Crafting New Value with Existing Tokens
Extending the value of existing tokens to unlock new value that didn’t previously exist
Where we are today
Non-fungible tokens can be bought with a store of value (Ethereum) or a fungible token from a specific game. We can create our own non-fungibles with FanBits and sell them for Ethereum. We can take non-fungibles and apply fungible tokens to them with KittyHats.
We’re at a point where dApps and platforms are at the center of their own ecosystems. Developers are creating their own dApps and expecting other developers to build on top of them, pushing for an entire community to be formed around their experience.
Developers lack certain incentives to build on top of another developer’s platform because the financial reward isn’t currently there. Creating a strategy for developers to build “layer 2 experiences” are means of an experiment more than a viable business model in its current state.
Non-fungible tokens are created for their native platforms, but hardly anyone uses existing tokens in larger contexts. Tokens should also be considered as a resource for a larger manufactured, digital good rather a standalone digital good.
Combining fungible tokens with non-fungibles to create value
Non-fungibles have been praised because of their extensibility. We can build these Layer 2 Experiences like KittyHats and Kitty Races to make CryptoKitties more valuable.
We can do the same thing with fungible tokens.
We can combine existing fungible tokens to have them as an ingredient in a recipe rather than a token native to its own network. Instead of using Augur as a work token, it can be burned to acquire a new output.
Crafty on the surface, is a recipe-creation game made by Matt Condon of XLNT and Nick from Zeppelin. Anyone can create recipes using other tokens to create new items. All tokens in Crafty are fungible (for now).
Let’s take a look at an example in Crafty. Let’s say I want to craft this trophy in the Crafty registry.
I’ll need the following tokens in order to craft the Trophy:
In order to craft the trophy, we’ll need to acquire some Augur and FTBL tokens. FTBL tokens can only be acquired through crafting.
In order to craft FTBL, we’ll need to craft Tools and Rocks as well. Like FTBL, Tools and Rocks can only be acquired through crafting.
But what if to create a FTBL, a crafting component wasn’t required, but a token awarded on another dApp?
KittyQuest
Maybe in order to craft that trophy, you need to acquire a CryptoKitty, race it in KittyRace, and acquire a Kitty Trophy (instead of ETH as a prize) The Kitty Trophy will be used as an ingredient in order to craft the Trophy (proof-of-win?)
KittyRace now becomes a step in a much larger quest rather than it’s own dApp. KittyRace is now part of a larger interoperable story, and anyone can incorporate Kitty Trophy as part of their crafting recipe, making KittyRace a more valuable dApp than its standalone state.
You can have an entire Kittyverse of dApps, each dApp with it’s own token, and you can craft each token into an accessory for your CryptoKitty. Fungible tokens can also affect the attributes of another non-fungible item by acting as a consumable.
We can use fungible tokens to create specific attributes for a non-fungible token using composables as well.
We can combine different tokens (fungible and non-fungible) to create new non-fungibles. In this case, a civic shirt can now become a non-fungible token represented by the burning of 5 CVC tokens and a CryptoKitty. This non-fungible shirt with the Civic logo can now be worn on your CryptoKitty representing your loyalty to Civic.
A completely new way to shill your favorite shitcoin!
Any single user can create this recipe, without the permission of Civic and CryptoKitties. If 1000 CVC NFTs were to produced, 5000 CVC tokens and 1000 CryptoKitties will be burned, creating an entirely new component of the token economy.
What Next?
Brands can now create their rewards for completing a set of tasks through a dApp like Crafty. Brands will be able to set the token reward and what tokens are required in order to receive the item.
Instead of creators selling their non-fungible tokens (digital art, cryptocollectibles, FanBits) for Ethereum, creators will be able create a requirement of specific tokens, making the transaction more of a quest rather than a transaction. While burning tokens are the current implementation, soon you’ll see users be able to trade their non-fungible token for an entire set of tokens through relayers.
I’ve created the first meme quest for you here. CZ is unstoppable. He’s like Iron Man. He wants a new iron man suit, built like a rock, powered by the tech of Golem. In order to craft Iron Man CZ (below) you will need:
- 50 BNB
- 5 Rock
- 30 GNT
TL;DR
- Non-fungible tokens are provably scarce, digital goods on the blockchain.
- Non-fungible tokens have extensibility, and can have new experiences built on top of them without the original creator’s permission.
- Fungible tokens can also have extensibility, and can become an ingredient or a single part of a much larger story.
- Creators and Developers can award tokens instead of a store of value to make dApps more interoperable.
- Creators can accept a variety of tokens to host their own quests and stories, making the reward or token perhaps more valuable
More Reading Materials on Non-Fungible Tokens and Extensibility
I like to write about the weirdness of the interoperability of tokens in my weekly non-fungible token newsletter, Not-So-Fungible Weekly. You can check it out here. Thanks to Ben Sparango, Gage Valentino, Allen Hsu, and Chris Cable for their feedback.
