible cards, it sounds fun, especially if it is 3D virtual reality enabled in some way.

Some Quick Parsing/Comments
1. While NFTs are "one-of-a kind," it’s not what it sounds like. They are unique only because an NFT is a unique and non-interchangeable unit of data stored on a digital ledger controlled by a private key, not because any digital collectible associated with them is unique. There are no NFT police making sure something of value is associated with an NFT only once. How many people have stayed at the Marriott in Hilo, Hawaii? If we all got an NFT, it would be special to us as part of our collection, but my NFT may be interchangeable with your NFT unless it has distinguishing features from others.

Comparing NFTs and their uniqueness is, at its best, limited to set of Thomas Kincaid prints, which differ from each other only by having a different serial number (1 of 1000, 899 of 1000) on them. I have some Binance US and Decentraland digital wearables as NFTs that are indistinguishable from tons for sale on Opensea.io, but they are NFTs nonetheless. While the token itself is unique, the objects behind them are certainly capable of mutual substitution between the individual units (or fungibles).

2. The right of “ownership” of any associated asset is not inherently proven by the private key, only control over the record itself. This is no different than ownership of art today. Rights and obligations are a legal issue, not a technical one. And the associated asset (a digital collectible, an intangible right, a physical item by some manner of proxy) is not paired. I’ve mentioned before the young techy couple that exchanged NFTs with wedding rings as a symbol of their love. Should I by some means gain control over one of those NFTs, I do not become married to one of the members of the imaginative couple.

3. The “metaverse” of the Marriott release implies 3D virtual worlds, a la Decentraland (or legacy Second Life). I have not seen anything other than static pictures of the first Marriott NFTs, and not seen any technical information to associate them with a specific blockchain or virtual environment. The text “3D surrealistic depictions” is in the press release, but NFTs are nor inherently dynamic nor 3D; my cryptokitties are happy in their 2D world for now, my NFT certificates for attending conferences nothing but an image. Nothing about a record on the blockchain assumes or assists 3D.

That is not to say that Marriott and its partners might not deliver some new experience that brings together the Pokemon Go augmented reality craze with NFTs in a new travel theme.

But that’s also not to say some NFTs (if not all NFTs) can’t be a potential “key to the metaverse.” A search on Google has delivered many hits on that topic. They say that NFTs can set you free from the bonds and reliance on a single developer or vendor. If you have accumulated items in a game (as I did on Second Life 10 years back), you are completely reliant on the game’s owner to have access to those items and cannot use them in other environments. NFTs on a public blockchain are in some manner independent of the origination points and may have greater interoperable power; I can show you on the Ethereum blockchain the records pointing to my Cryptokitties and Decentraland/Binance US swag. Of course, without the Cryptokitties folks, I can’t do anything with my kitties.

As one of the major sites for buying and selling NFTs notes, with a little internal commentary from me:

“There was also the belief that just because a smart contract was deployed [EEC: on a public blockchain, not under the control of the original developer], the assets would last forever [EEC: independently of any source]. This overlooked the fact that there are other entities (websites, mobile apps) that serve as the portal for regular users to interact with these applications. If these portals go down, the assets lose a lot of their worth. Of course, there may be a future where decentralized applications can be deployed in a fully distributed, ‘unstoppable’ way, but for now, we live very much in a hybrid world.”

Some Take-Aways as I Look Forward to Hearing More from Marriott
• I believe NFTs have tremendous potential, and they will be tomorrow’s digital collectible as well as an incredible tool in business for tracking digital, intangible and even physical items, across enterprises. But I can’t even find half of the NFTs I’ve gotten from conferences and other sources, across many blockchains.
• An NFT is just a unique digital record, and the legal rights between that record and any digital, intangible, or physical item should bring to mind George C. Parker, who made the old saw “If you believe that, I have a bridge in Brooklyn to sell to you” popular.