Connect with us

Blockchain

Going beyond marketplaces to deliver unique content

Published

on



The beginning of 2021 was marked by an unprecedented high interest in nonfungible token, or NFT, technology in various fields, the peak of which occurred in March. Nowadays, news about art deals with NFTs appears every day. What is more interesting is that NFTs are becoming fashionable among people who were previously ignorant of crypto. 

Examples of how the NFT mania is reaching its peak can be seen through Beeple selling his art piece for almost $70 million and the likes of the Hermitage Museum in Saint Petersburg, Russia, announcing that it will hold an exhibition of NFT art in 2021.

What is the reason for such interest in NFTs, besides the hype generated by celebrities supporting the technology? Can a regular crypto enthusiast actually engage with NFTs in a user-friendly way?

So, why are NTF platforms developing so quickly, and what exactly are they? Here’s why NTF platforms are becoming crucial for attracting the art community, how these platforms actually work, and what they can offer their users apart from just being a type of marketplace.

The basics

The whole point is in the NTF itself, in its uniqueness. It cannot be replaced, faked or divided. The author of the token can prove their ownership, or the fact that a transfer of said ownership has taken place. That is, the owner of such a product can tokenize it by releasing an NFT, assigning a price to it and putting it up for auction. The buyer of such tokens receives the right to own and dispose of the goods, while information about this is recorded on the blockchain.

Operations with tokens are obviously cheaper, easier and faster than operations with real objects, although platforms for creating and selling NFTs have just begun to develop. However, NFTs are not completely covered by law, and proving ownership in terms of intellectual property rights may be challenging. Yes, unfortunately, not everyone accepts that blockchain is a legal record-keeping method.

What rights does the buyer have who spends their hard-earned dollars on the author’s token? If there is no legal agreement between the creator and the buyer of the NFT, the exclusive rights do not simply pass to the buyer with the purchase of the token.

Other rules may be established by the platform, but today, the standard terms of the largest platforms do not contain such rules. It is likely that the platforms will give the NFT creators the right to choose the licensing terms themselves.

Of course, any financial instrument cannot live long without state regulation. Here, NTFs are likely to take the path of conventional cryptocurrencies, and some believe that lawmakers will eventually intervene.

First is security, second is NFT

NTF platforms offer content in a variety of formats, so everyone can choose what sphere of art they wish to enter. But before getting in the industry, it is worth understanding how they work and whether they are safe, with regard to the potential risks.

For example, an NFT exists on the Ethereum blockchain. Having chosen the NFT platform, the user would need to create an Ethereum wallet, from which unique tokens will be bought and sold. Wallets help to authorize users on the platforms, in most cases without entering additional data like a username or password, as the wallet identifies the user using their wallet address. Some platforms require users to buy a native token to then purchase the artwork.

The principle of operation of any NTF platform is simple: Users come to the platform in order to secure the right to the created or purchased content, and as a confirmation, they receive a token, which can be freely traded with another user. From the point of view of security, the NTF itself already acts as a guarantee, as the blockchain contains information about the owner, whether they are a creator or a buyer.

But this does not mean that by buying an NFT, users can relax, as they are not safe from thefts on NFT platforms. For example, in March, the Nifty Gateway trading platform reported that some users were faced with account hijacking, theft and purchase of NFTs using a credit card without their knowledge. However, it turned out that none of the accounts had two-factor user authentication enabled.

It is not a question of poor security of NTF platforms, rather of the lack of knowledge on behalf of the users. All valuable items need to be stored safely, and NFT tokens are no exception. It’s not enough just to buy a token and store it on the platform — users need to protect their account and enable two-factor authentication, keep their password in a safe place, and indeed, most platforms provide such opportunities. Each owner of a valuable NTF must understand their responsibility and protect their item.

The NTF platforms

A regular person will usually purchase NFTs on special platforms — marketplaces, where tokens can be bought or sold. One of the largest and most popular marketplaces is OpenSea. This site contains thousands of different NFTs, from game cards to paintings by contemporary artists. The platform also maintains their ratings and tracks the most popular tokens.

Another marketplace is SuperRare, where digital art can be bought and sold but cannot be traded directly between users. On this platform, artists validate their work by creating a tokenized certificate. They set a selling price and allow potential buyers to bid on their pieces. The investment aspect of SuperRare is its aftermarket. Anyone can resell a purchased piece of art as if it were at a regular auction.

In the field of sports, the most interesting platform as of yet is NBA Top Shot. The concept of the project is to publish and sell digital basketball collectible cards. However, instead of static images of players, NBA Top Shot cards contain video clips from past games. Each token is truly a unique piece of memorabilia.

But is there something else besides marketplaces? Is the NFT industry limited to such projects with a buy-and-sell concept? Of course not. Today, some interesting projects are emerging, representing a variety of financial opportunities.

Some platforms are striving primarily for the convenience of NFT purchases, where a user can buy an item they like with a regular credit card. For example, Crypto.com’s NFT project does this by attracting as much unique content as possible, not only in the field of games but also from popular artists, musicians and athletes — to be multifaceted. It will be possible to purchase valuable items on the platform using cryptocurrencies.

The platform Rarible has become very popular, as it enables artists to collect royalties every time their work is resold. Rarible introduced a governance token called RARI and is taking steps toward developing itself into a decentralized autonomous organization. RARI tokenholders, who include NFT creators and collectors, can vote on platform updates and participate in market moderation.

The developers of the project are also planning to launch an NFT index — a special search engine for those who want to invest in the NFT market but are not sure which works of art to choose.

For those who like creative design, there is a project called Art Block. It’s one of the first platforms focused on the automatic generation of programmable content that is stored on the Ethereum blockchain. The uniqueness of the platform lies in the creation of an endless amount of content that can be bought and sold as NTFs.

Users on the platform can choose the art style that suits them and pay for the piece of work, and the platform will randomly generate a piece of content in the form of an image, 3D model or interactive design.

In general, it seems that crypto enthusiasts need much more than simple marketplaces to buy or sell NTFs. This is where multiplatforms come into play, enabling its various groups of users to create both unique content and invest in art. NFT platforms are no longer only a place for tokenizing digital art and various collectibles, they are also a mechanism for attracting users.

“Tehn,” a community manager at Blockchain Cuties Universe — a game that operates on four blockchains at once and stores game inventory in the form of NTFs — believes that NTF platforms can eventually offer a much more interesting approach than simple marketplaces:

“I believe that a vast majority will be marketplaces at first. But there’s more uses for NFTs. Games already utilize them to store value in the game asset and give players full control of their inventories and even monetize their ingame time. That’s the beauty of it. Blockchain allows developers to create great assets, and empower players to play their game, while having full control of their account.”





Source link

Blockchain

GameStop saga paves the way for a new decentralized financial order

Published

on

By


Every significant transformation comes with a new toolset, one that is always surprising at the time and obvious in hindsight. Bitcoin (BTC), climate change and GameStop are all examples of ways in which mass action is pushing for dramatic, not evolutionary, action. We can also see that these are individual vectors of the same movement, highlighting the inefficient parts of the legacy system and the solutions driven by an aggregation of individuals with a collective belief.

What is so striking, but not unexpected, is that some of these events highlighted the opaque nature of centralized systems. They follow the recent trend of companies like Reddit, Robinhood and E-Trade restricting user access to entire platforms or specific features. The GameStop episode demonstrated how centralized systems could steer trading processes and unfairly disadvantage retail investors for the benefit of legacy institutions. Specifically, it brought to light a surprising amount of collateral requirements on brokers — such as Robinhood — by the clearing corporations. The reasoning for this was the maintenance of sufficient levels of margin.

Related: GameStop tale exposes regulatory paternalism and DeFi’s true value

Another thing that came to light is that brokers like Robinhood, Fidelity, E-Trade, Charles Schwab and TD Ameritrade engage in a much-debated practice called “payment-for-order-flow” that could lead to front running. In this process, market-making firms like Citadel Securities pay a broker a fee to access orders placed by retail traders. When bundled, these orders give market makers access to information about potential short-term, future price movements. Is there any benefit for the retail trader? As the brokerage companies state: yes, as this practice allows for commission-free trades.

Although these practices are commonplace in traditional internet and finance within a narrow context, things can get uncertain when we take a broader perspective of similar implications of censorship in other areas of our society.

In response to this broken system, viable decentralized alternatives create the precondition for a mass exodus, marking a historical curtailment of centralized structures. Decentralized finance, or DeFi, and decentralized exchanges, or DEXs, play an important part in this broader transformation, addressing the opacity inherent in legacy financial systems and the resulting disadvantages to common participants.

Related: GameStop saga reveals legacy finance is rigged, and DeFi is the answer

Can DeFi and DEX be a fair alternative to traditional finance?

The decentralized nature of blockchain technology confers censorship resistance. It thus allows for applications where the ability for centralized actors — such as Robinhood — to restrict traders can simply be designed out. The open-source and auditable nature of a decentralized ecosystem would make such moves obvious and result in the discrediting of such exchanges by its users. Thus, DEXs offer the promise of a censorship-resistant exchange function where users, regardless of retail or institutional status, can conceptually participate on a much more even playing field.

Innovation around DEXs is still in the early and experimental stages. But, it carries the potential to allow disparate participants unfettered access to a limitless world of asset exchange, not just for traditional blockchain tokens but public equities, commodities, derivatives and — yes indeed — even eventually GameStop, should the users demand it.

Related: The rise of DEXs: Fueled by DeFi and ready to disrupt the status quo

Many founders in the space say that the inequalities of traditional finance motivated them to build their part of the DeFi ecosystem. Alex Pack, the managing partner of Dragonfly Capital, said:

“The goal of DeFi is to reconstruct the banking system for the whole world in this open, permissionless way. You only get that shot every 50 years.”

In 2014, Bitcoin Foundation’s Harsh Patel published a paper titled “A block chain based decentralized exchange,” outlining how code, not institutions, could manage the trading market. The idea wasn’t new, but it came at a time when crypto markets were facing difficulties. Mt. Gox, along with many other centralized crypto exchanges, met its demise between 2011 and 2014 through hacks and loss of its users’ assets.

Related: Report on crypto exchange hacks 2011-2020

To avoid the flaws inherent in centralized exchanges, a number of entrepreneurs sought to launch DEXs, supporting what would come to be the core values of DeFi: transparency, unfettered access to trading opportunities and markets, and the option to participate in decision-making in the platforms they use through ownership of governance tokens.

Related: DeFi is the future of banking that humanity deserves

The future is decentralized

Early DEX protocols functioned by utilizing smart contracts to facilitate cryptocurrency trading in direct peer-to-peer transactions. However, challenges, including lack of liquidity and poor user experience, prevented DEXs from becoming viable platforms for users. Today, iterative and innovative DEX protocols have made considerable strides to overcome those challenges and are shaping up to have trading interfaces familiar to traditional markets. For example, traders today can buy crypto with card and bank account balances directly with fiat on/off ramps that convert fiat to cryptocurrency and vice versa.

In addition, soon-to-launch DEXs will introduce features germane to traditional markets such as market analytics, and trading tools like liquidity charts, trading volume and order book depth. These functionalities provide users with objective real-time data and insights into the trading landscape.

In this new financial system, DEXs that utilize automated market makers — like Uniswap or 1inch — generate an equal playing field for all participants. There are no brokers, clearinghouses or centralized market makers; trades are settled peer-to-peer or peer-to-protocol without arbitrators, except those codified by smart contracts. And critically, there are no different sets of rules for different groups of players.

Access is also improved. Whereas in traditional markets, it can be difficult to gain entry due to the complex requirements for accreditation, a typical DEX requires little to no private information from the user. These standards offer a benefit of pseudonymity and a measure of privacy protection that otherwise isn’t guaranteed when handing over your personal, identifiable information to a centralized broker. However, this may change with more Anti-Money Laundering laws coming to DeFi and the regulatory environment remaining uncertain. But, teams are working on solutions to address both the compliance requirements and an individual’s desire for privacy, which enables users to retain full ownership of their assets and identity rights, and grants specific permissions to businesses to verify their identity.

If the GameStop saga proves to be more than just a momentary anomaly, we might presently be witnessing the emergence of a profound change in the financial system or the creation of an entirely new one. As financial technology companies made it easier for consumers to participate in financial markets, DEXs are tackling the flaws of centralized markets. In some ways, this generation of DEXs may become the new Robinhood’s. Perhaps this is one of those moments where the people, and not institutional legacy, will define the future.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Elvina Kamalova is a director of investments at Aludra Capital, a digital assets investment management firm based in San Francisco. Elvina has a background in digital assets investments, portfolio management and fintech product development. She is the recipient of the President’s Volunteer Service Award, presented by former President Barack Obama. She’s supported underrepresented entrepreneurs and STEM education of girls and believes in the importance of developing solutions for reducing the wealth gap and cultivating human advancement.