A NonFungible Token Stampede Is Coming
I’ve seen the future. ERC721 markets are about to explode.
ERC-721 is a free, open standard that describes how to build non-fungible or unique tokens on the Ethereum blockchain. While most tokens are fungible (every token is the same as every other token), ERC-721 tokens are all unique.
Think of them like rare, one-of-a-kind collectables. (Source: http://erc721.org)
I’ll Explain the “What” ERC721 is, by referencing literally dozens of links, blogs, videos and other resources that went into my research, underneath my post. For now I think it’s important you grasp “Why”.
I have a grand vision for the future that lays before us, and I’d like to call it a “Token Stampede.” I may be wrong, but I find it so rare that the vision of the future is so clear that I feel compelled to share it with you.
“Don’t be discouraged if what you produce initially is something other people dismiss as a toy. In fact, that’s a good sign. That’s probably why everyone else has been overlooking the idea.” ~ Paul Graham, on Startup Ideas
There is so much more to CryptoKitties than meets the eye. The World is about to experience a new economic boom in digital assets, and they will be referred to NFT’s (Non-Fungible Tokens) and DAR’s. (Digital Asset Registries). CryptoKitties Isn’t About the Cats (hint: ERC-721). In December, CryptoKitties took up 15% of the Ethereum network. Recently it was reported that the company behind these funny looking cats, the “joke” of the Ethereum network, raised over $12,000,000. This lit up a lightbulb in my head that this isn’t just about Cats. It’s about building marketplaces for exchanging digital assets and digital representations of unique assets. Whereas ERC20 represented fungible tokens that could be used as currency in an application’s ecosystem, the introduction of the ERC721 standard signals a new trend of digitally recorded ownership and decentralized trade, where ownership of a token can exist long after the companies that actually mint or create the genesis of a record perishes. These two standards will actually complement each other. Decentralized and Hybrid Centralized/Decentralized models will start to pop up, where businesses will create Digital Asset Registries for things that you can purchase with ERC20 tokens, Ether, or some combination thereof.
If you’ve been watching the Cryptocurrency and Token markets over the past couple years, you experienced the effect of crowd mentality, and have seen the effects of fear and greed in the marketplace play out in the charts. There’s no doubt that the ERC20 token standard has left a lasting impact on how both retail and fund managers speculate, as well as companies having access to alternative methods of capital raises. For the first time in decades, Venture Capitalists have had to rethink their business models due to this new form of competition for capital that did not require a business to give up a giant stake of ownership in return.
With the SEC and CFTC giving somewhat conflicting guidance on how to classify and regulate ERC20 tokens, it has left the public scrambling to self-govern, and as a result we have entered a period of “wait and see” for many companies trying to build systems with Utility Tokens, that might possibly be treated retroactively as unregulated Securities. The climate has certainly changed in 2018, and has a very different feel to the Extreme Wild West days of 2017. Legitimate businesses that have offered tokens do not want to be made an example of, so many are starting to stay as far below the radar as possible.
I argue whole heartedly that the current climate of uncertainty is stifling innovation. There is a new push towards the coming wave of Security Tokens, like the Polymath ST20 standard being the next big thing to look for — but I think navigating that area could be met with a lot of push back from the powers that be and the legacy systems and exchanges that already hold the power. I also think we must be careful not to introduce a system of exclusivity; just because an individual doesn’t have a million dollars in their bank account doesn’t mean they should be classified as “unsophisticated” and thus prohibited from investments and opportunities that they completely understand. None of us should have the goal of replacing the old, broken worn out system of elitist financial markets with a new, shiny smart contract driven form of golden gates. I entered the Bitcoin, Ethereum and Blockchain space to help empower the individual, not prohibit them.
Good news! There is an area that is untapped and innovation in this space is about to explode. Regulators err on the side of caution for investments that look like Securities and Currencies, but when it comes to collectibles and digital asset registries, opportunity awaits. Come help #BUIDL the railroads of tomorrow.
Enter the ERC721 standard, that of Non-Fungible Tokens. What started out as a “Crypto Collectible” took the Ethereum network by storm. There is a part of human nature that seems to have an affinity with finding and collecting rare items: whether it be baseball cards, rare artwork, digital Pokemon, items in a video game, or even virtual land. I actually rolled out a Token Sale contract for Loci.io during the peak of the madness. Contributors to the sale had to compete among the other network participants by cranking up their gas fees to as high as 60gwei during December.
Where many people viewed that experience and poor throughput as a fault of the ethereum network, it helped me to more fully comprehend the sheer demand for this thing we know as the World’s Computer. Access to a global resource that is public, open, global and censorship resistant does indeed have a cost. It turns out, it’s ok that a transaction isn’t confirmed in the most efficient manner, in fact that’s by design. It’s the hashpower of the network that ensures data is verified and secure. As it turns out, there is also a huge demand for these types of “trustless” transactions with people all over the world. They don’t necessarily have to be fast, so long as you can rely on the fact that the network will process it without regard for who you are and why you are transferring data. Censorship resistant trade.
It might take a bit of imagination right now, but look around you. Imagine all the unique things you see: your car — it might be one of many crappy 2003 Trailblazers on the planet, but its your crappy 2003 Trailblazer, unique with its own VIN. Perhaps the Title to that exact vehicle no longer would need to be transferred through a DMV, but through a more frictionless marketplace. Same goes for Real Estate Deeds, extremely rare artwork that resides in The Louvre, or hell — even those damn digital beanie babies.
Even more apparent to me is the fact that Companies and Individual developers alike will benefit from the consequences of this standard by benefiting from interoperability on marketplaces designed and developed by the growing community. We are about to see marketplaces pop up for items that will empower individuals to trade items with each other, that were not even created by the site owners.
Even if you are the company that creates a particular instance of an ERC721 token, marketplaces can pop up like OpenSea, and list your NFT / DAR simply because you have made the wise choice to conform to this standard. They’ve even provided a tutorial for developers on how to conform to the standard for better integration! There is nothing forcing you to adhere to every single minute detail of the standard, and in fact there are companies like @KnownOrigin_io that have started to ask the question, “Can we enhance digital asset ownership?” via James Morgan.
In addition, your company can differentiate yourself from the “generic” marketplaces by providing additional services that make your company unique; the “magic touch” that customers have come to love when looking for a more pleasant user experience. I think this Hybrid approach of Decentralized / Centralized competition is about to create the likes of an economic boom that we have not seen before, and I’m excited to see it play out.
I have accumulated a master list of resources I highly encourage you to check out. These sources range from very high level understandings of the various proposals for standards floating around, to short videos, and even some more in depth, multi-part series that I found a joy to read. I owe a debt of gratitude for those that wrote the articles below. Without their efforts, I would not truly grasp what‘s ahead. I’d like to share those resources and make sure I cite the authors so that you can thank them and learn from them as well.
Blockchain WTF is ERC721
The Anatomy of ERC721
Jumping into Solidity — ERC721 (Multi-Part Series) Andrew Parker
Examples and Reasoning
Digital Collectibles & the Weird Future of Digibles Josh Stark
Crypto Collectibles article on CoinDesk
Concrete Open Source Example: Decentralized Software License Ownership
Alternate Implementation of Software Licenses as NFT
Non Fungible Markets — Conform to the Standard and get Discovered
https://www.etheremon.com/#/market Etheremon https://opensea.io/category/etheremon
CryptoZombies Educational Tool Loom Network
The Original CryptoKitties CryptoKitties
An Overview of Non-fungible Tokens
Crypto FinalFour — Tradeable March Madness Brackets
Invasion Of The ERC-721 Tokens From Outer Space!
DARs, NFTs, and the New ERC-721
Toshi Wallet supports ERC20 tokens & ERC721
Tokenizing will disrupt the gaming industry The Merkle
NFT Implementations and Other Projects
0xcert ERC-721 Token. https://github.com/0xcert/ethereum-erc721
Su Squares. https://tenthousandsu.com
Enjin Coin. https://enjincoin.io
CryptoKitties Deployed Contract. https://etherscan.io/address/0x06012c8cf97bead5deae237070f9587f8e7a266d#code
Su Squares Bug Bounty Program. https://github.com/fulldecent/su-squares-bounty
Curio Cards. https://mycuriocards.com
Rare Pepe. https://rarepepewallet.com
Auctionhouse Asset Interface. https://github.com/dob/auctionhouse/blob/master/contracts/Asset.sol
OpenZeppelin SafeERC20.sol Implementation. https://github.com/OpenZeppelin/zeppelin-solidity/blob/master/contracts/token/ERC20/SafeERC20.sol
Dan Emmons is the Blockchain Developer for Loci.io, owner of Emmonspired LLC, a Certified Bitcoin Professional, Certified Ethereum Developer, Full Stack Developer and Advisor on Cryptocurrency projects. He is also the creator of a Youtube Channel and iTunes Podcast called #ByteSizeBlockchain.