Blockchain Use Cases: Provably Rare Digital Assets
Blockchain technology allows us to assign rarity to digital assets. Bitcoin and other cryptocurrencies all have value because they are provably rare and any changes to the total supply can be seen by the entire network. We can apply this rarity to any other digital asset we like through the use of smart contracts— whether it be a collectible or an important document.
Having a basic understanding on how blockchain technology works will also aid you in wrapping your head around some of the technicals in this piece. You can head here for a great overview on how a blockchain works.
A couple of months ago I came across an extremely interesting project that had been launched on the Ethereum blockchain called CryptoPunks.
CryptoPunks is a proof of the concept that any digital asset can be provably rare. Their service allows you to purchase a collectible character using your Ethereum address. This assigns the unique character to your address and thus provides you with a way to prove ownership. Furthermore, you are able to auction off your collectible character and also see active bids on each CryptoPunk (even if it isn’t for sale). This is all managed by utilizing a smart contract running on the Ethereum blockchain.
You may be wondering how you can make digital assets rare; couldn’t someone just duplicate it with a simple copy and paste? Yes, they could and still can. But, thanks to the power of the blockchain, we can assign rarity to a digital asset through the use of hashes. Hashes are basically a unique string of characters that is given to some data. Any changes to the data will result in the hash being different. In order for the characters to be provably rare, the creators of CryptoPunks (larvalabs) took the hash of the 10,000 unique character composite image and embedded it into the smart contract that they wrote. This way, anyone is able to prove that your character is a real and genuine CryptoPunk because the hash of the original composite image is the same as the one stored on the blockchain. So even if someone ‘copied’ your CryptoPunk, they would be unable to prove that it was genuine as it doesn’t exist in the CryptoPunk smart contract.
There exists a CryptoPunk character that is totally unique. It is the only CryptoPunk that has the alien attribute and is smoking a pipe. Due to how the smart contract was written, no one (not even the original creators of the smart contract) is able to alter how many of each CryptoPunk exist. This makes this particular CryptoPunk the most valuable by default and it currently has a bid of $1,543.21 USD on it. You can view it here.
This use case is really fascinating because it can be extended to any other digital asset that you want to make provably rare. Say you wanted to start a digital trading card game (TCG) — you could create the trading cards and then, utilizing a smart contract, assign rarity to each one and thus it now has value based on that rarity. Just like in real life, where trading cards can fetch up to thousands of dollars just because of how rare or unique it is, so to can we now apply this rarity to digital assets which creates a market for them.
Networks like district0x are extending this further with plans to implement a ‘Meme Factory’ on the district0x platform in the near future. The Meme Factory will enable people to create and trade provably rare memes with each other. I know it sounds silly, but if recent events have shown us anything, its that memes have actual influence over real life events and can be abstracted in such a way that people end up coverting them.
The ability to assign rarity to digital assets was impossible before blockchain technology. I’m incredibly excited to see what the future has in store for this use case and I’m looking forward to seeing all the interesting projects people come up with.
Thanks for reading!