Non-Fungible Madness - The Daily Gwei #303
It's all about the culture.
It’s been an absolutely insane last few days in the NFT ecosystem as pretty much every project has been catching a bid with everyone’s favorite CryptoPunk’s stealing the spotlight after trading firm 3AC “swept the floor” by buying up 100 punks** (via Mining DAO). I wrote about the appeal of CryptoPunk’s back in January here so today’s piece is going to focus on NFTs more broadly.
** Apparently this buyer was not 3AC
I’ve been saying for a while that I believe NFTs will be the greatest onboarding vehicle that Ethereum has (for the next few years, at least). You may be wondering “but what about DeFi?” but as much as I love and value DeFi, it just doesn’t have the same broad appeal as things like art, collectibles and gaming do. Now don’t get me wrong, DeFi is still going to be absolutely massive and be the backbone of our new global financial system, but most people are simply not interested in finance and they don’t find it “fun”. And who can blame them as traditionally finance has been extremely boring, opaque and complicated - something that was just left up to the “suits on Wall St” to figure out. Though to be fair, DeFi does make finance a lot more enjoyable, but I still think it’s not something that will appeal to most people.
A phrase I like to use to describe all of this is ‘NFTs in the front; DeFi in the back; Ethereum at the base’ which basically describes how a user will interact with each layer in this stack. Let’s use an example - imagine someone heads to OpenSea and sees an NFT collection that they like but unfortunately buying 1 of these NFTs is out of their price range. So they then head to one of the ‘fractional NFT’ projects such as NFTX or Fractional and simply buy a piece or fraction of the NFT collection and in doing this, they use a decentralized exchange like Uniswap without even knowing it. So bringing this altogether - someone buys a fraction of an NFT (front) using Uniswap (back) on Ethereum (base) - the 3 layers work seamlessly with eachother and the user didn’t even have to know about DeFi (or Ethereum!) to get value out of it.
In saying all of this, NFTs go far beyond just the usual associations people make as NFT is a token standard on Ethereum and can apply to any unique thing. For example, ENS names are NFTs, legal contracts can be NFTs, you can build a digital ticketing system with NFTs - essentially anything that is unique can be tokenized as an NFT. Hell, Uniswap v3 liquidity provider positions are technically NFTs because they are unique which is probably the perfect example of how DeFi and NFTs actually end up working really well together!
Overall, I think all of this NFT activity is incredibly bullish for Ethereum because it basically cements Ethereum as the cultural nexus of crypto. Even the NFT projects like Axie Infinity that have bridged off of Ethereum to their own sidechain (due to the high fee issue) are still the most active ecosystems on Ethereum (as measured by fee revenue on Ethereum) and are still considered part of the “Ethereum family”.
As I’ve argued many times before, I believe that the blockchains with the strongest social layers will be the ones that win over the long-term - and what’s stronger than culture?
Have a great day everyone,
Anthony Sassano
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All information presented above is for educational purposes only and should not be taken as investment advice.