Fungibility is a desired characteristic of any currency that aims to be a store of value, medium of exchange, or unit of account. In cryptocurrencies, fungibility is an important aspect of maintaining their legitimacy.
This all changes with non-fungible tokens (NFT). An NFT is essentially a unique representation of an asset or good in the form of a digital token. These can be compared to baseball cards, as each has unique information and varying levels of rarity.
NFTs are unique and cannot be replaced by another item. The implications of this in a distributed medium without centralized authority are wide-ranging and will enable a future class of digital assets, from fractionalized ownership to tying real-world assets to a digital token.
Through cryptography, they help to verifiably prove ownership and authenticity of an asset. For example, a virtual piece of art where the artwork is tokenized and ownership of the token directly reflecting ownership of the piece of art is inscribed into the blockchain.
One early pioneer of non-fungible tokens was CryptoKitties, a blockchain-driven platform where players have the chance to collect and breed digital cats. Although protocols and standards exist outside of Ethereum for NFTs, the primary standard which enables their creation and exchange is the ERC-721 standard.
While the need for fungible cryptocurrencies will always remain, NFTs offer a diverse and imaginative use of the blockchain and the verifiable immutability and authenticity that it provides. One of the companies working on bringing NFTs closer to mainstream use is 0xCert.
What does 0xcert provide — a product or a platform? And what is its unique value proposition?
0xcert currently provides an open-source framework for fast and easy dapp development. Our starting point was non-fungible tokens, specifically the ERC-721 Ethereum standard. Although we hold the reference implementation of ERC-721, we have also built multiple upgrades to the existing standard – we named this upgraded token Xcert. Moreover, we developed a so-called certification process which allows us to use asset-type standards for enhanced interoperability and to add an additional privacy layer.
Although we released the framework in January and upgraded it numerous times since then, we also work on building solutions on top of it. The first working product that we deployed with the 0xcert framework was SwapMarket, which is the first multi-asset many-to-many decentralised exchange. In other words, you can swap three CryptoKitties and two thousand ZXC tokens for six Gods Unchained cards, four pieces of digital art and four hundred BAT tokens – all within one atomic swap.
We will be releasing more products in the next weeks and months, so stay tuned.
While ERC-20 tokens have seen wide use mainly via ICOs, why did ERC-721 see lesser usage/development?
On the surface, it might look like that, but if you dig deeper, you can see that NFTs are catching up very fast. Since the CryptoKitties boom, we’ve seen a great amount of interest and development, a massive increase in transactions and in the number of deployed contracts managing ERC-721 tokens.
Even since last year, many games have launched their own non-fungible tokens as in-game assets, raising substantial amounts of money. Which basically showed that the so-called Initial Deed Offering was a viable fundraising path.
Overall, there is a distinct shift of focus away from simple collectibles and more towards actual use cases, ever better UX and increasing traction. All this is culminating in more widespread usage, more development and ever-rising number of projects using NFTs.
How do you see NFTs to be implemented in the immediate future?
The most significant advantage of non-fungible tokens is their ability to deal with real-life examples and use cases directly — their realm thus encompasses far more than just digital collectibles. The NFT space started out with simple to implement solutions, which demonstrated to some extent the possibilities what can be done. There is a trend going on where these simpler solutions are growing into more mature applications. Not only grassroots communities but also larger business are starting to understand the implications and benefits that NFTs can bring to their industries and businesses.
Thus in the immediate future, we will see a strong trend from enterprises setting up pilot projects and slowly jumping on board the NFT bandwagon. A growing trend is already visible with companies like Ernst & Young, Microsoft and all the way to the Austrian Post.
Is the digital infrastructure ready to see NFTs used more widely?
There is still a lot of room for improvement, but the infrastructure is getting there. On a daily basis, we see projects launching with better wallet and UX experiences, as well as better scalability solutions. The number one challenge that NFT projects have is early user onboarding. However, this is a trait not only of non-fungible tokens but of the blockchain space in general, so the development of solutions for both go hand in hand.
We also think that acquiring more end-users of blockchain apps is a two-step process. First, we need to build better tools and lower the barrier for other, inexperienced developers to quickly and easily start building end-user applications. This ranges from open-source infrastructure solutions like the 0xcert Framework to UX improvements like wallet providers, payment processors, etc. The second step is the actual end-user onboarding.
Do you plan on using other blockchains other than Ethereum?
Just recently, we deployed our infrastructure on Wanchain as the second network for building dapps on. This enables Wanchain developer community immediate access to better tools and a platform to build NFT solutions faster and more secure.
We might also introduce another blockchain but not in the immediate short-term. In general, there are two limiting factors that we consider when looking at other chains. First and foremost, security. How big and strong the network actually is and how susceptible it might be to a 51% attack. Second, how easy the transition would be in terms of code. Wanchain, for instance, is based on Solidity, so the deployment was fairly straightforward.
Will Ethereum’s transition to Proof-of-Stake improve, damage or won’t impact the development and adoption of NFTs?
Adoption of NFTs heavily depends on use cases. This simply means that we require better scaling solutions if we were to use non-fungible tokens within larger enterprises that require a more significant transaction throughput. In that respect, the transition to proof of stake is very welcome, since we will be able to onboard a higher number of end users as well as larger companies, and quickly see a better network effect.
Cryptokitties, the most popular project with NFT usage, has seen its appeal fade in the past year. This leads many to discount NFTs as a fad (maybe similar to Tamagotchis in the 90s). What do you think?
It’s important to actually look past that, as CryptoKitties is just one use case of potentially life-changing technology. If you look at the gaming industry, what we need is actually better game mechanics, better design, and better user experience, not better assets. The team with CryptoKitties is definitely aware of that and is addressing it by building a so-called KittyVerse.
Discarding the ability to have unique assets on the blockchain would be a huge mistake. The reality is that we live in a time where a lot of experimentation is going on. There are many crazy ideas being put out, tested, retested and iterated on. Use cases might be completely different in a few years, but the base technology will be there.
Is there an underrated or unpopular opinion regarding NFTs or ERC-721 that you would like to share?
What often goes undiscussed is the fact that if you use non-fungible tokens with real-world assets, you will most likely need to go through an authority that can issue them – not for technological reasons but for legitimacy. The connection to blockchain always has a human factor, and this is where fraud and malicious attempts could be happening. Identity and reputation systems can address this and mitigate effects, but in the short term, we will most likely need to rely on previously established issuing authorities.
There are several use cases for NFTs that have yet to materialize, but what do you think is the one that would have the shortest path to inflection (which one would garner traction the fastest)?
Currently, collectibles and in-game assets are the hottest topics when it comes to non-fungible tokens, but they mark only the beginning. For example, the work that Ernst & Young does in this field can have much broader implications. They have a vast reach with global companies and can create massive network effects. Although they are working in the supply chain field, numerous use cases can be attached to these companies. If we envision the future to be automated by smart contracts through an immutable blockchain layer, then many enterprise assets (personnel, inventory, quality management certificates, intellectual property, etc.) will be recorded and managed in a tokenized form, specifically as non-fungible tokens.
Has 0xcert had users or developers for its product/framework/platform?
We have a growing community of enthusiastic developers. I would invite everyone to visit our GitHub repository, in particular, the Framework Users issue which lists some of the applications being built with our technology. Apart from that, I am very proud to see news like this popping up all the time. The last one was from Merchcoins, which are essentially gift cards from major retailers built with Fabr(x) and 0xcert technology.
What is the best advice you would give to dApp developers that want to work with NFTs?
Come and join our Gitter channel! Anyone interested in building with NFTs and 0xcert technologies is welcome to visit. Our developers are happy to guide anyone in the right direction and offer advice on how to start – or continue with their dapp development.
What do you think? Let us know in the comments below!
Images courtesy of Shutterstock.