At Crypto Pragmatist, we’re still pretty NFT-skeptical. Although there’s obviously value in having some type of immutable record of digital ownership, the current paradigm of fluffy cats and Bored Ape Yacht Club profile pics doesn’t seem to be particularly revolutionary, although we can’t really knock the artwork or the speculators who’ve made money off the trend.
First, a primer on NFTs for those who don’t have a background on the concept: NFT is an abbreviation for Non-Fungible Token. NFTs ares assets whose ownership is held on a decentralized ledger (Ethereum being the most popular one) in the form of a 1-of-1 token. These tokens are ‘non-fungible,’ meaning they’re unique and can’t be replaced by another equivalent: like works of art (one of a kind) versus a dollar bill (any old one will do the trick).
It’s obvious that the public adoption of NFTs is in its earliest stage. Both NFT fanatics and the NFT-skeptical can understand that these digital tokens currently used to represent ownership of JPEGs and GIFs (not even the intellectual property behind those JPEGs/GIFs) are pretty rudimentary in their current state. But they do have potential, which you can read about in Chris Dixon’s brief blog post here:
Simultaneously, it’s hard to deny the fact that NFTs have become a force to be reckoned with: with Adidas, Nike, Visa, and the NBA all in the space, there’s simply no way to deny that NFTs have managed to capture public attention in a way that crypto hasn’t been able to previously. The market cap of NFTs has exploded to nearly $40 billion dollars last year, with somewhere around 500,000 people owning at least one NFT.
So yes, profile pictures and online collectibles are powerful. But at Crypto Pragmatist, we’re, well, pragmatic. And we do imagine a future where NFTs are more than JPEGs; a new use case for crypto that is both unique and innovative. We hope NFTs can move far beyond collectibles.
With this blend of crypto optimism and pragmatism, we decided to spend the week hunting for novel use cases of NFTs: corners of the cryptoverse where these non-fungible tokens go beyond cultural or collectible memes and cross over to the realm of innovative technology.
- The use case must only be achievable with NFTs
- The use case must move beyond collectibles
- The use case must be robust and replicable
- The use case must provide value in a new way
We’re not sponsored by any of these–we just think they’re cool projects, and like we said, we’re a bit NFT-skeptical. We’ll start with what we see as the most innovative:
At Crypto Pragmatist, we’ve been closely following the launch of the brand-new token exchange Solidly built out by DeFi pioneer Andre Cronje. He’s built on recent innovations in decentralized crypto exchanges to create a product that is hypothetically better-incentivized and better optimized to create fee revenues than earlier iterations of decentralized exchanges.
But all of his marginal innovations may someday be seen historically insignificant to Cronje’s veNFTs, a new NFT-based mechanic for governance that hasn’t been seen before. These Vested Escrow NFTs (veNFT for short) were airdropped to protocols as a way to lock up governance tokens: imagine getting a stock, but not being able to sell it. You could borrow against it, sure, or agree to sell it in the future, but the non-fungible token represents a fixed supply of fungible ones to be unlocked at a later date.
In short, Solidly wants protocols to have a representation of their governance in the protocol (veNFT) without actually giving them actual stake in the protocol (tokens). Simultaneously, Solidly can give the protocol a way to earn money against their future ownership share (by borrowing money) without selling the tokens themselves and depressing the token price.
What does this mean for the DeFi? Well, that there are many ways for NFTs an be integrated with the world of crypto-based decentralized finance seamlessly, all with the possibility of designing new parameters around governance, holding periods, lockups and more.
These veNFTs give more freedom to protocols and developers to better design incentive structures.
Love him or hate him, Gary Vaynerchuk is one of the most ambitious and innovative creators when it comes to NFTs. Due to his massive following across social media, Gary has been able to onboard new users into the crypto world through his NFT project, VeeFriends.
The project was launched in early May 2021 with a mint price of .5 ETH, at the time around $1,300. Now, the floor price sits at about 13 ETH, or ~$36,000. How exactly are these so valuable?
Gary has a combined 16.53 million subscribers/followers across his three main content platforms. While this absolutely contributes to the popularity and high floor price, we think the main value proposition is the real world utility that users tap into when they become a VeeFriends owner.
All 10,255 tokens provide exclusive access to the annual VeeCon, a multi-day event focused on business, marketing, ideas, and creativity: the things Vaynerchuck is best known for. NFTs are sold under the premise that these events will provide tremendous value to holders by fostering innovation and opening doors to a new network. The first VeeCon will happen this spring, and it’ll be interesting to see how this affects price.
But these admissions tokens go beyond tickets, with more expensive ‘access tokens’ on sale that grant users a unique and personal experience with Gary. Some of the available access token options are group/one-on-one video calls, courtside Knicks games, dinners, various sports activities, and even giving holders the opportunity to host Gary on a podcast.
3. The Bakery DAO
The guys over at The Bakery DAO are good friends of Crypto Pragmatist, starting up an online community around crypto that’s completely web3 native. We’re phenomenally excited to be an early part of the Discord server and be part of the community alongside crypto thought leaders and traders like Light, DCFGod, CryptoMessiah, Banteg, and more.
The Bakery is all structured on both traditional finance rails as well as Web3/crypto rails, meaning you can log in after buying an NFT on OpenSea or by simply using your credit card. But the NFTs get you access to the digital community, which has been natively integrated across a web browser, Telegram, Discord, and a merchandise store.
The platform is in early stages: NFTs haven’t been widely announced or marketed, nor is the entire platform built out yet: but The Bakery DAO is living up to the promise of NFTs allowing for users to create types of cross-platform identities and communities. Hold an NFT in your wallet to participate in the Discord, check the Telegram group, and read crypto content. Then, when you’re done, you can sell your NFT. Maybe it’s even gone up in price.
This symbiosis is one of the original promises of crypto: individual ownership breeds positive externalities. One of the ideas floated in The Bakery DAO is that users can act as affiliates, referring others to the platform and collecting a portion of subscription revenue.
So now, you can buy an NFT, write an article, and contribute to the group chat. If you have onboarded users to the DAO, now you can earn passive income as an affiliate and sell your NFT at a premium when you choose to exit. Each individual adds value and benefits from the value created in multiple ways.
Ownership creates value.
JPEG’d is an innovative lending protocol that hopes to bridge the gap that lies between NFTs and Decentralized Finance via borrowing.
Take CryptoPunks, for example, the above-mentioned NFT collection. JPEG’d allows you to deposit your ‘Punk’ into a smart contract as collateral and borrow against it, creating what the founders call a Non-Fungible Debt Position (NFDPs).
The mechanics of the protocol are quite simple – after depositing their punk into the vault, users will be able to mint a dollar-denominated stablecoin against this collateral called PUSd. According to the team’s Medium, PUSd will seed liquidity from a basket of other tokens in order to maintain a peg as close to $1 as possible. Liquidity incentives will be in place to allow for PUSd holders to exchange the token into other assets to earn yield elsewhere.
Thus, Punks and other NFTs onboarded to the platform turn into stores of value that can turn into yield generating assets. The team is anonymous, but has released a list of advisers that include Tentranode, Dopex, and other notable names in the DeFi and NFT space. The protocol will be managed by the DAO and governance token, $JPEG, in all matters ranging from debt parameters, floor price, and future projects.
With the illiquid and variable nature of NFT prices, JPEG’d has partnered with Chainlink to create a customized pricing oracle solution. The price feed will use a Time-Weighted Average Price of recent sales and offered floor prices in order to create an accurate and representative price of punks for the owners to borrow against.
JPEG’d has plans to expand this product to all liquid and valuable NFTs. We see the benefit of this project as two-fold:
- NFT owners can earn yield on money that was previously not available
- The intrinsic value of NFTs will increase solely due to their new use case (they can now be borrowed against.)
Combine this platform with something like a veNFT and you can begin to see how these interlinking tokens, ideas, and standards can combine and fit together to create value that goes far beyond the original use cases imagined for NFTs.
In NFTs, a medium that’s often seen (and rightly so) as highly speculative, it’s refreshing to see new use cases and value unlocked by DeFi pioneers. This all relates back to a concept called skeuomorphism (it’s a big word, but hang on for a second) that can apply really well to NFTs (the concept of skeuomorphism comes from the Chris Dixon blog post above).
Skeuomorphism is the idea that new technology is informed by old technology. Take, for example, the Instagram logo, which, even though it had nothing to do with film cameras, took the form of one.
Collectibles are skeuomorphs, meaning that they exist in previous tech and now have been adapted to fit NFTs. But the true potential in NFTs lies far beyond collectibles: while NFTs in their current form might not be attractive to you, there are use cases to be created in the future that are original and specific to NFTs, use cases that can revolutionize ownership, finance, borrowing, and community membership.
And with the protocols we’ve mentioned today, we begin to scratch the surface.