Humanity has found usefulness and value in Earth’s natural resources, and thus has learned to transfer that value from older systems of exchange such as bartering, to systems in which we exchange coins, paper money, and today, on the frontiers of the internet, with Bitcoin, Ethereum, Solana and more. With each of these shifts (e.g., bartering to coins; coins to paper money, etc…) our lives, economies, and cultures have transformed.
But now that we’ve paved the roads into this new digital frontier, what discoveries are there to be made in our newest economy? What values lay hidden within our internet? Or, do we create the value?
A Token Economy
Currency & Digital Currency
Let’s compare the real world and crypto now. There are 180 currencies (i.e. ₹, .د.ب, $, MT) across 195 recognized countries –allowing us to buy goods and services. However, in our new digital frontier, there are just over 18,000 cryptocurrencies across multiple blockchains; although 45% of those are not active tokens, which leaves us a whopping 10,000 coins that allow us to purchase things both on the internet, and in real life!
What’s cool about digital currencies? All the tokens and coins working on the blockchain are basically interchangeable!
Assets & Digital Assets
Homes, land, cars, computers, clothes — anything we personally own — are our assets. These things hold personal value — as well as monetary value that’s tied to currency. With the advent of the non-fungible token (NFT), we introduced digital assets to the internet which has led to a surge of interest recently. One of the asset creations we humans came up with? Digital art!
Note: An NFT is by definition a unique digital asset. But NFTs don’t have to be viewed as a specific token with unique characteristics, such as a piece of art. In fact, unique doesn’t need to be thought of as a limited supply of just one quantity. One can have two (or more) examples of the same digital art, but each one is actually unique on the blockchain.
What’s cool about digital assets? You can own these items, which may accrue even more value over time! The internet is not just for big corporations — you too can have skin in the game as we head towards the future of our digital lives.
Though it doesn’t demonstrate the full value of NFT technology, right now there are many who are capitalizing off the hype of some NFT projects using the NFT flipping strategy — turning their profits into real world value for themselves and their families.
What’s the NFT Flipping Strategy?
Users mint an NFT and sell it fast to get a good percentage profit (e.g. a minimum of a 100% ROI within minutes). Then they may buy it back — after the typical correction that these NFTs have in the first week.
But First, Why are There Different Chains?
There are many blockchains, different ecosystems, and many projects on each of them. Here’s a short list of some popular chains below:
- Solana ($SOL)
- Polygon ($MATIC)
- Ethereum ($ETH)
- Binance Smart Chain ($BNB)
- Cardano ($ADA)
- Bitcoin ($BTC)
Differences between chains are mainly about stability and the widespread use of the chain. While not the oldest, Ethereum, a successor to Bitcoin, is one of the most stable blockchains we have today. Solana is new and has attracted lots of eyes. Each chain has its own pros and cons, whether that be the expensive gas fees that Ethereum has or the struggle in stability that Solana has experienced.
Note: While on the outside high gas fees may be unattractive, they do have good effects — they help to deter scam projects.
Why Should You Care About the Chain?
If you’re going to own tokens you can begin to think of yourself as a retail investor — where the point is not in choosing one chain over another, but rather in choosing the project(s) with the concept and roadmap you like the most.
Note: In the NFT space, it is more common to think of those who own an NFT not so much as an investor, but rather as a fellow community member of a select few that get specific rewards and perks, which become some of the additional value for owning that asset.
Why Do Projects Choose to Launch in a Particular Ecosystem?
Some projects have in-house developers that know the network language of a particular blockchain, and choose to build a project based on their human resources. But if that’s not a factor, some teams select various chains based on a number of factors such as: costs, likability, or the opportunity to become a pioneer in one of these early ecosystems, where the team can take greater risks to be the first one (or among the first ones).
A Brief Timeline of NFT History with Examples
- 2012: Some claim that Bitcoin’s Colored Coins, created in 2012, are the first example of NFTs in history.
- 2014: Yet, others consider 🎥 Kevin McCoy’s “Quantum” NFT, minted on the Namecoin blockchain to be the first NFT. The debate continues to this day.
- 2015: The first usage of NFT and blockchain technology in a game called Spells of Genesis; they were not only pioneers for issuing in-game assets onto a blockchain, but they were also among the first to launch an ICO: Spells of Genesis funded development by launching a token called BitCrystals, which was used as the in-game currency.
- 2017: (June) Another NFT initiative that became a symbol of NFT technology is CryptoPunks. John Watkinson and Matt Hall algorithmically generated 10k pixel art characters on the Ethereum blockchain, using a custom contract.
- 2017: (October) The first widely-recognized implementation of NFTs was CryptoKitties that inspired the new ERC-721 standard for Ethereum the next year.
- 2018: ERC-721 standard is introduced to the world which describes how to build a non-fungible token for Ethereum
Note: Other chains are developing their own standards.
Contracts, Standards, and Blockchains — Oh My!
Because each of the blockchains we mentioned earlier have to follow specific rules within their respective chains in order to create and fulfill the desires of their respective projects, standards — the sets of rules — are created so that anyone who wants to develop or create something on the chain can do so. We like to think of this as standards as a building block or even as a cookie cutter — whereby, you’re not beholden to a particular shape of the cookie-cutter, but you can use the aggregate of multiple cookie-cutouts to create even larger creations on the respective blockchain.
Though the current sentiment towards NFTs seems to be mostly focused on short term gains via the NFT flipping strategy, we are still just at the very beginnings of NFT technology.