Will NFTs be a trillion-dollar market by 2030? Or will they vanish in a blazing explosion of hate from all the naysayers?
(I might give even odds on each side, actually!)
In this episode of TechFirst I chat with Rarible chief product officer Alex Salnikov. And yes, he’s aware that there’s way too many bored apes, yacht apes, space apes, technicolor apes, and all other kinds of crypto mishmash digital art that are vying for the stupid money that is out there chasing NFTs.
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But, he says, half of all digital commerce doesn’t need to have a physical component at all. And that would transform the future of commerce with digital objects. Using, of course, the foundation built by today’s NFTs.
But we’re early. In fact, we’re just now in the “Cambrian explosion,” Salnikov says, which will birth a massive amount of innovation and completely change the face of commerce, crypto, and how we buy, own, and share the things we want.
Check out the story on Forbes here, or keep scrolling for video, podcast, and a transcript …
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Transcript: chatting with Rarible chief product officer Alex Salnikov
(This transcript has been lightly edited for length and clarity.)
John Koetsier: What is the future of NFTs? It feels like we’re on a bit of a roller coaster here, an entirely new industry spun up in front of our eyes.
Random people and literally random images made millions of dollars, and now, every brand and every opportunist, it seems, on the planet is rushing in. We’re even seeing some backlash, but we’re still seeing some amazing innovation.
Here to chat about the future of NFTs is Rarible chief product officer, Alex Salnikov. Welcome, Alex!
Alex Salnikov: Thank you, John. Thank you for having me here today.
John Koetsier: Look, the common definition of NFTs is non-fungible token, right? It’s a certificate of ownership. It’s a deed to the property. But what’s really revolutionary about NFTs for you?
Alex Salnikov: Yeah, it’s a great question.
So, I think — I’m thinking about it a lot actually, and one of the best ways to put it that I came out with is probably the following: so, there has been a lot of talks about metaverse — metaverse, metaverse, it almost will be an obscene word soon — but, in reality, we all already live in the metaverse.
And my definition of metaverse is just the digital universe that we all exist in. And the simple evidence of that would be going to your iPhone settings, the screen time, and looking at that — about five hours.
John Koetsier: [Laughing] No! Don’t look at that … don’t make us think about how much time we’re staring at a little chunk of glass.
Alex Salnikov, co-founder and Head of Product at Rarible
Alex Salnikov: Exactly. You’re connected to this chunk of glass, and more than five hours a day usually and up to 10 hours a day among several people, and your telephone or your computer are basically your interface to the metaverse.
So we all exist in the digital world where we speak digitally with our friends; we have our social network profiles; we have our music libraries, domain names, all sorts of things there. And how the current landscape is set up, all of this metaverse things, they are managed by some companies that store this data for you. So, your Facebook page is not like really yours, it belongs to the Facebook. Facebook can moderate it, ban it from you and all sorts of things like that.
So we already have a lot of things exist in the digital world that we are owners of, and the NFT and the whole blockchain revolution is about the attempt to rebuild that world, ground up, and to create the level of ownership that is detached from platforms — that you own your digital items directly on the blockchain, attached to your wallet.
You can change the wallet; you can change the platform; you can change the marketplace; you can change everything, but your things will be yours. And this idea, it is so powerful because the same as in the real world, yes, you can have a fake Gucci bag. You can have a lot of things. Somebody can try to, I don’t know, scam you or something like that — I don’t even want to say that word — but, some of those things will happen in the metaverse.
But this core concept of the freedom over the private property never existed in the internet. And now we have the private property that is free and open with NFTs, and that can represent ownership in anything.
We started with pictures, with simple things, but I think there’s this deep thought about private property. It brought the world, the physical world where it is now, the private property is like a super core concept of the current economy, and now we have the same on the internet. This is like the true, big, one revolutionary thing for me that NFTs bring to this world.
John Koetsier: So … I love the vision of that, and I love — that is an appealing dream, that is an appealing call to arms — democratize ownership of digital things.
How real and executable is that?
Because if we look at what blockchain does, blockchain essentially says, ‘Hey, we have a consensus reality, and I own a piece of that reality, and you own a piece of that reality, and we distribute that in various shares around the planet.’ And no one person can change that. We need a majority to change that — and you can have different rules and different blockchains, of course, so that can change a little bit — but the amount of data that we’re … A, the amount of data that we’re creating every single day is just growing like insane, and can we store that multiple places all over the world? And B, as we see Web3 right now, it’s actually really centralized. I mean, where images get stored is probably AWS, right?
And who owns or controls a particular blockchain or maybe even an NFT marketplace is pretty centralized as well. Is this a vision that you see evolving and becoming true? How do you see that?
Alex Salnikov: Yeah, sorry, my light in my hotel just shut off…
John Koetsier: [Laughing] It’s okay.
Alex Salnikov: No electricity. So…
John Koetsier: It’s because it’s centralized technology and you can’t … [laughter].
Alex Salnikov: But internet works, so we’re happy. Yes. What you’re seeing is true in the all sorts of realms. Yes, the pictures are stored somewhere, but obviously they’re not stored on AWS right now, we’ll get into that further. So, the one very important concept that the whole community, the whole blockchain community — I will go to the conference and I’ll hear the word ‘decentralization’ a thousand times per day…
John Koetsier: Yes you will [laughing].
Alex Salnikov: This community is very passionate — the Web3 community — about decentralization, and one core aspect of that is ability to opt out. So, you say that images are stored centralizedly sometimes, yes?
So they’re stored on IPFS. IPFS works like Torrent, so somebody should host these files for them to be live, right?
And usually this is the companies, but you can find an instruction on the internet, how do you go and set up your own IPFS node and replicate your own NFTs. You can actually host your own NFTs on your computer.
You can be like, you can go to the bunker [laughter] and host it all yourself … host your blockchain node, your energy node, your wallet node. That’s — and of course people don’t do that, right? Because it’s not efficient, it’s hard.
So there is still various companies that do that for them. But the one very important topic there is you can always opt out from one company and either do it yourself or go to another company, which is not something possible in the Web2 world. Those companies…
John Koetsier: You mean I can’t host my own Facebook? [laughing] I can’t host my own Twitter?
Alex Salnikov: Unfortunately not.
John Koetsier: [Laughing] I guess not. I guess not. That makes sense … I buy that. Let’s talk about NFTs now — and we’re going to get into a lot of stuff here: we’re going to get into security, we’re going to get into the future of NFTs, we’re going to get into what place they’ll have and our social and economic system in the future — but let’s talk about right here and right now for NFTs.
When they first started getting significantly massive, maybe 2021, newness was enough, right? Any NFT was cool. ‘Whoa, you minted an NFT, that’s awesome. Somebody will buy it.’ And the price would, you know, go massive. Now, that’s a different reality.
There’s kind of a glut of digital properties. Everybody’s making ‘bored’ something or ‘yacht’ something or ‘zombie’ something or whatever, and if there’s a thousand, there’s ten thousand, and they’re programmatically created and they have little differences.
So, there’s kind of a glut of digital imagery out there that’s being minted as NFTs. What do you see as critical for NFTs in the near-term future, to become or to be?
Alex Salnikov: It’s a very deep question actually, so what happened in 2020 was the explosion of crypto art. And you were able to go to the blockchain, upload a picture, and … so, by definition, art is something that is new — you created something new, a new concept in life; you take a banana, you tape it with the tape to the wall, and nobody did that before — that’s art, right? That really created something new in this world.
So, just uploading a picture and creating an NFT with that picture was already an art in itself, even if it doesn’t have anything really new in the art concept, because that was the new thing. That was like, it’s a usual art uploaded to blockchain and it is something new. And that’s why it was cool in 2020 to create NFTs just because it’s something new. Now, NFTs is not new anymore and they became a medium.
Now they became a medium for presenting something. And this something should evolve, and it is evolving more and more. So right now, everybody is doing ‘yachts’ and ‘bored’ and all sorts of things like that. And where I see the current state of the NFT market, you can compare that to the luxury brands of the real world.
So, Twitter came up with this feature to put something on your avatar and that is working to signal that you are part of some club, you’re part of some social circle, you’re part of usually a rich and culturally relevant group of people that everybody wants to be in.
And this is the current state of the market.
And what we see is this, okay, NFTs are a medium to represent something, and this something is evolving and becomes more and more and more useful.
So let’s say, let’s take Nouns DAO. Noun, it’s an NFT that represents your ownership in the DAO. You can vote with that NFT in the DAO. Some NFT collections have this royalty stream put in their treasury and their voting — how should we almost manage our club’s treasury; let’s market our club; let’s go and buy the New York Wall Street advertisement. So, again, this is more utility to this NFT.
Or in-game assets, you can go and you can play with that particular item inside a game. Or CloneX, which is an avatar, a 3D avatar that is connected with Ready Player Me SDK to several metaverses. You can, you will be able to import your avatar into the metaverse and play with it. [Light turns on.] Oh, the light is back.
So the utility side of NFTs should grow. And it’s growing, that’s what we see right now. Everybody’s asking, ‘Oh, we should — what’s your NFT utility? What’s your NFT utility?’ And eventually we will just like explore and explore and explore more utilities.
John Koetsier: Where do you see that we are in the evolution of NFTs? I mean, like, it’s a really hard question to answer, obviously, because anywhere we are in any age of progress or technological evolution, that’s where you are, and it isn’t always clear where it’s going. But, if you would take the big picture and you say, you know what, hey, we’re 5%, we’re 50% … towards what NFTs will eventually become, where do you see us in evolution of NFTs?
Alex Salnikov: We are at the beginning. I’ll use the evolutionary metaphor as well, we are at the beginning of a Cambrian explosion of NFTs [laughter].
People are ideating. People create all sorts of NFTs — physical, digital, attached to this and this and this — and some of them will die, right? They won’t outcompete others, and some of those ideas will be live.
And we just started, so, in 2020, the NFT market was a hundred million dollars. In 2021, the NFT market was 24 billion dollars. And the beginning of this 2022, we already see two months, the January was 6 billion dollars. If we multiply that by 12, that will be like 70-80 billion dollars [inaudible] market. So it’s a — and probably even more, right? So, and we are almost at one tenth of the trillionth in the first three years.
I believe that by 2030, we will reach a trillion dollar market by the NFTs.
And they will represent all sorts of things …. half of the e-commerce doesn’t make sense to be in physical. I mean, when you buy a Star Wars Lego toy, you buy it not because it has some physical characteristics, like a knife on the kitchen, right, but because it’s a character, it’s cute, you love it, from this universe. It has almost zero reasons to be physical. You can have it in AR and it will have all the same utility.
Like half of the e-commerce doesn’t need to be physical. It will transfer to the digital world, it will be based on NFTs. It will live purely in the digital world like we are living in the digital world.
And we are at like 0.1 stage of that.
John Koetsier: Yes. Yes. It’s really interesting because you brought up metaverse when we started talking, and you brought up the fact that, hey, you know what, we’re in the metaverse right now — maybe we’re in like version 0.3 of it or something like that, it’s pretty early.
You and I are connecting right now on a digital platform; this will get shared out on multiple digital platforms. We’re looking at a pane of glass. At some point, maybe a decade, two decades, maybe we’ll live inside of it, you know, maybe we’ll upload ourselves in a hundred years or 300 years.
Situate NFTs, if you would, and what place they’ll have in our social economic systems as we become more digital.
Already, what is it, 10%, 20%, 70% for some people, of our existence is mediated by technology. The information that we get comes via technology, and we express our feelings about it out with technology, as well.
As that just seems to be growing and growing, do NFTs assume a more and more central role as physical worlds and our physical property becomes potentially less and less important … do NFTs take that place?
Alex Salnikov: This is what’s happening. So, a big part of that is more or less the adoption of the blockchain, and NFT massively pushed that. So before that, we only had blockchain for mining. Now we have blockchain for NFTs, but still there is a long road ahead.
We need to work with regulated entities about how do they accept these NFTs. And what we see is the revolution ground up. So, this is one of the core things that blockchain allows you to do, is to do something and then answer, right? It’s permissionless. I don’t need to ask anybody’s permission before I do something. I still need to comply with all the laws and and be legal, but I’ll do it just after I did something. It’s not that I need to ask somebody before.
And NFTs, like my dream and hope is that the NFTs will represent all the digital property rights on the internet. And so far, this seems to be a very realistic dream as if we don’t have any other means to represent this private property on the internet.
You know, somebody said that digital signature is one of the greatest inventions of the 20th century. And we actually see the aftermath of that, because all NFTs, everything that exists on the blockchain, it is attached to your private key and to your digital identity, to just to your digital signature that you created for yourself. And this is like you in the digital world.
And before that, there was no ‘you’ in the digital world.
John Koetsier: The implications of this are pretty staggering, because in the physical world we’ve traditionally accumulated things … you see some of them in my background. You’re in a hotel room right now, I see.
You’ve purchased the right, you’ve rented that space, that ‘thing’ there that you’re in.
As we move more and more of our identity to digital and we have digital means of representing who owns something, who can use something, how you can use it, what you can do with it … that’s really interesting, because if we have that record on a blockchain, well, guess what? Not all blockchains will survive.
We see that in the real world — quote/unquote “real world” … everything is real even if it’s digital — but we see that in the physical world. Subcultures die out, whether those are subcultures or trends in fashion, or whether it’s a subculture of people, an ethnicity, or a language that is dying out or other things like that, and something is lost when that happens.
And imagine a scenario in the future: you’re living in a very metaversey world but your tribe is dying, and there are fewer people who are keeping a copy, a record of ownership on the blockchain of what you’ve got and what you have, and your digital identity could disappear — the things that you own could disappear.
Ahh, it’s a crazy world we’re moving towards.
Alex Salnikov: Sounds fun.
John Koetsier: [Laughing] Love it. Love it. Let’s talk about security, that becomes a bigger deal, right? There are people — you might be among them, I have no idea — but there are people that I know, who have a significant fraction of their net worth in digital goods, in NFTs, other things like that.
What kind of security do we have and do we need to build around that ownership, also the things that they own and people potentially, fraudulently claiming that they have them or creating counterfeits?
Alex Salnikov: It is super, super important topic. So, I think we can try to break it down into several pieces, into several layers, more or less.
So the base layer of security, it is what blockchain provides us. And this is why we have all sorts of debate of Ethereum versus Solano versus Tezos versus Flow, because this is — now, piggyback on all we just said — this is the foundational like security of our private digital property, right? This is very important.
And that’s why Ethereum is winning so far, because it’s one of the most secure chains. Bitcoin is probably a little bit more secure even than Ethereum right now, because it is relying on this massive network of miners that are burning all sorts of electricity to support the security of the network.
So, the security of the network is more or less determined by its decentralization level. How many different nodes that they’re independent do we have? Because it’s all democratic, we need the majority to rewrite the history, right? And how many independent people that we can rely on we have that’s the security of the chain.
Now, there is like a lot of different other layers that are all come to like the security of the smart contracts do we.
We perform audits of the smart contracts with third parties. They’re open source. The more eyes are looking at the code, the better it is.
We’ve seen the massive things like this Solana hack, not the Solana Wormhole hack that like 300 million dollars were stolen, and then right the next day somebody got there and said, ‘Okay, we’re replenishing this $300 million just to keep all our users safe,’ right? This is the strength of the community, everybody’s like got everybody’s other back. And then it goes multiple, multiple levels of security that will end up, okay, how are the NFT market looks like now — where the images are stored, we briefly touched that. How are the marketplaces monitoring like who copied what.
So, the current state of the things is more or less like that. We store NFTs on IPFS. You can host your own node. Of course, somebody needs to host these images for yourself, and we have NFT contracts, smart contracts that keep the ownership, the track of ownership, who owns what.
Now, as if in the physical world, anybody can try to create a fake copy because you don’t need to ask anyone’s permission — we just chuckled about that — that’s a pro and a con in the same time. You don’t need to ask anybody’s permission to create a copycat.
So we are relying on post-moderation or somebody’s relying on pre-moderation to tackle that. Some platforms say, oh, we will only accept people that we pre-moderated to create that, so you need to ask our permission before you start. Rarible is relying on post-moderation. At first, everyone can create anything, but then community flags, okay, these are the things that are not relevant. And again, as the same thing as in physical world, marketplaces are more or less responsible for taking that from listings, because you can’t remove something from the blockchain.
It will always be there, but in the physical world, the Gucci copy of Gucci bag would be traded on the corner shop, right, rather than in the prominent online places there will be originals and something like that happens with the NFT … all sorts of parallels there.
John Koetsier: One thing that, for me, makes it difficult to try new NFT experiences or platforms is that they want you — you come in the front, it’s like going to Walmart and saying, ‘Give me your credit card’ when you walk in the front door [laughing]. You go up and you’re signing up for a service and they say, ‘Give me your wallet … connect your wallet.’
And I’m like, hmm, I know the security record in the crypto world, and it frankly sucks [laughing] and I don’t really want to connect my wallet. I just want to come in, take a look and browse, and maybe there’s something I’d like to buy. And if I’d like to buy something, then I would like to give you some money or crypto or whatever the case is, but I don’t want to give you my wallet right off the bat. What do you say when you hear that?
Alex Salnikov: Mmmm, interesting. The second thing that you described, how you want it to be is actually how it works in Rarible.
John Koetsier: That’s good.
Alex Salnikov: You go there, you browse, and you see all NFTs. You see who owns what, and then when you click ‘buy’ it will prompt you to connect the wallet, and then you can pay.
Now, it might not necessarily work for all the people because that’s the thing that we have in the blockchain world, one of the fundamental limitations — or, not a limitation, depends on how you see it — is that your wallet is your public digital identity.
It’s not only your wallet. In the Walmart when you come you present yourself, right, first. And then you have a wallet in your pocket which might be hidden.
While in the blockchain, your wallet is you … they’re inseparable, so far.
We will create — there is all sorts of innovation happening on the privacy end, and zero-knowledge approves all sorts of things like that and will detach probably the things you will be able to see the wallet but not know how much money does it have. But so far, it is public and it seems like it’s working for people.
I mean, you can have 10 wallets. One of them will have your money, your bags and the other one will be your public identity which will have some like change that you use to buy some JPEGs.
John Koetsier: I see that. I see that. And I think that the way around it is to have multiple wallets and to the one that you’re going to connect to various services that are like, as I described, hey, connect your wallet before you even come in the front door … okay, I’ll give you a wallet that has like a couple, a little bit, a tiny little bit of Ethereum in there so that if you screw me, I’m not too worried about it.
I think that’s a … more of a bug than a feature, and I think that I really look forward to the ability to have a digital identity in the crypto Web3 space that is not my wallet. But, maybe that’s just me. I’m not sure. Maybe let’s end here: we’ve crystal-balled a little bit, but let’s draw it back and look at the future of where Rarible is, where NFTs are, in about five years.
What do you see NFTs doing, being … being capable of in five years? Where do you see Rarible in five years?
Alex Salnikov: Let me try to picture something here. I’m pretty sure that somebody said that people usually overestimate what can be done in one year and underestimate what can be done in 10 years.
John Koetsier: Yep.
Alex Salnikov: So in five years, I’m pretty sure we will live in some crazy future that nobody would even be able to predict.
One trend that I see is the financialization of NFTs, the ability to take a loan backed by your NFT connection, enough NFTs to DeFi world, automatic pricing. I think that we’ll uncover a lot of potential.
So, somebody said to me, ‘It took me eight weeks to remortgage my apartment, in the physical world, right? And then I go to DeFi and I take a million-dollar loan backed my digital assets in 20 seconds.’ So, connecting NFTs to the DeFi world and being able to represent — probably, I want to tell the story about how your apartment will become an NFT that is stored like on the ledger and then you can go remortgage your apartment in 10 seconds rather than eight weeks on the blockchain, but it kind of looks like the reality will be it will be your apartment in sandbox rather than [laughing] in New York in five years from now.
But I’m really excited about all this connection of this asset class that they merged to the financial primitives that DeFi world built on.
John Koetsier: I think that’s super interesting, and I look forward to that. And, at the same time, I wonder if that eight weeks isn’t as much a bug as it is a feature in that you’re making massive financial investment here or changes and having some time to think about that [laughing] and take some time to — is this a good idea? Should I do this? Have some laws around, you know, I can change my mind in seven days or three days, depending on the place that you’re in.
Might not be a horrible idea when you’re dealing with hundreds of thousands or millions of dollars and taking in 20 seconds to, you know, make a multi-hundred thousand dollar decision might be a little dangerous.
But, I’m sure that we’ll figure out checks and balances and other things in those worlds as well. It’s been a fascinating conversation, Alex. I really do appreciate your time. I hope you have a wonderful day at your conference and thank you for spending this time with me.
Alex Salnikov: Thank you, John. Awesome answers. Awesome questions. I really enjoyed how deep we went on these topics … very abstract, but I hope our listeners will enjoy that.
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