As indicated in my previous blog, the IBF ecosystem needs both types of tokens, the IBFx tokens for “exchange” of values and IBFs tokens for their own “esteem” value. While the former is a fungible token, the latter has to be a non-fungible and unique one. And as we discussed, both can be issued as ASAs bringing in all the positives, such as, high level of security with layer one, high speed and low cost of transactions. In this blog, I am tempted to deal with the NFTs in greater detail, because of some recent developments that kept the spotlight on NFTs. Here is a sample of snippets that have steadily been trickling in over the last several weeks:
- Dragon the CryptoKitty is currently valued at 600 ETH (1 ETH= 2013.7 USD).
- The one-of-a-kind “1-1-1” race car from F1 Delta Time priced at 415.9 ETH (in May 2019).
- Alien #2089 – part of the CryptoPunk collection, the first NFTs ever created – was priced at 605 ETH (in January 2021). Overall, there are 10,000 different CryptoPunks and only nine Alien CryptoPunks.
- An NBA Topshot digital collectible card of basketball star LeBron James sold for $100,000.
- An Axie named Angel from the NFT-based game Axie Infinity sold for 300 ETH.
- An artwork that consisted of nothing but a single red pixel was put for sale and is currently priced at nearly $900,000.
- Twitter CEO Jack Dorsey’s first tweet NFT sells for $2.9M
- Digital artist Mike Winkelmann, better known as Beeple sold the now-famous “Everydays: The First 5000 Days,” a digital collage for $69 million in a Christie’s auction.
- NFL veteran Rob Gronkowski recent held an auction of a limited edition series of trading cards commemorating his four successful NFT campaigns. Each successful NFT title was represented by an NFT trading card consisting of 87 digital versions, while a fifth, one-of-one “Career Highlight Refractor Card” was created as a tribute to those four successful campaigns. Gronk managed to sell a total of 349 trading cards at auction for 1,014 Ether (ETH) valued at $1.8 million as well as the one-off Career Highlight card to 95 different owners for 229 ETH valued at around $435,000.
A February 2021 study from NonFungible.com estimated that the total value of NFT transactions rose 400% to $250 million in 2020. Non-fungible tokens (NFT) are digital assets that represent a wide range of unique tangible and intangible items, from collectible sports cards to virtual real estate.
Even though these appear to be interesting developments, I am inclined to contrast the same with the following:
Last week, one of the oldest (139 years old) and the biggest copyright companies in the world SIAE uploaded 4.7 million NFT’s to Algorand blockchain! This meant 4.7 Million ASAs and 19 Million transactions over last 7 days!
There is a huge difference between the nature of above two developments. With the former, I see history repeating itself. The mention of virtual estate reminds me of the dot-com days at the turn of this Century when domains were compared with virtual estate and were sold for astronomical sums. What pushed the market forward then was its “unrealistic expectations”. What drives the market now borders on insanity. Of course, some believe that NFTs are part of a digital revolution that will democratize fame and give creators control over their destinies. Others ask, “Is this trend beneficial to digital artists, or to help wealthy cryptocurrency holders get richer? Psychologically speaking, it simply implies buying some “bragging” rights. Economically speaking, it implies an opportunity to sell an NFT later for more money. Predictably, there is little sense in their valuations, often with little differentiation between bad meme art and beautiful, high-quality animations. So, is this a market where connoisseurs are conspicuous by their absence? One may argue that connoisseurs are known in all ages for their “expert” valuations that would often appear to be completely irrational to lesser mortals. Agree. But then, isn’t the inconsistency in valuation seen in the context of the “red pixel” too obvious to be attributed to hidden but rational factors?
Is the hype around million-dollar NFT art and digital collectibles unwarranted? Perhaps no, since new use cases are widely anticipated to emerge that are rooted in sanity and rationality.
Interestingly, most of the NFTs in the first category are developed on Ethereum. Proponents of this protocol assert that NFT art and other collectibles demand relatively low cost of minting as compared to games, for example. This perhaps explains the popularity of digital collectibles over games. While this may be true, critics do underline the prohibitive “gas cost” and the adverse environmental impact of the protocol. They note that minting on Ethereum protocol demands processing power, which requires electricity, and which generates emissions. As they say, bitcoin has a carbon footprint comparable to that of Switzerland, while Ethereum’s is comparable to Tanzania’s.
Experts also note that the design space for NFTs can only get larger – from its current use in the art, collectibles, gaming and metaverse domains to loyalty programs, financial contracts, tokenization of real-world objects, intellectual property and patents and what-have-you. When SIAE, a 139 years old company chooses Algorand, they are voting for secure and frictionless transactions. They know this is the best choice with 0.001$ Algo fees, decentralization, and near-instantaneous transactions. They know this is the best blockchain to bring NFTs mainstream with its security, finality, and cheap transactions! Indeed, Algorand may be the only blockchain that can handle #NFT congestion with its excellent infrastructure. NFTs can be built using Algorand’s layer 1 ASAs in seconds. Silvio Micali, cryptographer and founder of Algorand, in a recent interview with Coindesk explained why it’s ideally suited for NFTs.
“And you could do this without writing any code any in a matter of minutes not hours. That’s another one and third, I would say you have to look at our chain. It never forks and you know an NFT is a unique artifact. And when there is a fork in the chain there is a big problem. So, the fact that we don’t fork is a big advantage.” Indeed, Leonardo da Vinci would be in considerable pain – after creating his Monalisa in 1503 – to find two of them doing the rounds!
“And by the way, not only you want to generate the NFTs but then you also want them to be served after you generate it. For instance, you want to acquire the rights to NFTs and in Algorand you can do with an atomic swap it takes only a few seconds and with immediate finality. Why? Because the chain doesn’t fork.” Due to atomic swaps or similar operations in Algorand costing of one thousandth of an Algo, a lot of revenue models become possible that were not at all possible beforehand.”
Let the green and clean technology win! Let the superior technology win in the long run!
To be continued