Hello everyone, this is BORA team.
Recently, NFT (Non Fungible Token) has grown in its importance amongst the blockchain community. The meaning of digital asset ‘ownership’ has been solidified due to variety of industries implementing blockchain technology.
Especially when utilizing NFT, the existing digital asset ownership disputes can be solved.
BORA, as a service platform for diverse range of digital contents, has been focusing its efforts to actualize BORA’s own NFT. We’ll be introducing the articles of the BORA’s NFT in three parts. And in part 1, we’ll be explaining the basic information of the NFT and its distinctive characteristics.
What is ERC-20?
Before we dive into the NFT’s non replaceable nature and its uses, explanation of ERC-20 is needed for your understanding of the whole subject. Those who are accustomed to the Ethereum network, will be familiar with the term ‘ERC-20’.
First, ERC stands for ‘Ethereum Request for Comment’. In simple terms, it is the protocol to follow when making tokens in the Ethereum network.
And amongst those protocols, 20th protocol is the ERC-20. And the cryptocurrencies that are produced from this protocol are ‘ERC-20’ tokens. Most of the tokens created within the Ethereum network, including BORA, has been created based on ERC-20. Ergo, these cryptocurrencies can be traded with the native Ethereum currency (ETH), and with other ERC-20 based currencies. Furthermore, the tokens can be transferred freely using ERC-20 token supporting wallets such as My Ether Wallet (MEW).
Purchase, sell, trade with equal values: ‘ERC-20 token’
ERC-20 token’s most significant characteristic is the fact that, it doesn’t matter who holds it, it still possesses the same value. Thus, it is like the currencies that we use in our daily lives. $10 note holds the same value, no matter who’s in possession of it, and so is the ERC-20 token.
If we use BORA token as an example, If James and Rachel both holds 1 amount of A token each, both are of the equal value. Therefore, if they choose to use the same exchange for trading, both can trade it for the same value. If, Rachel can trade A token with ETH(Ethereum) with the ratio of 1:1, others including James can also trade the A token with the same rate.
Ethereum’s NFT (Non Fungible Token), ‘ERC-721 token’
Then, what is so different about ERC-721? ERC-20 token is replaceable, but ERC-721 token is not. In other words, ERC-721 token is the NFT that is implemented within the Ethereum network.
Like the analogy of dollars for ERC-20 token, ERC-721 token is like that of an object.
If we were to draw a lady bug and called it ‘Lady Bug’. The drawing will be a one of a kind drawing that has the name ‘Lady Bug’. In this example, the drawing process is referred to the process of making an ERC-721 token, and the drawing ‘Lady Bug’ would be the actual ERC-721 token. Thus, an ERC-721 based NFT ‘Lady Bug’.
Another interesting feature of the NFT is that, the ownership of the token can be divided like shares. The partial ownership is allowed, and therefore can be divided in to 1/n and traded. The ‘Lady Bug’ with the value of 100ETH can be owned solely by James, if he decides to buy the NFT with 100ETH, or James can purchase only 10ETH worth of the NFT and own 10% of the token, and Rachel owning 90% of the token by purchasing with 90ETH.
The sales and purchase of NFT is not limited to online market. Offline products such as automobiles can implement ERC-721 token onto the product and the ownership of that product can be traded online. In case of music industry, the ownership of a song can be divided into shares and the profit can be allocated according to the amount of ownership one holds of that specific song. Like the examples above, there are many ways to utilize ERC-721 based tokens. And recently the game companies have released games that have implemented the ERC-721 tokens onto their game features, let’s find out how they have managed this.
Games that utilize ERC-721 token: Crypto Kitties and Decentraland
Most recognizable game that utilizes ERC-721 is the Dapp Crypto Kitties. The users collect and mate their kitties in order to breed the rarest kitties and trade them for high value. The kitties in this game are comprised of ERC-721 tokens. NFT’S unique feature of ‘non-tradeable’ is shown by the fact that every kitty (ERC-721 tokens) is different to one another, and no users can possess same kitties (identical tokens). The kitty that I have will be the only one in the world.
The kitties are priced differently according to the rarity(value) when they’re born. Thus, the users attempt to acquire more unique kitties through mating the kitties or purchase others. One kitty was apparently sold at a price higher than $86,000, so you can imagine how big the digital asset market is!
Another case of NFT implementation can be found in the game called Decentraland, where the virtual land ownership is utilized in the gameplay. The ‘Land’ created in the 3D virtual world is made from ERC-721 tokens, same as the Crypto kitties above. The users who have purchased the land within the game possesses the sole ownership of the land and can make use of the space by engaging in different activities such as establishing businesses, build under water resorts. The corporate companies are planning to make use of these unique ERC-721 based lands to open virtual shopping malls and casinos. One cryptocurrency wallet company Ripio believes in the potential of Decentraland and has purchased the game’s main square where users first arrive.
The appealing quality that both games possess, is the fact that ERC-721 tokens of the users are not limited to its service. In other words, users have the sole ownership of the ERC-721 tokens and other than using it in the game, it is also possible to trade them within the Ethereum network, thus converting the digital assets into ETH.
(Please be advised that prior consultation with CryptoKitties and Decentraland has been completed regarding the case presentation.)
NFT pros and cons through ERC-721 token
As you’ve read from above, NFT plays a significant role in guaranteeing the ownership of digital assets for users.
Digital assets in existing system were not solely owned by users. For example, in games, the items that users acquire by investing their time and money, is only useful or guarantee its value limited to the actual service, and the assets are erased if the service was to shut down. Which made the efforts and resources of the gamers, pointless. However, if NFT Is implemented, all kinds of digital assets can be stored in the blockchain system, with ownership guarantee and safer protection. The records within the blockchain will prove ownerships, and the assets are easier to trade between users due to the system. Thus, making it easier for users to manage their digital assets and utilize them.
However, through the cases of ERC-721, there were issues when implementing NFT. When Crypto Kitties became quite popular, excessive amounts of trade volume occurred in short period of time, which caused strain within the Ethereum network. Which inevitably increased the transaction fees (gas fee) that users had to pay. The scalability and excessive gas fee issues remains to be solved, since most NFTs are Ethereum based tokens.
BORA’s NFT: Solving the existing problems and increase the usability of digital assets.
BORA’s NFTs have try to maximize its advantages whilst overcoming the existing limitations. First, BORA provides independent side-chains for each service, through its Layer-Two system. Ergo, accomplishing faster network speed, compared to Dapps that utilize the Ethereum public chain. Naturally, the transaction fees (gas fee) are minimized thus reducing the costs that users had to bear.
Taking one step further, BORA aims to tap into the potential of the digital asset utilization, through its variety of services within the platform. The details will be introduced in the Part. 2 of the NFT series, and we’ll be show casing our NFT experience API: ‘Auction for coloring Book’.
Thank you.
BORA team
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