The Growing NFT Momentum
A closer look into Non-Fungible Tokens (NFT’s) and how popular experiments such as tzcolors are showcasing NFT’s on Tezos.
There was a really great piece from Chris Dixon, founding partner at a16z (a leading venture capital firm in blockchain) that I happened to stumble upon. While it’s been over a decade since publication, the piece correlates surprisingly well with Non-Fungible Tokens (NFT’s).
In the piece, Dixon outlines how the next big thing that will be inevitably overlooked by many at origin, will start out looking like a “toy”.
This does not mean every product that looks like a toy will turn out to be the next big thing. To distinguish toys that are disruptive from toys that will remain just toys, you need to look at products as processes. Obviously, products get better inasmuch as the designer adds features, but this is a relatively weak force. Much more powerful are external forces: microchips getting cheaper, bandwidth becoming ubiquitous, mobile devices getting smarter, etc. For a product to be disruptive it needs to be designed to ride these changes up the utility curve.
NFT’s are more than “toys”
Much too often, I hear the immediate dismantling of NFT’s with virtually the identical arguments that have been made towards the art world.
“Why is a JPG, GIF, etc. worth X amount, this literally sounds like the dumbest thing ever?”
For arguendo sake, I shared these same thoughts at first. However, as I began to understand the processes behind the surface level simplicity of them, they really go far deeper than the simple conclusion of the market deciding their value. There’s a bit more going on here.
So, what is going on here?
A few things.
- Marketplaces: NFT’s are creating a market for things that currently don’t necessarily have one. Those that do, they strengthen the relationship between collector/artist on a global scale, and improve liquidity (you can buy/sell it quicker than you would be able to do conventionally with fine art, trading cards, etc.).
- Verifiable Ownership/Authenticity: With fraud so rampant in the art world, this is a unique and important characteristic. Being able to validate true ownership via blockchain without the need of an intermediary agency also cuts down on cost.
- Guaranteed scarcity: NFT’s cannot be interchanged, they aren’t fungible, each piece is unique and cannot be reproduced. Artists can set how many editions there will be of a certain piece of art and once that is set, it will be final.
- Digitization: Everything is moving to digital, it’s a part of a massive growing trend.
All of these characteristics fall into a macro scheme of momentum that we’re witnessing today. If we look at certain things that are hot such as digital collectibles, e-sports, and blockchain; they all fit into a major trend. That trend is taking these things that exist physically and digitizing them.
Cryptocurrency is taking money, digitizing it, and opening a plethora of potential applications to be created. In the simplest form, Bitcoin can best be thought of as a world treasury asset/store of value, one accessible on a global scale and without borders. What we’ve begun to see over the past few years is the expanding of this underlying technology (blockchain) within more complex processes and applications through smart contracts in the form of DeFi, DAO’s, and more.
An entire different world has been unlocked, one of which I’ve explained a bit more within a previous publication.
As Chris Dixon compelled earlier, we can see the evolution of these processes within cryptocurrency as an example. It’s becoming clearer that blockchain networks comprise more than just an underlying technology, especially as their processes are evolving. These processes can center on how this technology gets managed by stakeholders (governance), how much supply should be available (economics), and more.
The same thing I feel will likely begin to play out in digital collectibles and NFT’s. How exactly some of the processes begin to evolve remains worth seeing in the future as cryptocurrency has more time under its belt to develop. NFT’s are still relatively early.
What is this stuff?
Non-Fungible Tokens (NFT’s) refer to a type of asset which cannot be interchanged or substituted due to unique attributes. Examples such as virtual collectibles, fine art, collectible digital sports cards, and more can represent these as they cannot be swapped or replaced for like items as no two items are truly alike.
Going back as far as of late 2017 when the abrupt euphoria of cryptocurrency and ICO’s were flocking in the masses of retail investors to the market, the thought of digital collectibles (ex. Crypto Kitties) selling for obscene amounts seemed truly like a bubble.
We can’t really blame the proponents of this very thinking as to a logical person, the mere notion of digital cats accounting for more than 25% of Ethereum network traffic seemed rather, outlandish.
Fast forward towards today, the same company behind this creation is likely going to raise $250M from Coatue Management and celebrities, crypto enthusiasts alike — are selling out NFT’s as fast as hot dog stands on Times Square.
To give a few macro highlights, see the following news:
- Grimes sold $6 million worth of digital art as NFTs
- Musician 3LAU sells the world’s first-ever crypto-albums, making $11.6 million in under 24 hours
- NBA Top Shot leads NFT explosion with $230M in sales
This can’t be a coincidence, right?
It’s because it’s not.
The same backlash towards NFT’s has pervaded the art world for years. The mere thought that some people would spend millions on a painting has eluded many who fail to understand the very principles behind where the value gets derived and why NFT’s take ownership of truly authentic collectibles to another level.
That said, it’s worth examining some popular experiments within the Tezos ecosystem that showcase how some interesting applications and usage could perhaps unfold within the NFT’s space.
How tzcolors is showcasing NFT’s on Tezos
We’re beginning to witness some exciting developments around NFT’s on Tezos. While the sector itself is still early, what’s beginning to get showcased is some of Tezos’ traits that help it stack against an already more established network (ex. Ethereum).
When it comes to artists and creators, a viable, cheap, eco-friendly, and technologically sound platform such as Tezos makes a lot of sense for a few reasons, but don’t just take it from me, see the following:
In the case of tzcolors, we’ve begun to see several Tezos standards showcased and this has led to a massive influx of new creators, artists, and crypto enthusiasts alike to begin minting NFT’s on Tezos.
Initially starting off as an experiment by the Papers team, creators of multiple Tezos-based products (AirGap, Beacon, Ecoo); tzcolors has grown to lead this growing influx within the ecosystem today around NFT’s. What’s special about tzcolors is not only in collecting these unique colors and dipping your feet into the world of NFT’s within the Tezos ecosystem, the following standards and products that Tezos offers have been showcased.
Loosely, some of these that are being showcased are the following:
- Beacon v2
- FA2 token standard
- Metadata specifications
- Better Call Dev
Pascal Brun, Co-Founder of Papers was kind enough to further elaborate on this topic.
Yeah it started exactly as an experiment. We just released Beacon v2.0 which brought a lot of improvements on the UI side. We were also looking closer at FA2 and the metadata specifications. We had the idea that we should build something really simple that essentially is an experiment but showcases these standards.
These standards are Beacon, FA2, metadata, taquito, Better Call Dev, SmartPy, and so on. We just started thinking about what is the simplest way we can accomplish this and we landed on the idea of using colors and representing them as NFT’s. So, we started building this with a focus of being as simple as possible, as useable as possible and we were quite surprised with the results when we launched!
Our main focus was taking these building blocks, putting them together, and seeing that the whole community essentially really liked that approach made us very happy.
Key Insight from Papers
To learn a bit more about tzcolors and the role they’re playing in showcasing NFT’s on Tezos, I decided to reach out to Pascal Brun of Papers for a few comments.
Can you discuss more about some of the benefits in utilizing Tezos for minting, distribution, etc.?
So, the introduction of TZIP-12 helped pave the way. You also have FA2 which essentially allows you to have a contract that allows for fungible tokens and non-fungible. In addition to that, with TZIP-16, there is a well-defined way in which metadata gets handled. Now that this in a more or less a final state, you’re now essentially able to use a FA2 contract with the metadata that is defined in TZIP-16 and create NFT’s that follow a certain standard.
I believe TZIP-16 is only a few weeks old since finalization and it’s really cool from a contract side that this is essentially laying the groundwork to have a standard for NFT’s on Tezos. TZIP-17 should be coming out soon as well which will focus on permits, so it’s really exciting to see all these things coming together from a tooling perspective.
In terms of stats for tzcolors, can you provide some more data on how much usage has been made thus far?
Sure, there has been over 27,000 operations from launch until now which I think is one of the highest in terms of contract operations on Tezos. The other ones that come to mind are Harbinger and Kaiko price oracles which essentially pulls price data every few blocks. Better Call Dev shows these statistics in more detail.
Is there anything else in store with tzcolors that we should be excited about and what do you hope to see come out of tzcolors?
So, we are still trying to figure out what will come out of tzcolors. This is something we started with about 3 people just as an experiment so we’re currently focusing on what other steps we want to take in regards to the platform. In terms of a security audit, we’ve had a few ecosystem developers look at our contracts and nothing stood out that was negative in any way. But, we do not yet have an official third-party company to audit our contracts just yet.
We are also working on bringing smaller updates to the site as well. A new frontend update on detailing auction history should be coming out soon. Also, we want to find a way for token holders to be able to decide who will receive part of these initial auction rewards. The idea we’re playing around with is that we want to give the token holders a voice as to where they want the funds of the initial auctions to be distributed.
As from a macro level where we’re seeing the growing shift of physical assets towards digital ones, NFT’s are becoming increasingly interesting and adopted. With tzcolors showcasing several standards and developer tooling in existence within the ecosystem, it makes it worth watching the continuing ripple effects of more artists and creators coming to Tezos for creating, showcasing, and distributing their creations.