Thread by @LeonidasNFT

What is an NFT? What is ownership?

Turns out these questions aren’t as straightforward as you might think and it’s important that we come together as a community to answer them over the coming years.

Thread👇

The recent rediscovery of the 2015 Terra Nullius contract raised some thought-provoking questions and I quickly realized that the conversations going on had implications that transcended any single project.

I’m writing this thread in an attempt to open up these conversations to the NFT space as a whole and I’ll use the Terra Nullius project as a case study.

Because early contracts predate the ERC-721 standard it’s not as clear cut as you might think to answer the question “what is an NFT?”. Each contract needs to be dissected and independently evaluated.

Code deployed to a blockchain in the form of smart contracts is exactly that. A bunch of code, nothing more and nothing less. We are the ones who came up with the concept of an NFT and who are trying to force that code into a neat little box.

Because this space is so new and because there aren’t good examples to go off of it’s up to us to define what an NFT is. We’re literally writing the NFT history books as we speak. There are no precedents. The precedents are being set right now.

We don’t have to look any further than the Terra Nullius project to see where things start to get nuanced. For those who are out of the loop, the Terra Nullius contract was dug up earlier this week, and given its August 7th, 2015 timestamp this was a big deal.

This makes Terra Nullius the first NFT on Ethereum. Only hours after rediscovery the dev of the formerly oldest NFT on Ethereum tweeted out that it didn’t count as an NFT because it didn’t have a transfer function.

Putting aside the obvious incentive to make this assertion, I still think it’s important that we evaluate this criticism by taking a deeper look at the Terra Nullius contract.

The premise of the project is that you can “claim your spot” on the Ethereum blockchain by writing a message that will be stored forever. The dev could have just created the ability to post a message but they did more.

They intentionally chose to attach metadata to messages. Specifically, each message is given an “index” that allows it to be uniquely identified. Anyone can use the “claims” function to verify this. I think it’s reasonable to agree that this makes it check the “non-fungible” box.

Then if we turn our attention to the “T” in NFT which stands for “Token” it gets a little trickier. The word “token” seems to carry some expectations around ownership and transferability and thus begs the question “what is ownership?”

The Terra Nullius dev went a step further by adding a second piece of metadata, the “claimant”. The “claimant” stores the address of the wallet that created the message. Merriam-Webster dictionary defines “claimant” as “one that asserts a right or title”.

So it certainly feels like the intention of the dev was to create ownership, however quite paradoxically they didn’t build any means to transfer or exchange that ownership. If you can’t transfer ownership can you really own it in the first place?

In an empty world with a sole human being holding a brick of gold in their hands but with no means to transfer it due to there being no one to transfer it to do they still own the brick of gold?

I would tend to say that this does count as ownership and thus Terra Nullius does check the “token” box. It feels like it was pretty clearly the intention of the creator to create ownership over a message regardless of if they coded in a transfer function or not.

Therefore Terra Nullius should probably be considered an NFT and thankfully because others have done the painstaking work of reviewing every single contract deployed before it, it’s safe to say that it’s for sure the first.

The lead-dev of the ERC-721 standard (@fulldecent) has a great blog post that goes through all of the contracts that predate Terra Nullius to prove this.

👉 fulldecent.blogspot.com/2021/09/there-…

Perfect! Most people think it’s reasonable to crown Terra Nullius as the first NFT on Ethereum, so that’s it then. Well, not so fast. Someone made a wrapper contract that attempts to allow for the transfer of ownership.

Wrapped pieces 👉 opensea.io/collection/ter…

For anyone who doesn’t already own low id pieces of the first NFT on Ethereum this is the closest you will ever get to being able to do so however it gets a bit complicated.

It’s not a traditional wrapper in the sense that you might expect because there is no native transferability to the tokens being wrapped. Rather the creator of a message (but only the creator) can voluntarily choose to “wrap” their token into the Terra Nullius V2 contract.

In the absence of a transfer function, this feels like a reasonable solution to allow those who would like to transfer their ownership to do so. By wrapping and then transferring the message, the creator is clearly expressing intention for a transfer of ownership to occur.

This is no different than when artists have “migrated” their projects from other chains to Ethereum.

As long as transferability is frozen on one end and collectors are participating voluntarily it seems that the market is slowly coming to accept this new form of transfer of ownership in lieu of a better solution.

And what about the cross-chain bridge for all of the Counterparty assets like Rare Pepe and SoG? What if after moving your asset over to Ethereum a bug is introduced on the BTC/Counterparty side that makes it no longer possible to send it back across?

Would the market accept the ownership on the Ethereum side even without the ability to claim the original asset on the other chain because it is permanently frozen?

For those who have been around long enough to remember The DAO hack, the majority of the Ethereum community came together and through social consensus overrode a traditional transfer of ownership and thus set the precedent for forking.

Through social consensus and voting with our wallets, the NFT community has the power to do the same kind of thing when we find it reasonable to do so and I would argue that this is actually already happening.

It feels like we are heading in a direction where ownership of a digital asset will be traced back not only by reviewing the ledger for traditional transfer transactions but also for transactions where the current owner voluntarily expresses intent to transfer ownership.

This might feel uncomfortable to some and I have no idea if this is a good or bad thing, I am merely pointing out a trend where the market is beginning to value assets that rely on this broader definition of ownership.

After spending the last couple of days thinking about this I would like to propose a framework for how we should determine what an NFT or ownership is. Rather than thinking in binary terms and having strict definitions, I suggest we evaluate NFTs and ownership on a spectrum.

To determine where an asset falls on the “NFT spectrum” or “ownership spectrum” you have to look at which boxes it checks. This maps better to reality and how the markets are currently determining value.

Some believe that Curio Cards aren’t an NFT because they don’t check the non-fungible box due to there being multiples. Some believe an NFT must be fully on-chain to count. And there are countless more definitions.

The bottom line is that if you think in terms of a spectrum it becomes easier to reconcile the fact that all of the non fully on-chain projects still have very high market caps. Who are we to set a strict definition if the free market is clearly valuing them as NFTs?

Projects like CryptoPunks that check a lot of boxes will have multi-billion dollar market caps and projects like NumberBoard with an infinite supply and thus don’t check as many boxes will have lower market caps.

I realize that due to the nature of this space we all have incentive alignments that skew these conversations but that’s okay and totally natural. All that I ask is that we show one another the same respect that we would like to receive.

Divisive language such as the words “scam” or “worthless” only serves to shut down discussions. We should strive to create a culture of having considerate, civil, and open-minded conversations. Putting down "competing" projects is always a bad look.

I can’t emphasize enough how appreciative I am of everyone who is helping to push these vital conversations forward. It’s very important that we keep questioning and having these healthy debates. I am very much looking forward to hearing everyone’s thoughts on this.

I’m incredibly proud to be a part of the NFT Archeology community and the NFT space as a whole and have complete confidence that over the coming years we will navigate hard questions like these while balancing healthy skepticism with humility. ❤️

Update: Literally as I was tweeting this thread out someone claiming to be the original Terra Nullius dev has just emerged in the discord. I would very much like to hear their opinions here. If I am getting something wrong please let me know. I want to discuss all angles.