The Economic System build by Fiat Currency is obsolete While we talk of global economy, fiat currency: USD, Euro, Yen are still local. Nowadays e-commerce giants like Amazon and Taobao operates all over the world. But the currency the customer pays is seldom the currency the producer receives. It means there are many currency exchange transactions hidden in a simple purchase. It creates friction and costs.
Tokenomics is simply the amalgamation of two words: Tokens and Economics. So what is a token? According to Merriam-Webster Dictionary, it is “a piece resembling a coin issued as money by some person or body other than a de jure government. “ In essence it can be anything that represents legal money or anything that is of value. Based on this definition your Octopus Card is a token, your Starbucks Card is a token and a share of a stock is a token since they all represent something of value. Their values are recognized by the central authority and are protected by legal means.
A group of crypto enthusiasts, who get rich from cryptocurrencies, is interested in NFTs nowadays. They sell their cryptocurrencies to buy NFTs. They consider buying cryptocurrency is a kind of speculation, but they consider buying NFT is same as collecting art piece. For NFT investors, digital art minted as an NFT is same as a physical oil printing. Traditional art collector will hang the printing on a wall. Similarly, NFT holder will show the digital art on LED monitor. Furthermore, they feel themselves more superior, because they are supporting their favourite artists financially.
Who spent the most on a digital art?
The most expensive digital art, Everydays: The First 5000 days created by Beeple, was bought by the founder of the world’s largest NFT fund, Metapurse. Metakovan, the pseudonym of the buyer, paid 42,329.453 ETH to settle the transaction and said in a statement released by Christie’s. “When you think of high valued NFTs, this one is going to be pretty hard to beat. And here’s why – it represents 13 years of everyday work. Techniques are replicable and skill is surpassable, but the only thing you can’t hack digitally is time. This is the crown jewel, the most valuable piece of art for this generation. It is worth USD 1billion.”
Mar 2021 was a month of NFT Carnival, and Crypto people fell into fever.
On 11 Mar 2021, Christie’s, the big traditional auction house recorded a single digital art sold at USD 69,346,250. The art, which did not exist in physical form, was created by Mike Winklemann whose pseudonym ‘Beeple’ and minted as NFT on 16 February. He stitched his daily creations in his past 13 and a half years together into one whole piece and called it ‘Everydays: The Frist 5000 days’. Every individual piece can be zoomed in to reveal picture. All a sudden, many news reporters discussed about the auction sale and NFT gains huge attention from mainstream.
Who are trading NFT?
High tech celebrities also enjoyed the fun, too. The Co-founder of Twitter, Jack Dorsey, published his first tweet and minted it into NFT. His first NFT tweet was sold at USD 2.9million. The world’s richest guy, Elon Musk, made song about NFT and sold it as an NFT. His fans just bought like crazy. Furthermore, his wife Grimes, who is an Electro-pop musician, sold her NFT digital art collection called “WarNymph” as an NFT last month for USD6.3 million in 20 minutes.
Other sale in NFTs
Some other NFT products also performed very well at the same time. 3LAU sold digital album and digital goods for U$11 million. LeBron James’ Slam dunk NFT digital clip was sold at USD 200,000. Logan Paul sold his NFT video clips, which could be watch on youtube for free, for upto USD 20,000. A small digital art called Gucci ghost was sold at USD3,600. Lastly but not the least, a green CryptoKitty, was sold at USD 600,000. However, the Deeper Labs gave a reminder that most of the CryptoKitties were not sold at high price. Only the special creatures were expensive.
Anyway, there are few albums very popular, performing persistently over a year. Their bid/ask prices, historical data and trading volume are listed on NFT marketplaces’ websites. The NFT market capitalisation of CryptoPunks collections has been going for over USD 119.9million.
NFT is a Non-Fungible Token embedded in a Blockchain network. Digital contents, including digital image, digital art, digital song, digital music, digital video, digital sticker, digital document, online game, virtual real estate, e-book and tweet, can be minted as an NFT in the blockchain which will be immutable.
An NFT cannot be divided into smaller size, and it exists as a whole piece. One NFT can only be linked to one single digital content, but a single content can be linked to more than one NFT. Each NFT is unique and it cannot be replaced or exchanged, which is unlike Bitcoin. A digital game CryptoKitty in green colour in form of NFT has different value to another NFT of CryptoKitty in pink colour, therefore they are not exchangeable. However, a Bitcoin can be split into many fractions. A Bitcoin has the same value as any another Bitcoins, so they can be exchanged.
NFT cannot be destroyed or removed, because it is stored via a smart contract in a blockchain. Ownership of NFT is recorded and immutable, where the history of ownership information can be found on blockchain. The first owner of NFT is usually the digital content creator, which can be represented as a certificate of authenticity as well as a virtual signature of the creator. Of course, when the NFT is transferred to the buyer, it will also become a proof of ownership for the buyer, too.
Where do NFTs live?
NFT firstly appeared in Ethereum ERC-721 on 21 October 2015. The first tradable user-generated content of NFT was available on 13 November in London. Proof-of-Stake (PoS) verification method is used in NFT transactions. Although it consumes less energy than another consensus algorithm, i.e. Proof-of-Work (PoW), NFT is still criticized by environmental organisations, as a study revealed that for an average single-edition NFT, its carbon footprint could be as high as driving a car for 1,000 kilometers. Nonetheless, Ethereum ERC-1155 introduces the idea of ‘semi-fungibility’ to the NFT world with a lower transaction fee, incorporating an ERC-721 asset.
Alternatively, the Simple Ledger Protocol (SLP) can also be used to support NFTs by minting an indivisible token. Using this SLP token structure, NFT1 was introduced onto the Bitcoin Cash blockchain in 2019.
Flow is the other blockchain which also has NFTs running. It is created by Dapper Labs, the team behind CryptoKitties which is a digital game for players to purchase, collect, breed and sell virtual cats. In 2019, over 2 million on-chain transactions were generated by nearly 100,000 CryptoKitties owners, occupying 10% of network traffic in Ethereum. The Ethereum network was almost halted and the speed of transaction was slowed down significantly, so Dapper Labs decided to build their own chain. Flow, which also adopts Proof-of-Stake, offers a lower transaction cost for users. Importantly, Flow NFT can only have 1 owner, who cannot be copied, duplicated or destroyed, which ensures the real value preservation and safety protection. CryptoKitties are migrating from Ethereum to Flow. Upgradable and extensible smart contracts will be available after migration.
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