Part 2/3: Class 1 Digital Assets
tldr: A definition, method of valuation, and example of non-fungible tokens (NFTs) and composable non-fungible tokens (cNFTs).
Background: Please Read “Part 1/3: The Value of Traditional and Digital Assets — Market and Book Value” and “What are crypto-collectibles?
Featured DApp: mokens.io, Axie Infinity,
The discussion surrounding the market value of digital collectibles and digital assets is primarily concerned with Class 1 Digital Assets, or digital assets that directly drive revenue and/or competitive advantage. Methods of valuation for class 1 digital assets are grounded in many theoretical discussions about market value.
@Jihoz_Axie, Growth Lead @Axie Infinity defines valuable digital assets as “rare things that are both powerful and beautiful.”
To achieve this, @Jihoz_Axie outlines the Triple Threat for the value of a digital collectible or digital asset:
Triple Threat of a Valuable Class 1 Digital Asset
1. Scarcity: can be defined as the total supply (quantitative)
2. Utility: can defined as the usefulness or functionality (quantitative/qualitative)
3. Aesthetics: harder to objectively define-beautiful or “officialness” (qualitative)
This is a powerful definition but not complete for composables. To determine the value of a cNFTS, one must ask: Is the whole equal to or greater than the sum of it parts? Another way to ask this question could be, what is the value add? I would like to expand @Jihoz_Axie definition, to provide a more complete definition for understanding digital assets like NFTs and composables, by replacing utility with the word synergy:
The interaction or cooperation of two or more organizations, substances, or other agents to produce a combined effect greater than the sum of their separate effects.
“Composed” Assets: Traditional and Digital
A car and a financial portfolio are very well understood traditional assets. They are also, in a manner, composed. I will the examples of a car and portfolio them to exemplify how class 1 digital assets, whether fungible or non-fungible (NFTs or cNFTS), are valued in manner that calls upon reasoning like @Jihoz_Axie outlined.
Car
A car has many parts, some more and some less. Various amounts of time and money are needed to build a car. Even if car has all the same parts as another, cars have great variety. Cars are valued differently because of maker, materials, longevity, attractiveness, performance, ect.. The car has more value when assembled than it does in its separate parts. A car retains qualities of the book and market value. A valuable cNFT combines various NFTs in a similar manner so that they are more valuable together than separate.
Portfolio
A portfolio is a collection of investments owned by one organization or individual, and managed as a whole. You could compose all your ERC-20 tokens into a moken in a manner that they act like a financial derivative or ETF. You could transfer this “portfolio” moken to a new preferred wallet or auction it in a marketplace like OpenSea.io rather than having to sell or swap each different token in a DEX or an exchange. A portfolio retains qualities of the book and market value. You could even transfer your entire MetaMask Wallet of CrpytoKitties, Axies, Ethermon, and ETH to your Cipher wallet in a single moken transfer. All of these composed digital asset arrangements retained various book and market values.
Tomorrow we will release Part 3 of this article series on Class 2 Digital Assets. Class 2 Digital Assets are different from Class 1 Assets because they have no inherent economic, profiteering, or competitive advantage. Tomorrow:
Wednesday, July 25th
Part 3/3: Class 2 Digital Assets: Licenses, Certificates, and Identities, OH MY!
A definition and example for the value of having digital assets on blockchain.
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Edited by Nick Mudge
Edited by @Jihoz_Axie
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Citations for In-Text Hyperlinks
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Summers, H. (2018, July 06). What are crypto-collectibles? — mokens — Medium. Retrieved from https://medium.com/mokens/what-are-crypto-collectibles-4d56220958d1
Summers, H. (2018, July 23). Part 1/3: The Value of Traditional and Digital Assets — Market and Book Value. Retrieved from https://medium.com/@haleysummers/part-1-3-the-value-of-traditional-and-digital-assets-market-and-book-value-b4c6b1b15ab0
Synergy. (n.d.). Retrieved from https://www.merriam-webster.com/dictionary/synergy
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Upton, J., Janeka, I., & Ferraro, N. (2014, January). The whole is more than the sum of its parts: Aristotle, metaphysical. Retrieved from https://www.ncbi.nlm.nih.gov/pubmed/24406559
What is a DEX (Decentralized Exchange)? (2017, October 10). Retrieved from http://cryptoincome.io/dex-decentralized-exchange/
Titan Seal. (n.d.). Retrieved from https://titanseal.com/
