March 16, 2021 · 10 min read
NFTs are on fire 🔥
In this blog post, you will learn:
What exactly NFTs are
How NFTs are applied to different industries
Where to trade NFTs
Interesting NFT projects
What it looks like when DeFi marries NFTs
If you haven’t collected at least one of the below as a kid, you were missing out!
Pikachu stickers or cards
Capes and guns for your favourite game character
Baseball trading cards
McDonalds happy meal toys - FYI this month, it’s Disney’s Raya and the Last Dragon. (I personally collected barbie houses. Words could not express the disappointment when I got the kitchen section twice when I needed a living room!)
Then things went digital, you raised Tamagotchis and played Nintendo Animal Crossing. You fed your virtual pet that would l do all sorts of things to butter you up, you could borrow land from a racoon neighbour to grow carrots and pay back a loan.
Fast forward to today, your trading cards, virtual lands and pets moved onto blockchain. They are now called the NFTs.
So what are NFTs?
Do you remember CryptoKitties, collectible crypto cats that made a big buzz in the crypto scene back in 2017? Crypto collectibles are underpinned by the concept of NFTs. NFT stands for Non Fungible Token, a token which is uniquely identifiable and distinguishable. “Non-fungible” means that no item is identical to each other. Bitcoin, for example, is “fungible” because I can swap 1 BTC with your 1 BTC and I still have 1 BTC. CryptoKitties are “non-fungible” because my Milo is not identical to your Kitty! Smart contract standards guarantee your virtual items’ rarity, provenance, authenticity and allow fast and secure transactions. That means, no bully can steal your Hank Aaron baseball card from you, no one can re-print your original photography and claim it is authentic. NFTs’ ability to represent ownership of unique items and track provenance led its fast adoption in the gaming and art industries.
Over the past month, there has been a flood of NFT-related headlines.
Let’s highlight some of them ✍️
Technoking of Tesla Elon Musk said in a tweet “I’m selling this song about NFTs as an NFT.” Then soon after the post, he changed his mind and decided not to sell the song. The video of the track features a "Vanity Trophy".
The hottest digital artist Beeple had his work Everydays: The First 5000 Days sold for $69 million. The auction was held by Christie’s one of the most prestigious auction houses in the art world. In February, Beeple’s another NFT artwork Crossroads, originally sold for $66,666.66 has been resold for $6.6 million on Nifty Gateway.
Canadian musician Grimes, also well known as Elon Musk’s wife, sold $6 million worth of digital art pieces as NFTs on Nifty Gateway.
Muhammad Ali’s legendary career now breathes on blockchain as an NFT collections. The collection features photographs of the historic fight with Joe Frazier. The NFT drop will take place on Ethernity.
NFTs and virtual lands
NFTs are also making a clean sweep in the gaming industry. As the world has been struck by the deadly pandemic for over a year already, we’ve seen many social hangout platforms rise (and fall sometimes) from Houseparty to Clubhouse. In the blockchain world, you and I could turn 100% virtual and still mimic the real life socializing experience. Let’s look at some of the blockchain VR platforms well placed to gain momentum in the NTF craze.
Developed in 2015, Decentraland is an Ethereum-based virtual reality platform where users can purchase lands and build applications on top of them. Decentra”land” is divided into parcels of LAND which are NFTs, and the ownership of LAND gives you full control of what you can build with the LAND. LAND can be purchased with an ERC20 token MANA. Since the beginning of the year, the price of MANA has shown a 13-fold increase.
Atari, the gaming company behind Pacman and Pong, has recently announced that it will develop a casino in “Vegas City”, a district in Decentraland. Whether it be Gatsby’s party mansion, a casino, or Mad Hatter’s tea garden, you can build whatever you want to and be a real estate tycoon! Build art galleries, hang your crypto collectibles, your status symbol because who needs to Italian sports cars anymore to flex?
However, NFTs in virtual societies are more than bragging rights. You can contribute to the well-being and development of a community you are a part of, engage with fellow members, socialize, and make your area the hot place which will lead your LANDs’ price appreciation. How “real”!
So come over to my renovated house, let’s catch up (and please don’t forget to wow at my crypto collectibles curated in the living room)!
Axie Infinity is a gaming platform where users raise creatures “Axies” and make them battle like Pokémon. Players can collect, trade, and even breed them to create outperforming offsprings. There is also land property feature in the Axie universe. The land is divided into 90,601 tradable plots which are NFTs, which can be developed as Axies’ operation bases and homes. Last month, a user bought $1.5 million worth of real estate in Axie Infinity. In March 2021, the price of its token AXS quadrupled.
Explain me the hype around NFTs please
The scarce nature of NFTs drives the prices to the sky. Why such high demands? To be honest, the same reason we queue for Supreme or Yeezy. Uniqueness and rarity. The fact that those two key values are authenticated and recorded on blockchain adds to the hype. And so the NFT space as of now pretty much revolves around collectibles, art, and gaming. The whole point of NFTs really is owning one as you can see above from Elon Musk's "Vanity Trophy". However, the potential of NFTs expands beyond that.
New Paradigm in Intellectual Property
Kings of Leon has recently become the first band to release a new album in the form of NFTs. NY-based EDM musician 3lau sold an album as 33 NFTs, totalling $11 million. It includes a redeemable custom made song and access to unreleased tracks. The unfair revenue distributions among record labels, streaming services and artists have been igniting conflicts in the music industry for years. The introduction of NFTs to the industry allows the artists to own what they make and to create special experiences with their fans by rewarding them with custom made perks.
In an era where you can literally right click and repost contents without the original creator’s consent, NFTs bring “justice” to ownership.
Where does DeFi fit in?
Let’s look at projects that marry DeFi and NFTs.
Earlier this month, interest-bearing NFTs called Aavegotchi funded by the Defi lending protocol Aave went live. Aavegotchis are crypto collectibles looking like cute ghosts that have Aave’s yield-bearing aTokens staked as collateral in each of the gotchis. Make money on money, but make it cute ;) Two birds one stone kind of a deal.
Charged Particles transform your NFT into an interest-bearing token by letting users deposit any ERC-20 tokens into the NFT. Users “charge” the NFT “particles” by depositing primary assets such as DAI or USDT. The primary assets then convert to interest-bearing assets, for example, cDAI, aUSDT and start accruing interest. The value of the “charged particle” thus represents: the value of the underlying asset, the speculative value of the NFT, and the interest accrued.
NFTX creates index funds backed by NFTs and the funds are made for people who want exposure to NFT markets, not specific individual NFTs. NFTX currently provides index funds based on Hashmasks and various types of funds based on CryptoPunks.
Where can I buy and sell NFTs?
You can go to the OG NFT marketplace OpenSea to buy ugly sneakers to wear in Decentraland, CryptoKitties and Hashmasks. Go to Rarible to fulfill your dream as a meme-librarian. Turn to Grime’s choice Nifty Gateway for premier digital fine art. For trading card NFTs, go the Ethernity. Rarible and Ethernity have their own governance tokens RARI and ERN. $RARI increased by 8% and $ERN doubled in the past 7 days.
NFT projects in Momentum Pairs
NFT related DeFi projects have shown strong performance in the past week in Momentum Pairs. If you didn’t know yet, Momentum Pairs is a Uniswap liquidity pair tracker developed by Novum Insights. Our analyst team selects interesting projects of the best performing pairs on Uniswap by seven day, 30 day and 90 day periods. Below is sorted by 7 day performance.
MUSE is a governance token of NFT20, a protocol that enables users to tokenize NFTs and make them tradable on DEXes. Users deposit their NFTs in a pool and get ERC20 token derivatives of their NFTs, they can head to Uniswap to speculate them or to earn $MUSE as rewards.
Shroom Finance (SHROOM)
Shroom is building a DeFi ecosystem focused on in-game assets. LPs will provide liquidity to game developers and support them during the early stages of their development via SHROOM pairs. The team is building a DEX GameSwap (beta) to trade and cash-out virtual game items with crypto. GSWAP is the governance token of the DEX.
NFTs have shown strong performance in DeFi, but remember it's early days for NFTs, and we are seeing a lot of activity, confusion, disputes, and large crypto transactions. Regulators may move on NFTs and create limits for big money moves in NFTs to prevent money laundering. NFTs are attractive because of their capacity to support artists, but there is still a long way to go.
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Novum Insights is your guide to the Defi, Crypto and Fintech Economy.