[E]ach kitty has some interesting properties:
- Each Kitty is distinguishable from all the rest and has a unique identity and existence
- Each kitty is owned by someone. Specifically, it is controlled by whoever has the private keys associated with the address that the kitty is tied to.
This is a good description of the properties of NFTs in general. Notice that nothing here says that NFTs have to be about art, or collectibles, although that’s the primary use case right now that’s generating so much hype. Cryptokitties were more interesting than most of the NFT use cases right now because the smart contract allowed them to be remixed to produce new kitties (for a fee).
Suppose I rewrote the quote from my post on Cryptokitties like this:
[E]ach verifiable credential (VC) has some interesting properties:
- Each VC is distinguishable from all the rest and has a unique identity and existence
- Each VC is owned by someone. Specifically, it is controlled by whoever has the private keys associated with the address that the VC was issued to.
Interesting, no? So, what’s the difference? The primary difference is that right now, we envision VC issuers to be institutions, like the DMV, your bank, or employer. And institutions are centralized. In contrast, because NFTs are created using a smart contract on the Ethereum blockchain, we think of them as decentralized. But, not so fast. As I noted in my post on Cryptokitties, there can be a fly in the ointment.
There is one problem with CryptoKitties as a model of self-sovereignty: the CryptoKitty smart contract has a “pause” function that can be executed by certain addresses. This is probably a protection against bugs—no one wants to be the next theDAO—but it does provide someone besides the owner with a way to shut it all down.
I have no idea who that someone is and can’t hold them responsible for their behavior—I’d guess it’s someone connected with CryptoKitties. Whoever has control of these special addresses could shutdown the entire enterprise. I do not believe, based on the contract structure, that they could take away individual kitties; it’s an all or nothing proposition. Since they charged money for setting this up, there’s likely some contract law that could be used for recourse.
So, without looking at the code for the smart contract, it’s hard to say that a particular NFT is decentralized or not. They may be just as centralized as your bank.
Take a property title, like a car title, as an example. The DMV could decide to issue titles as verifiable credentials tomorrow. And the infrastructure to support it is all there: well-supported open source code, companies to provide issuing software and wallets, and specifications and protocols for interoperability
. Nothing has to change politically for that to happen.
Now, of course, the DMV could also issue car titles as an NFT. I prove I own the car by exercising control over the private key that controls the car title NFT. Suppose I want to sell the car. With a verifiable credential, the state would still be there, revoking the VC representing my title to the car and issuing a new VC to the buyer when the title transfers. The record of who owns what is still the database at the DMV. With NFTs we can get rid of that database. So, selling my car now becomes something that might happen in a decentralized way, without the state as an intermediary. Note that they could do this and still retain a regulatory interest in car titling if they control the smart contract.
So, we could use NFTs for car titles, but right now there’s not much point. NFTs don’t provide the same level of support either in code or ecosystem for issuing them and they aren’t interoperable in any way without a lot more work to normalize the idea. The real value of issuing a car title as an NFT would be if it were done using a smart contract in a way that decentralized car titles. The state might do this to provide more automation for car transfers. If you imagine a world of self-driving cars that own and sell themselves, then that’s interesting. You could also image that we want to remove the DMS from the business of titling cars altogether. That’s a big political lift, but if you dream of a world with much smaller government, then NFT-based car titles might be a way to do that. But I think it’s a ways off.