One of the enduring tragedies of journalism today is its inability to monetize the significant intellectual effort that goes into creating great articles. With so much content being available 'free' readers have become increasingly reluctant to pay for articles that they read. Print magazines that have moved their contents to the digital format have tried protecting their IP behind paywalls and subscription mechanisms. Many users find this too cumbersome and opt either to read the few free articles or to simply go somewhere else. Which is a tragedy.
What we would want is a micropayment mechanism that allows individuals to pay for articles that they actually want to read without having to bother about annual subscriptions tied to credit cards and other relatively complicated payment mechanisms. In an earlier post that was also published in Swarajya in 2016, I had explored how browser based crypto-wallets could be used to make micro payments and I am delighted to note and report that MetaMask - the Ethereum wallet that can be added-on to both Chrome or Firefox - is now being widely used by the crypto-community. MetaMask is used both to establish identity and to make small payments. With a little bit of effort, websites can acquire the ability to make pages of the site available against small payments from MetaMask wallet.
But technology is moving even faster and now with non-fungible tokens we have a really new way to manage this process of protecting and monetising intellectual property.
|image credit https://www.bankofengland.co.uk/knowledgebank/what-are-cryptocurrencies|
What is a non-fungible token? Opensea is currently the best known marketplace for NFTs and their tutorials (1) The Beginners Guide ... and (b) The NFT Bible .... are good introductions to the topic. The fundamental difference between a traditional crypto-token ( like Bitcoin, Litecoin, or Ethereum) and an NFT is the concept of fungibility. A rupee coin ( or any fiat currency) can be exchanged for another without any loss of value. If you lend me a rupee and you take it back from me after a year, you will never ask me for that specific rupee coin that you had given to me. Any other rupee coin will do. That is fungibility. On the other hand, if you had leased a flat to me to live in and after a year you want me to give it back to you, you will demand that same flat. I cannot say that I am giving you back another flat in another part of the city of similar value. It never works that way because a flat - or anything physical - is a non-fungible asset.
What is true in the world of fiat currency (like rupee or dollar) and physical assets is also true in the world of crypto assets. Bitcoins or any other crypto-assets hold significant value ( as do fiat currency) but they are fungible. Cryptocurrency transactions are approved by the network participants ( also called 'miners') on the basis of total historical inflows being more than total historical outflows from a wallet resulting in a current wallet balance being more than the current outbound transaction. There is no need to track the specific coin or token or any part thereof.
Non-fungible assets or tokens are different because one has to keep track of the ownership of the entire token. Non-fungible tokens exploded into the crypto landscape through a trivial game called Cryptokitties that allowed people own and trade images of kittens all of which were different from each other. Almost all non-fungible tokens are based on smart-contracts built with the Solidity language and deployed on the Ethereum network. For more information on how these things are done, please see my recent post on how to build smartcontracts. Stripped of all jargon, what this means is that the contract defines a digital artifact -- an image, an audio or video file -- and an owner, whose identity changes when there is a transfer of ownership. All transfer of ownership is recorded in an immutable Ethereum blockchain and so there is never any doubt about the ownership of an asset.
But there are two problems :
- What if I make a copy of the digital artifact? Frankly there is nothing that can stop you. You can go to the Louvre and take a picture of the Mona Lisa but that does not mean that own the Mona Lisa. Ownership does not change. You have a copy that is obviously a copy. In the case of digital assets, it is impossible to distinguish the original from the copy so does it really make much sense to go to such extent to protect a digital asset?
- What if the asset is something physical like a car or a house? Does it make a little more sense? It surely does! If the asset is physical, the ownership is clearly established but whether you can enjoy the asset would depend on other factors like being able to evict squatters or illegal occupants with the help of the judiciary or the police.
These are important issues but resolving them needs a little more understanding of the process of creating a non-fungible token.
During the process of creating an NFT, we usually provide only two things :
- The asset, which is a digital file that is stored either on the blockchain ( which is very very expensive) or otherwise on some server and only the location is stored in the blockchain.
- The wallet that owns the asset as defined by its address or the public key. Anyone who has access to the private key of the wallet is technically -- de facto or de jure -- the owner of the asset.
Obviously there is no fun if the asset can only be seen by the wallet owner? What is the point if I own a million dollar painting that no one can see. So all owners will make their assets visible. But then people can copy it? Which makes ownership pointless!
So where is the catch? Why are non-fungible assets suddenly so valuable? Not because of stupid Cryptokitties!
The salvation lies in one specific feature of non-fungible tokens called Unlockable Content. This is a piece of information that can be viewed only with the private key of the wallet that owns the asset and can be used to store truly private information. This is where one can keep stuff like access keys or passwords with which one can actually use the asset, rather than just see it.
- If the asset is password protected PDF file, then the PDF can be publicly visible and downloadable but the password will be an Unlockable Content that is only available within the wallet.
- If the asset is house or a flat, that is visible from the road, then access key of an electronic lock to the house can be kept as an Unlockable Content within the wallet. Without this one cannot enter the house.
Armed with the concept of Unlockable Content, one can design a simple mechanism to protect and distribute journalistic content using a general purpose eBook reader that has an embedded crypto wallet to handle non-fungible assets. This is very similar to the MetaMask add-on that can handle fungible assets like Ether. We will refer to this wallet enabled eBook reader as an eReader/Wallet.
On the Ethereum blockchain there are two standards : ERC-20 for fungible tokens and ERC-721 for non-fungible tokens and both are in the public domain. So any website that publishes content can set up the mechanism to interact with any eReader/Wallet. What we need is a way for the website to request fungible tokens from the eReader/wallet and when this is approved by the human user, the website will receive the ERC-20 fungible token and send the ERC-721 non-fungible asset to the eReader/Wallet. Obviously, the owner of the eReader/Wallet must have loaded up the wallet with ERC-20 fungible tokens like Ether or equivalent prior to any transaction. What is interesting is that the same eReader/Wallet can interact with any website that is built as per ERC20/721 standards. So there is no need to subscribe to any specific website separately.
The non-fungible asset (say a PDF file) may or may not move to the users machine. It may still reside on a distant server but the unlockable content (say, the password) will be on the eReader/wallet and using this the user can open the asset and view it within the eReader/Wallet.
There are two very interesting aspects to this mechanism
- The user who has received the PDF file cannot send it to someone else. They will not be able to read the file without the access key stored as the Unlockable Content in the owners wallet.
- The user, if they so want, can transfer the asset to someone else through a standard ERC-721 wallet transaction but then they lose access! This is no different from buying a paper magazine at news stand, reading it and then passing it on a friend.