A Modest Introduction into Non-Fungible-Tokens & NFT Ecosystem
Warm welcome to our medium blog from Babylons core team.
As our first article, we would like to introduce the concept of fungibility and the blockchain ecosystem built around non and semi-fungible assets also known as non-fungible-tokens, NFT’s. Additionally, we will be discussing how and why we designed Babylons to take part within the ecosystem as a community-owned NFT marketplace.
This is the first of planned community updates. More information on how to take part in the early Babylonsian Community can be found at the end of this article. Moreover, we will airdrop community members that fuel the early network growth to incentivize their respective contributions.
We have some exciting news regarding partnerships with various artists, teams, collectives and other blockchain projects both in and out of the NFT space, sharing our mutual vision however, we will be saving them for future and more comprehensive updates alongside investment-side news and token details to be shared very soon together with our litepaper.
Before we dive into subject matter, let’s give you an outline of this article:
1) What does fungible mean?
2) Brief history of NFTs
3) Who uses NFTs, why and how?
4) Status quo of NFT market
5) Our Approach as Babylons
6) Misconceptions
7) Conclusion
Let’s start!
Definition
Most discussions about NFTs begin by introducing the concept of fungibility, which is described as “able to exchange or be exchanged by another identical item.” However, we think this definition is vague, instead taking the majority of your belongings into consideration constitutes a better approach to understanding the essence of non-fungible assets in general. The smartphone that you are reading this on, or your laptop, the carpet in your house, the pillow that you love to sleep on, anything you can go and sell on secondary markets fall under the category of non-fungible things.
A government-issued currency is a straight-forward and definitive example of a fungible asset. 10 dollars is always 10 dollars no matter its serial number or whether it’s paper or digital. Ability to exchange 10 dollars with another 10 dollars (or two fives, for that matter) is what makes a currency fungible.
We would also like to remind that fungibility is relative by definition, it is only applicable when multiple things are compared to each other. Think about concert tickets being sold as VIP and Regular. Each ticket may be considered fungible within its classification, but you cannot swap a VIP ticket with a Regular ticket fairly and one-to-one. Even your washing machine may be categorized as fungible since it is replaceable with a washing machine of the same model, unless you have upgraded your machine or made it somehow special and unique. In addition to relativity, fungibility is also subjective since anybody that develops a special attachment to a normally fungible asset, may consider that asset non-fungible: i.e. a rare 2 dollar bill issued in a specified date may worth more than 2 dollars to a collector.
Brief History of Non-Fungible-Tokens (NFTs)
Non-fungible digital assets first appeared conjointly with the birth of the world wide web before the invention of blockchain just as we had digital currencies in games before the emergence of cryptocurrencies. Domain names, in-game items, event tickets or social media handles are all non-fungible digital assets we had but never really owned before NFTs. These assets only vary in tradability, liquidity and interoperability. Before blockchain, people had issues like not being able to indefinitely transfer or hold their digital assets. After the invention of blockchain, people can now finally and truly own, sell or transfer their non-fungible digital assets standardized as Non-Fungible-Tokens or in short NFTs. Blockchains began to provide a coordination layer for digital assets, giving users ownership and management permissions with the start of the first NFT experiments: i.e colored coins and Rare Peeps on the Bitcoin network.
Let’s have a chronological look at the emergence of NFT experiments and see the story of how NFTs came to today as we publish this article.
Rare Pepes
Created by Matt Furie, Pepe the Frog is one of the most popular memes on the internet. It is a frog with a human body. Yes. The meme was created in 2005 however it became an internet meme in 2008 (thanks, 4chan) and gained popularity ever since. The domain rarepepedirectory.com was founded in 2014 — as the name suggests, this was a directory of rare Pepe memes. Some of these rare memes were sold on eBay and some in a live auction in New York.
Colored coins
A colored coin generally refers to Bitcoin with metadata. They are also known as meta coins. Meta coins were created by Bitcoin miners using the data space in the blockchain to encode metadata. This slowed down the network but the Bitcoin team fixed the issue: They added a 40-byte field to store data as a transaction, along with the encrypted ledger of transactions and data about the creation.
CryptoPunks
The first Ethereum based NFT experiment was CryptoPunks. It consisted of 10,000 unique collectible characters with proof of ownership. Larva Labs, the name behind the project, defines CryptoPunks as “the project that inspired the modern CryptoArt movement.”
CryptoKitties
Launched in 2017, CryptoKitties was the first mainstream NFT project. It featured an on-chain game that allowed users to buy, breed, and sell digital cats. What made CryptoKitties mainstream was the context. Who doesn’t find kitties adorable, shareable, and fun, right? Plus, paying thousands of dollars to digital cats seems so absurd — and absurdity makes a great story.
Layer two games
Soon after the hype around CryptoKitties declined, third-party developers came up with new games. Some examples of them are as follows:
- Kitty Race: Allowed racing CryptoKitties against each other to win ETH.
- KittyHats: Let users accessorize their CryptoKitties with hats and paintings.
- Wrapped Kitties: Combined Kitties and decentralized finance by letting you turn your CryptoKitties into fungible ERC20 tokens to be traded on decentralized exchanges.
Hot Potato Games
An example mechanic of a hot potato game can be seen in CryptoCelebrities project back in 2018. Simply you buy a collectible celebrity NFT. It immediately becomes purchasable for a higher price adding up some increment to the previous purchase price. As long as there is someone to buy your collectible celebrity NFT, you are guaranteed to profit but if you become the last one holding the “hot potato” in this case the collectible celebrity NFT, you will simply be in loss. This mechanic went viral after some collectibles sold for astronomical prices, but the project has been shut down later. This most probably harmed the ecosystem overall, however we think that the experimentation around auctions and pricing mechanics may result in the most innovative break-throughs in the NFT multiverse.
NonFungible.com
Daniel Kelly and Gauthier Zuppinger launched nonfungible.com in February 2018. They define their goal as “to create the link between the different communities of the non-fungible token ecosystem, and to provide support and service to both project leaders and consumers of non-fungible token products.”
NonFungible.com started a tracking platform for NFT markets and solidified the term “non-fungible” as the primary term to describe the new asset class.
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Starting in early 2018, Venture Capitals also grew interest in the NFT space realizing the potential behind the hype. Total market cap of current NFT projects is rising aggressively above $27 billion as we are writing this post and hundreds of millions of dollars has been invested and are continuously being invested by VCs into NFT projects. After the hype cycle in 2018, more teams started to build projects like us and created minting platforms, marketplaces, high-level games, trading cards, virtual worlds, data aggregators and many other experimental projects including collaborations with big brands like Gucci.
Who uses NFTs, why and how?
We, as the citizens of the digital age, own a lot of digital stuff as we explained before. Some of them are original work of ours and some of them are copies. An NFT comes into place when one needs to declare or prove ownership of a digital asset, thus being able to trade it too in a minting platform and a marketplace like our beloved Babylons.
Downloading ≠ Owning
Digital products can easily get copied. That is what downloading is basically. You download a copy of an existing product to your drive. But right-clicking to an image, audio, or any other file and downloading will not get you its ownership. It doesn’t have to be digital at all. You can buy printables and print them yourselves, but that doesn’t mean you own the original artwork but merely a copy of it only. In the case of semi-fungible digital assets which are also considered as NFTs, we can give the example of an in-game item such as a sword with its scarcity fixed to 100. In this case more than one person can own these swords which are unique but not unique as their scarcity isn’t fixed to one even though owners of those swords really do own the swords themselves and not copies of them.
Why and how did NFTs become so popular?
Long story short: big names jumped in. Here are some well-known figures on the NFT band-wagon:
- Beeple: A conceptual 3D artist whose real name is Mike Winkelman. He became the third wealthiest living artist after an NFT containing his work sold for $69.3 million in March.
- Kings of Leon: They became the first band to issue NFTs.
- William Shatner: Stark Trek actor sold 90,000 virtual trading cards as NFTs last year.
- Grimes: Canadian musician Claire Elise Boucher, married to Elon Musk, sold $6 million worth of her digital art last month
and many more are getting into the NFT space as it gets more adapted by the mainstream.
Are NFTs used for digital assets only?
No. Nike has already come up with blockchain-based sneakers. However, at its current stage, NFTs are accepted for digital assets mostly. Anything digital can be sold and bought as an NFT whereas physical assets can be linked to those NFTs as well, as unlockable content most of the time.
Status quo of NFT Market
There are over 200,000 active NFT wallets, over 75,000 buyers, over 40,000 sellers, and a market cap above 27 billion USD. The growth rate of the NFT market was over %300 between 2019 and 2020. It’s going even higher looking at the first quarters’ numbers, with sales over millions of dollars. Each week we come across with various new projects and teams that are getting their hands dirty on NFTs, building trading card games, multiplayer online role-playing games, VR galleries, 3D environments, marketplaces, aggregators, protocols and so much more with new technologies available today.
This time the art world has started to get interested in NFTs. It turned out that digital art is a natural fit for non-fungible-tokens. An essential part of the value of a physical artwork is the ability to reliably prove the original artist and the ownership of a piece and display it somewhere. This is something that hasn’t been as true as in the digital world. Many curious artists, engineers or pioneers let’s say, started experimenting in the subject matter, NFTs. As of 2020 and 2021, a lot of minting platforms easing the process of creation of NFTs (minting) emerged within the ecosystem. On the other hand, Ethereum being the dominator blockchain backing up the infrastructures of these platforms made minting NFTs almost a privilege since it became so expensive to mint, buy or sell NFTs on the platforms using ETH blockchain. As creators, visionaries, engineers and members of the global NFT community, we decided to create our own platform in order to solve the problems we were having in such an Ethereum dominated scene. We will discuss more about our approach in the next section.
Our Approach as Babylons
First-of-all, Babylons is designed to be a community-governed fully Decentralized and Autonomous Organization (DAO) so that the community who uses the platform, who likely to owns NFTs as well, will also partially own the platform by utilizing Babylons’ governance token $BABI. It will allow members to have a voice in the future decisions regarding the further development of the Babylons project. There will be various features of $BABI token which will make it a deflationary fungible digital asset. More information about tokenomics, investment rounds and the infrastructure of $BABI alongside with the roadmap and team will be officially released in detail very soon on various mediums including Medium.
We are building our minting platform and NFT marketplace, Babylons, as well as $BABI token on the Binance Smart Chain (BSC) rather than Ethereum as most platforms do. NFTs built on the Ethereum blockchain are subject to high gas fees and long waiting times which in our ideals is something that is totally and basically superfluous. As of today, minting an NFT on the Ethereum blockchain costs around $80 on a normal day to $200 on crazier days in terms of network traffic. On our testnet activities we recorded minting costs to be around $1.5 on the test network of Binance Smart Chain regardless of the network traffic which is also pretty high these days, nevertheless it doesn’t affect the costs as significantly as it does on Ethereum. Mass adoption, increasing popularity, innovative dynamics and a vibrant community are some of the other reasons that made us decide to be a part of the BSC ecosystem as well as its speed and low costs, avoiding the pitfalls of Ethereum. As of today, PancakeSwap, the main DeFi platform for BSC projects, has more processed volume than Uniswap, the main DeFi platform for ETH projects.
As BSC network traffic grows rapidly, thousands of users are migrating to the BSC ecosystem due to its obvious advantages and to serve as a building ground for highly scalable platforms like Babylons. We believe alongside DeFi enthusiasts, the NFT community rooted in ETH will closely follow the same path and migrate to the BSC ecosystem. By Babylons’ globally wide-spread creators and collectors community, its genuine incentive mechanism, low commissions and fees, and through strongly established partnerships; lack of liquidity problem also will cease to be an issue on Babylons in particular besides it is built on BSC and its inherent involvement in the BSC ecosystem which differentiates us from the existing NFT marketplaces also built on BSC.
We aim to be the leading community-owned NFT marketplace in the BSC ecosystem. We believe we can establish a healthy and vivid marketplace for NTF artists, creators, collectors and the token holders as part of our ever-expanding and diversified community by aligning their incentives together as a DAO. We also believe NFTs in general, and Babylons as the subject matter, has the power to truly disrupt the centralized and traditional dominance of art marketplaces of any kind, from streaming platforms to video games to fine arts, you name it. From where we see it, the NFT ecosystem is a major milestone of a much larger and global digital arts and ownership movement.
Misconceptions
As hype is built up around the crypto markets as well as the NFT ecosystem, of course materials online about these concepts and projects sky-rocketed. Probably you come across various discussions online or in real life regarding NFTs or cryptocurrencies and blockchain projects in general. Now as of April 2021, probably more than ever! As the number of newcomers continues to rise, freely created content about these phenomena on various social platforms arise with it. Well, not all of the content is true, that’s for sure. We wanted to highlight a few of these misconceptions that we see relevant, and shine light to the darkness as much as we can. Since it is not the main objective of this article, we will keep it short, and maybe later we will make a comprehensive and in-depth article covering only the misconceptions about NFTs.
Only the Scarcity of an NFT Creates the Demand and Value
Some might think that only because an NFT is scarce or one-of-a-kind, it will increase in monetary value. This might not be the case at all. Instead, with a more traditional way of thinking, such forces as utility and provenance may be more powerful driving the demand of an NFT. For example, you could buy an NFT to get into a concert, or get special forces in a game, or to get some kind of privileges in a social club maybe. These utility properties of NFTs are much less speculative and make it safe to invest in for the majority of people inside or outside the ecosystem.
Provenance on the other hand, is another great feature of NFTs which encapsulates the story of an NFT essentially. With the ability to prove the original creator and previous owners of an interesting NFT, its story will start to grow more complex and significantly impact an NFTs’ value as the industry matures.
Environmental Impact Arguments: NFTs are Killing the Earth
This is again a topic to be discussed in a dedicated article, however, we wanted to clear the misinformation or in crypto terms, the FUD (fear, uncertainty, doubt) about the actual environmental impacts of blockchains, cryptocurrencies and especially NFTs lately. If not, at least we wanted to briefly output what we think of this matter.
Even if we say blockchain is bad for the environment which is not fair to say since its very existence disturbs and aims to stop the main authorities from causing the environmental crises in the first place. Still, BTC and ETH are responsible for most of the energy consumption in the blockchain world which we are not also fond of because they became infeasible. That’s why we are using a much greener blockchain BSC, which uses less energy for each contract deployed on the blockchain and requires significantly less computing power, thus less energy consumption.
It is also a fact that NFTs and blockchain in general have very little energy consumption when compared to governments and banks. Plus, the positive impact of NFTs as artworks on people and their visions, might just be bigger than its impact on the environment with respect to the main generators of this problem (traditional system). It may even help to solve the crises!
Conclusion
NFTs will become a bigger part of your life — especially if you are a creator or a collector of any kind but still regardless of that either. Building a productive and supportive community is the only path for artists, creators, intellectuals to a better day.
The next step is for you to join the community. We will be doing community airdrops to early members to incentivize our growth, and on-board new developers, artists, collectors and more to our platform, to be hit the right targets in such a fast-paced and challenging environment as crypto markets and blockchain start-up scene is.
- Please follow us on Twitter here. Retweet or quote this medium article. Bonus points if you tag your friends in the scene and may be or already are interested in the NFT space.
- Please join our Telegram Community Channel here.
- Please follow us on Instagram here.
- If you would like to take part in the testnet, please fill out the form here and fulfill the requirements listed in the form to be eligible for testnet airdrop as well.
- Come hang around in our Discord Server!
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Thanks a lot for reading, we hope we could provide some useful information!
Stay tuned, wild and vibrant! You will be hearing from us again pretty soon on all communication mediums and also on the Medium itself.
Peace.
