NFTs 101 with Eric Pulier & Craig Sellars
In a Nutshell
Eric Pulier and Craig Sellars originated NFTs in 2015 as state-changing tokens bridging physical and digital worlds, enabling unique, non-fungible representations of real-world items like a warming beer on blockchain for decentralized ownership and identity. Key innovations include Virtual Atomic Digital Matter (VADMs), over 30 million minted by Fortune 500s, powering metaverses, DAOFs (autonomous lifeforms), DeFi, governance, and applications in real estate, healthcare, education, and unbanked economies. NFTs evolve scarcity to digital objects, unlock trillion-dollar value via provenance/timestamps, and drive participatory DAOs, with practical adoption accelerating despite regulatory hurdles.
These notes were generated by AI and may contain inaccuracies.
In January of 2015, after building the prototype, during lunch with Eric Pulier and Reeve Collins (CEO of Tether then), Eric described tokenizing a beer: take an image of a beer on phone, swipe to bartender to redeem. Discussion started with redeeming digital dollars (fungible), extended to physical items like bottles of water.
The innovation wasn't the digital image (now common in NFT craze), but Eric's idea: if not redeemed in days, beer gets warm—changing state of a token, making it unique. This enables representing finite, non-fungible real-world items on decentralized, peer-to-peer, permissionless blockchain. NFTs conceived 6 years ago by Eric Pulier and Craig Sellars.
We have the ability to change state of a token and make it unique. That is the most important invention we've ever seen.
This is the permeable membrane between virtual and real worlds, dissolving boundaries.
Eric ran DECA, inspired by Dean Kamen (greatest living inventor). Dean challenged: distribute clean drinking water to nations without monetary systems or identity, create microtransaction system. Core problem: identity—to own something (digital goods like physical), you must be somebody. Needs decentralized identity system underpinning NFT movement. World wasn't ready; Eric funded it, Craig worked on it. Now Craig focuses on it at keychain.org.
Released codebase at keychain.org with developer docs for self-sovereign digital identity. Building company for on-ramps; white paper soon. Three components from Eric and Craig's ideas:
- Declaration of yourself
- Attestations/claims about yourself or others
- Delegate authority to others
This creates your own NFT—you are a non-fungible digital item. Ties to wallet: you are your wallet. Fundamental for ownership of digital goods.
Evolution of online engagement: early email → message boards → silos (Prodigy, AOL) → World Wide Web (Tim Berners-Lee's hypertext layer). Then static → dynamic → semantic pages, e-commerce.
Next step (as big as WWW): identity + ownership + social canvas extending to AR/VR persistently. Creates metaverse—future of human engagement across sectors.
Recent insanity: artists as primary adopters. Early: Spells of Genesis (playing cards), CryptoKitties (crashed Ethereum). Now OpenSea, decentralized platforms for scarce digital art (painters, sculptors, musicians).
Bitcoin's innovation: digital scarcity (fungible). NFTs: non-fungible scarcity for physical objects (art, sculpture, antique, wrench) on blockchain.
Like Tim Berners-Lee's text hyperlinks → images (W3C women dancing) → multimedia → movies → JavaScript. VADMs (Virtual Atomic Digital Matter?): thumbnail portal to interactive app. Beer image in wallet gets warm; digital refrigerator cools it.
Future: every app on phone an NFT.
Creatives entering (not just geeks) create alchemy. Artists express imagination tangibly. Innovation: network-aware scarcity—changes state by weather, sports scores, interactions. Living conduit between creator/owner, cuts middleman, elevates fandom, creates evolving value-based relationships.
VADM NFTs create communication pathway. Over 30 million VADMs worldwide; most common NFT minted by Fortune 500. Built 5-year scalable IoT-like infrastructure for interaction with environment/people.
Next: social canvas connecting people, massively scalable social world to bring humanity together.
Birth of multi-trillion dollar economy as humanity moves between real/virtual worlds.
Twitter: @OmniCraig, @Pulier_Eric.
Beyond digitizing physical: pull infinite digital objects into real world via AR (e.g., Pokemon Go GPS coordinates). Infinite digital possibilities vs. finite physical.
Peter Diamandis gave Bitcoin at Abundance 360 2014 ($50k tickets). State change for humanity/economics/ownership/interaction. Digitization: deceptive → disruptive → dematerializes, demonetizes, democratizes (BOLD book).
Speculative frenzy (gambling, downfalls, fraud, wash trades, fake blockchains). Like .com bust (pets.com), but here to stay—90% engagement value.
Built on giants: Gunther Thiel, Lucas Fleury, Alistair, Farquharson, Ashish. In months: education, healthcare, government.
- Pharmacist: NFT digital twin prescription, HIPAA-compliant chat, contraindications.
- Education: metaverse gifts/micro-rewards gamify attention/memory.
- Shopping/marketing: post-advertising aligns values, gifting.
5 months: dramatic change; 5 years farther.
Started with distributing value to unbanked via micro-economies, NFTs + DeFi. Policy-based NFTs: distribute school books, bus rides for electricity credits, redeemables at light speed securely.
Craig's project banks unbanked via digital identity (unique snippet: declaration, attestation, delegation).
Permissionless, peer-to-peer, uncensorable value exchange + delegation = decentralized governance. Delegate votes (e.g., women's rights to expert; space to Peter). True participatory democracy: Congress as GitHub—citizen pull requests, representatives sponsor via delegation.
Fortune 500 (90% known cases) building with VADMs. Practical, adoptable now; watching flower blossom.
Future intercepts GPT-3/4, Apple AR/VR, Starlink, distributed 5G. Living in multiple worlds, moving atoms/NFTs between. AI + NFTs = autonomous digital objects. Applied AI to NFT for most sophisticated use: make a dog.
I call them distributed autonomous life forms (DAOFs), the first version of the Intel Corporation, where they made very basic butterflies and released them into New York City. People could chase them around in augmented reality (AR) and get gifts and donate to a charity. You caught it and they were able to hold things. That was the inception. Their brains were primitive; they only knew how to go in circles. Now this dog NFT on Ethereum has behaviors, gets thirsty, goes to get a drink, notices if you're nearby, and comes over to you.
This matters as we extend AR and VR because it's not just a better game. This is an extension of reality. What makes the brain understand reality is persistence: when you leave something there, it's there. If you pick it up, it's gone for everybody. That consensus around reality makes something perceived as real. This world of distributed autonomous lifeforms allows the dog to leave through a wormhole in the metaverse or VR version of the web, walk out into Central Park, and you can look at it with your phone or eventually glasses. It'll be there in one place at one time. If you pick it up, it won't be there. If it walks back through the wormhole, it returns to the world, visible to people with digital avatars. That persistence and connection between worlds makes this an extension rather than a silo.
Pam's question: What app, software, or hardware do I need to get into the artist's NFT market?
You need a phone and internet connection. For an artist wanting to mint an NFT, simplest use case: scribble on a napkin at dinner, take a picture, and mint it via platforms like VAT on, Nifty Gateway, Rarible, or OpenSea. Google NFT for simple NFT makers.
Advice: Market is flooded due to democratization, so stand out. Marketing and community slipstream are key, like becoming #1 on Billboard charts. Get creative: Does it change? Wear an umbrella when it rains? What does it combine with? What story does it tell?
Objects plus story equals treasure. That's where you make money. What's the narrative around it?
Gordon Bowen quote: objects + story = treasure.
Lena's question: Introducing NFTs for online business retailing gold/silver collectible physical coins without confusing customers (thinking it's an altcoin).
If creating a digital token redeemable for actual gold coin, serious regulatory concerns: CFTC, securities regulation. Exchanges like OpenSea may not list if considered a security.
If just a token looking like a gold coin with branding/designs, no issue. Altcoins are fungible; no wallets represent them as coins. Interfaces describe the difference.
Tip: Interface should clarify, e.g., coin flips to show if bearer bond for exact gold amount (tethered) or digital twin of exact coin. Be clear with metadata.
Judd's question: If $50,000 or $5 million to invest in three coins/tokens for two-year lockup, what to pick?
Not investment advice. Paraphrasing Brock Pierce: Invest in yourself—education, platforms/teams that inspire you, gut instinct over picking coins.
Lewis's question: Can an NFT be assigned to a civil address (property/unit in high-rise)?
Yes. NFTs improve complexity of title, ownership bureaucracy, paperwork, fraud. Great use case for provenance. NFT doubles as IoT device: tells about property, chain of title, assurity of ownership.
Caveat: Possession of NFT has no legal standing without title. Government/governance not caught up.
NFTs suited because real estate non-fungible. Tokenized real estate discussed 5-6 years; now possible with NFT tech.
Example: Stradivarius violin tokenized; own a piece.
Structure: NFT for real estate, high-rise, units; fractionalized tokens for 1% of unit. Gives rights like 1 day/decade stay or income stream portion.
Hurdles exist but happening. Infinitely divisible; state change pops rewards like free night at condo/dinner for holding 3 months.
Applies to stock certificates: e.g., U.S. Steel token explodes with gift for holding.
Network-aware, state-changeable tokens apply to everything, but comply with law (taxes, securities). Work with rule-makers.
Everything becomes network-enabled, dynamic, interactive; develop relationship, hope for evolution.
Brand = indefinable relationship; pay more despite Amazon cheaper replicas.
James's question: Aside from art, what industries adopt NFTs? Why? How?
Evolution of online engagement: identity + ownership + social canvas extending to AR/VR. Can't unsee impact on classroom (retention, attention, education), healthcare (exchange objects, selective access via identity to records).
Re-examine everything. Like evangelizing websites: now everyone wants better engagement with employees/businesses/consumers.
Question: Right team to convince local governments to accept NFTs/titles? How to start business?
Use lobbying orgs: Coin Center, Chamber of Digital Commerce—blockchain brain trusts.
Regulators see wall of water. Engage via those riding the wave. Caitlin Long in Wyoming (blockchain-friendly; form DAO as LLC).
Start county/city level: auditable blockchain title, immutable records, government co-attests as custodian.
Steps: Educate, pilot programs/testbeds for efficiency. Be patient; push reform.
Nikki's question: Best steps to apply NFTs to emerging DAO creating communities?
Native to DAOs: self-governed by owners/participants. Incentive structures, reward pro-social activities.
NFTs as policy-based, changeable objects interactive yet retaining value. Affect rewards via reputational score in action context, with floor.
Caution on reputation: Age-old; prone to gaming (China, Black Mirror). Blunt rewards create those behaviors.
Prefer Google opaque algorithm: general principles voted on; reputation rises/falls within architecture. Avoid direct reward-chasing.
Identity + reputation levels playing field, lifts repressed (e.g., genius in wrong geography/religion).
Story applies to people too: with identity, you are the NFT. Rising story = community rewards.
DAOs beginning of better world; early stage. Avoid 'experts'; debate/mold together.
Amanda's question: NFTs = manufactured scarcity like diamonds. As digital reliance grows, used to restrict digital access? Implications?
Decentralized identity works for Federal Reserve to refugee (free entry). Full spectrum: free digital objects for attributes to multi-million art NFTs.
Entry free, scales with resources—covers world.
Uses: Tickets/keys restrict access (e.g., metaverse back room). Trade on utility.
SpatialWeb.net: Build native NFT metaverse, NFT key for $9,000 back room.
Philosophically: Accommodate unbanked for global economy access. Everyone generates value; digital identity/NFTs retain/exchange it worldwide.
Abundance mindset: every year more opportunity. NFT limited term; need new like VATs (virtual atoms) or digital objects for evolutions beyond images.
Human brain equates scarcity with value. People collect coins, stamps, bottle caps—no inherent value if unlimited.
Physical items like stamps, coins, or bottle caps gain value through scarcity, flaws, or verifiable stories. If you could print a thousand copies, they would have zero value. People collect scarce, unique things and trade for them, enabling value transfer in the physical world.
In the digital world, MP3s, apps, or website URLs lack value because they are easily replicated—there is no one-of-one. A photo of the Mona Lisa can be copied endlessly. Scarcity psychology assigns value to unique items.
Virtual goods in games have been traded for decades, creating a massive business, but face limitations: they can be duplicated, and if the game dies, the goods die. Blockchain provides an independent trust source to certify an item as one-of-one, track and trace it, ensuring authenticity. This transfers the brain's value assignment from physical to digital objects.
A virtual atom is a digital object made of bits that cannot be copied, duplicated, or double-spent, making it a true NFT with unique value.
I'm going to make an NFT out of that explanation. And I will buy it.
Question from Tim: Could NFTs replace trademarking or patenting?
NFTs won't replace patents or trademarks, but they are an all-time great use case, especially for patents. Patents are hard to transfer due to patent trolls who buy them to sue. Tokenizing a patent as an NFT makes it simple, tradable, and liquid.
Putting patents on the blockchain unlocks dormant value—trillions in patents could become liquid assets. People with inherited patents sitting in poverty could benefit without resources to exploit them. Liquid patents via NFTs are astounding.
Blockchain timestamps information, establishing provenance and prior art. Recording an idea, process, trademark, or phrase on blockchain provides permanent evidence of first conception, which others must recognize.
Marketplaces enable trading; people buy undervalued assets for liquidity, creating wealth and increasing velocity of capital, ideas, and creation.
Thanks to Eric Pulier and Craig Sellars. Eric is one of my dearest friends; grateful for Craig's brilliance and the Abundance Digital community.
Extraordinary content for entrepreneurs—hundreds to thousands of billion-dollar companies will be built on this capability in coming decades.
Next webinar: Wednesday, June 2nd, 1 p.m. Pacific Time with CEO of Chef Robotics. Robots in kitchens cooking gourmet meals via app, with Amazon delivering components for perfect results every time.
Thank you, Peter.
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