Connect with us

CryptoCurrency News

Microsoft and the Metaverse

Published

on

Here is the punchline: the Metaverse already exists, it just happens to be called the Internet. Consider the seven qualities Matthew Ball used to define the Metaverse; the Internet satisfies all of them:1

  • The Internet is persistent
  • The Internet is synchronous and live
  • The Internet has no cap to concurrent users, while also providing each user with an individual sense of “presence”
  • The Internet has a fully functioning economy
  • The Internet is an experience that spans both the digital and physical worlds, private and public networks/experiences, and open and closed platforms
  • The Internet offers unprecedented (although not perfect) interoperability of data, digital items/assets, content, etc.
  • The Internet is populated by “content” and “experiences” created and operated by an incredibly wide range of contributors

I really don’t see anyone creating some sort of grand nirvana that beats what we currently have on any of these metrics. The entire reason the Internet is as open and interoperable as it is is because it was built in a world without commercial imperative or political oversight; all future efforts will be led by companies seeking profits and regulated by governments seeking control, both of which result in centralization and lock-in. Crypto pushes in the opposite direction, but it is a product of the Internet that relies on many of the qualities in Ball’s list, not a replacement.

What makes “The Metaverse” unique, then, is that it is the Internet best experienced in virtual reality. This, though, will take time; I expect that the first virtual reality experiences will be individual metaverses, tied together by the Internet as we experience it today.

Mobile and the Physical World

Forecasts, particularly those that extend multiple years into the future, are always a dangerous enterprise; look no further than January 2020, when I argued in The End of the Beginning that mobile + cloud represented the culmination of the last fifty years in tech history:

 

 

The idea behind this article is right there in the title: “The End of the Beginning”. Tech innovation wasn’t over, it was only beginning, but everything in the future would happen on top of the current paradigm.

Then COVID happened, and now I’m not so sure if that’s the entirety of the story.

Implicit in the assumption that mobile + cloud is the endpoint is the preeminence of the physical world. After all, what makes the phone the ultimate expression of a “personal computer” is that it is with us everywhere, from home to work to every moment in-between. That is what allows for continuous computing everywhere.

At the same time, for well over a year a huge portion of people’s lives was primarily digital. The primary way to connect with friends and family was via video calls or social networking; the primary means of entertainment was streaming or gaming; for white collar workers their jobs were online as well. This certainly wasn’t ideal: the first thing people want to do as the world opens up is see their friends and family in person, go to a movie or see a football game as a collective, or take a trip. Work, though, has been a bit slower to come back: even if the office is open, many meetings are still online given that some of the team may be working remote — for many companies, permanently.

This last case presents a scenario where the physical is not pre-eminent; an Internet connection is. In this online-only world a phone is certainly essential as a means to stay connected while moving around; it is not, though, the best way to be online. Virtual reality could be.

Work in VR

There have been two conventional pieces of wisdom about virtual reality that I used to agree with, but now I think both were off-base.

The first one is that virtual reality’s first and most important market will be gaming. The reasoning is obvious: gamers already buy dedicated equipment, and gaming is an immersive activity that could justify the hassle of putting on and taking off a headset. One problem, though, is that gamers buying dedicated equipment are going to care the most about performance, and VR quality is still behind; the bigger problem, though, is that there simply isn’t a big enough market of people with headsets to justify investment from game makers. This is the chicken-and-egg problem that bedevils all new platforms: if you don’t have users you won’t have developers, but if you don’t have developers you won’t have users.

The second assumption is that augmented reality would be a larger and more compelling market than virtual reality, just like the phone is a larger and more compelling market than games (excluding mobile games, of course). This is because the phone is with you all of the time — an accompaniment to your daily life — whereas more immersive experiences like console games are a destination: because they require your full attention, they have access to less of your time.

However, this is why I discussed the COVID-accelerated devaluation of the physical: for decades work was a physical destination; now it is a virtual one. While it used to be that the knowledge worker day was broken up between solitary work on a computer and in-person meetings, over the last two years in-person meetings were transformed into a link on a calendar invite that opened a video-conferencing call. This is the demotion of the physical I referred to above:

 

Meanwhile, new products like Facebook’s Horizon Workrooms and Microsoft’s Mesh for Microsoft Teams make it possible to hold meetings in virtual reality. While I have not used Microsoft’s offering, one of the things I found compelling about Horizon Workrooms was how it managed mixed reality: not only could you bring your computer into the virtual environment (via a daemon running on your computer that projected the screen into your virtual reality headset), meeting participants without virtual headsets simply appeared on video screens, no different than workers calling in to an in-person meeting in the physical world.

I am very impressed — and my opinion is colored — by the experience of Horizon Workrooms. I now understand what CEO Mark Zuckerberg means when he talks about “presence”; there really is a ta+ngible sense of being in the same room as everyone else, and not only in terms of focused discussion: something that is surprisingly familiar is noticing the person next to you not at all paying attention and instead doing email on their computer.

At the same time, it’s not an experience that you would want to use all of the time. For one, the tech isn’t quite good enough; the Quest 2, while a big leap in terms of a standalone device, is still too low resolution and has too limited of battery life to wear for long, and a good number of people still get dizzy after prolonged usage. The bigger problem, though, is that putting on the headset for a call is a bit of a pain; you have to unplug the headset, turn it on, log in, find the Horizon Workrooms app, and join the meeting, and while this only takes a couple of minutes, it’s just so much easier to click that link on your calendar and join a video call.

What, though, if you already had the headset on?

Think again over the last couple of years: most of those people working from home were hunched over a laptop screen; ideally one was able to connect an external monitor, but even that is relatively limited in size and resolution. A future VR headset, though, could contain as many monitors as you could possibly want — or your entire field of view could be one massive monitor. Moreover, the fact that a headset shifts your senses out of your physical environment is actually an advantage if said physical environment has nothing to do with your work.

In this world joining a meeting does not entail shifting your context from a computer to a headset, but simply clicking a button or entering a virtual door; now all of the advantages of virtual reality — the sense of presence in particular — comes for free. What will seem anachronistic is using a traditional laptop or desktop computer; those, like a headset, keep you stationary, without any of the benefits of virtual reality (of course not everyone will necessarily use a fully contained headset like an Oculus; those with high computing needs would use a headset tethered to their computer).

PCs and the Enterprise Market

Here is the most important thing: if virtual reality really is better for work, then that solves the chicken-and-egg problem.

Implicit in assuming that augmented reality is more important than virtual reality is assuming that this new way of accessing the Internet will develop like mobile did. Smartphone makers like Apple, though, had a huge advantage: people already had and wanted mobile phones; selling a device that you were going to carry anyway, but which happened to be infinitely more capable for only a few hundred more dollars, was a recipe for success in the consumer market.

PCs, though, didn’t have that advantage: the vast majority of the consumer market had no knowledge of or interest in computers; rather, most people encountered computers for the first time at work. Employers bought their employees computers because computers made them more productive; then, once consumers were used to using computers at work, an ever increasing number of them wanted to buy a computer for their home as well. And, as the number of home computers increased, so did the market opportunity for developers of non-work applications like games.

I suspect that this is the path that virtual reality will take. +Like PCs, the first major use case will be knowledge workers using devices bought for them by their employer, eager to increase collaboration in a remote work world, and as quality increases, offer a superior working environment. Some number of those employees will be interested in using virtual reality for non-work activities as well, increasing the market for non-work applications.

All of these work applications will, to be clear, still be accessible via regular computers, phones, etc. None of them, though, will be dependent on any one of those devices. Rather these applications will be Internet-first, and thus by definition, Metaverse-first.

Microsoft’s Opportunity

This means that the company that is, in my opinion, the most well-placed to capitalize on the Metaverse opportunity is Microsoft. Satya Nadella brought about The End of Windows as the linchpin of Microsoft’s strategy, but that doesn’t mean that Microsoft abandoned the idea of owning the core application around which a workplace is organized; their online-first device-agnostic cloud operating system is Teams.

It is a mistake to think of Teams as simply Microsoft’s rip-off of Slack; while any demo from a Microsoft presentation is obviously an idealized scenario, this snippet from last week’s Microsoft Ignite keynote shows how much more ambitious Microsoft’s vision is

What is not integrated is the hardware; Microsoft sells a number of third party VR headsets on said webpage, all of which have to be connected to a Windows computer. Microsoft’s success will require creating an opportunity for OEMs similar to the opportunity that was created by the PC. At the same time, this solution is also an advantageous one for the long-term Metaverse-as-Internet vision: Windows is the most open of the consumer platforms, and that applies to Microsoft’s current implementation of VR. The company would do well to hold onto this approach.

Meta’s Challenge

Meta née Facebook is integrated in a different direction: Meta is spending billions of dollars on not just software but also hardware, and while Workrooms is obviously an enterprise application, Meta has to date been very much a consumer company (Workplace notwithstanding). The analogy to the PC era, then, is Apple and the Mac, and that is a reason to be a bit bearish relative to Microsoft.

Meta, however, has a big advantage that the original Mac did not: the Internet already exists. This is where Workroom’s integration of your computer into virtual reality is particularly clever: when I am using my computer in virtual reality, I have access to all of my applications, data, etc.; perhaps that, along with Workroom’s meeting capabilities, will be sufficient.

Meta, though, should shoot for something more. First off, if I am right, and the enterprise is the first big market for VR, then some of that billions of dollars should go towards building an enterprise go-to-market team that can compete with Microsoft. Second, there remains a huge opportunity long squandered by Google: to be the enterprise platform that competes with Microsoft’s integrated offering by effectively tying together best-of-breed independent SaaS offerings into a cohesive whole.

This is, to be honest, probably unrealistic; Meta is starting from scratch in the enterprise space, without any of the identity and email capabilities that Google possesses, much less Microsoft. More importantly, it’s just very difficult seeing the company having the culture to pull off being an enterprise platform. That, though, places that much more burden on Meta making the best hardware, and keeping its integrated operating system truly open. To that end, it is worth noting that Meta is focused on its headsets being standalone, while Microsoft is still tied to Windows; this gives Meta more freedom-of-movement in terms of working with all of the platforms that already exist.

What is clear, though, is that Facebook needed to change its name: no one wants to use a consumer social network for work. And, as I noted in the context of the name change, Meta is still founder-driven. That may give an execution and vision advantage that other companies can’t match. Again, though, that could mean too much focus on a consumer market that might take longer than Meta hopes to be convinced of why exactly they should buy a VR headset.

Apple and AR

Apple seems like it should be a strong competitor. The company is clearly the most advanced as far as hardware goes, particularly when it comes to powerful-yet-power-efficient chips, which is a big advantage in a power constrained environment. Moreover, Apple can leverage the fact it controls the phone, just as it does with the Apple Watch.

However, I am bearish on Apple’s prospects in this space for three reasons:

  • First, rumors suggest that Apple is focusing on augmented reality, not virtual reality; as I detailed above, though, I think that virtual reality will be the larger market, at least at first.
  • Second, Apple’s iPhone-centricity could be a liability, much as Microsoft’s Windows-centricity was a liability once mobile came along. It is very hard to fully embrace a new paradigm if the biggest part of your businesses is rooted in another; indeed, the fact that Apple is focused on augmented reality reflects an assumption that the world will continue to be one in which the physical has preeminence over the virtual.
  • Third, because both virtual reality and augmented reality will be new-to-the-world interfaces, the importance of developers will likely be more important than in the case of the phone. People bought iPhones first, and developers followed; Apple may have trouble if the chicken-and-egg problem runs in the opposite direction.

Apple Watch is the counter to all of these objections: it’s a device for the physical world, it benefits from the iPhone, and Apple delivered the core customer propositions — notifications and fitness — on its own. Perhaps a better way to state my position is that Apple is likely well placed for augmented reality, but not virtual reality, but I have changed my mind about which is more important.

The Field

It’s hard to see any other hardware-based startups emerging as VR platforms; I think the best opportunity for a startup is riding on Microsoft’s coattails and offering an alternative operating system for the hardware that is produced for Windows. Valve is obviously already doing this with Steam, but there may be a place for a more general purpose alternative, probably based on Android (which, I suppose, Google could build, but the company seems awfully content these days).

Snap and Niantic, meanwhile, are focused on augmented reality, but will be handicapped by the inability to effectively offload compute onto the phone in the same way Apple will be able to, and again, the trick will be getting consumers to care.

Roblox, meanwhile, is arguably the Teams of the consumer space: it is a 2D-metaverse that is device-agnostic; the company is working to keep people connected even when they aren’t playing games, including buying Discord competitor Guilded. Discord, meanwhile, is a bit of a metaverse in its own right, with more connections to external applications; this could be a candidate for the aforementioned company that rides on the Microsoft ecosystem’s coattails.

Again, though, none of this is so different from the world as it exists today, because the Internet already exists (and yes, that includes crypto). That is one of the things I still stand by from The End of the Beginning: technology doesn’t move in step changes, but rather evolves on a spectrum towards more continuous computing. Name changes, whether that be from Facebook to Meta or from Internet to Metaverse, are a marker of that evolution, not a punctuated equilibrium.

By Ben Thompson

 

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

CryptoCurrency News

BREAKING: Gensler – A Ban on Crypto Is ‘Congress’ Decision – DETAILS

Published

on

By

In a Tuesday hearing, Gensler told the House Committee on Financial Services that the SEC has no plans to ban crypto.

U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler told Congress on Tuesday that the SEC has no plans to ban crypto.

When asked by Rep. Ted Budd (R-N.C.), a longtime crypto supporter and member of the Congressional Blockchain Caucus, if the SEC had any plans to follow China’s lead in banning cryptocurrency in favor of a prospective central bank digital currency (CBDC), Gensler said, “No, that would be up to Congress.”

Gensler’s assertion that the SEC does not plan to ban crypto mirrors similar remarks made by Federal Reserve Chair Jerome Powell last week, when the central bank head told the House Financial Services Committee that the Fed had “no plans to ban” the $2.2 trillion asset class.

Gensler mostly reiterated his previous thoughts on crypto regulation including the need for exchanges to “come in and register” with the SEC, the potential systemic risk posed by stablecoins and the need for them to be subject to increased regulation, and that “most” cryptocurrencies fall under the definition of a security.

However, Gensler also expanded on his understanding of the SEC’s authority to regulate the crypto industry.

When asked by Rep. Jim Himes (D-Conn.) to provide “guidance” on the topic of crypto regulation, Gensler reiterated his previous position that crypto exchanges need to register with the SEC but added that decentralized exchanges (DEXs) would also be subject to regulations.

“Even in decentralized platforms – so-called DeFi platforms – there is a centralized protocol. And though they don’t take custody in the same way [as centralized exchanges], I think those are the places that we can get the maximum amount of public policy.”

Gensler also expanded on his stance on stablecoins, which he has previously called the “poker chips” at the crypto “casino.” Gensler doubled down on his poker chip analogy during his response to several questions, adding that he viewed stablecoins as a systemic risk to the economy.

“The $125 billion of stablecoins we have right now are like poker chips at a casino,” Genser said. “I do think that if this continues to grow – and it’s grown about tenfold in the last year – it can present those systemic wide risks.”

The statement comes a day after we first reported that USDC stablecoin issuer Circle was served with an “investigative subpoena” from the SEC’s Enforcement Division in July.

The price of bitcoin, already up on the day, appeared to jump further on Gensler’s comments, rising to as high as $51,678.20. In recent trading, the price of the leading cryptocurrency was at $51,329.82, up 4.59% in the last 24 hours.

Continue Reading

CryptoCurrency News

WHAT IS DEFi?

Published

on

By

Defi is a short form of  “decentralized finance,” a term that carries  Ethereum and blockchain applications g pivoted toward disrupting financial intermediaries.

DeFi is short for “decentralized finance,” an umbrella term for a variety of financial applications in cryptocurrency or blockchain geared toward disrupting financial intermediaries.

DeFi draws inspiration from blockchain, the technology behind the digital currency bitcoin, which allows several entities to hold a copy of a history of transactions, meaning it isn’t controlled by a single, central source. That’s important because centralized systems and human gatekeepers can limit the speed and sophistication of transactions while offering users less direct control over their money. DeFi is distinct because it expands the use of blockchain from simple value transfer to more complex financial use cases.

Bitcoin and many other digital-native assets stand out from legacy digital payment methods, such as those run by Visa and PayPal, in that they remove all middlemen from transactions. When you pay with a credit card for coffee at a cafe, a financial institution sits between you and the business, with control over the transaction, retaining the authority to stop or pause it and record it in its private ledger. With bitcoin, those institutions are cut out of the picture.

Direct purchases aren’t the only type of transaction or contract overseen by big companies; financial applications such as loans, insurance, crowdfunding, derivatives, betting, and more are also in their control. Cutting out middlemen from all kinds of transactions is one of the primary advantages of DeFi.

Before it was commonly known as decentralized finance, the idea of DeFi was often called “open finance.”

Ethereum applications

Most applications that call themselves “DeFi” are built on top of Ethereum, the world’s second-largest cryptocurrency platform, which sets itself apart from the Bitcoin platform in that it’s easier to use to build other types of decentralized applications beyond simple transactions. These more complex financial use cases were even highlighted by Ethereum creator Vitalik Buterin back in 2013 in the original Ethereum white paper.

That’s because Ethereum’s platform for smart contracts – which automatically execute transactions if certain conditions are met – offers much more flexibility. Ethereum programming languages, such as Solidity, are specifically designed for creating and deploying such smart contracts.

For example, say a user wants his or her money to be sent to a friend next Tuesday, but only if the temperature climbs above 90 degrees Fahrenheit according to weather.com. Such rules can be written in a smart contract.

With smart contracts at the core, dozens of DeFi applications are operating on Ethereum, some of which are explored below. Ethereum 2.0, a coming upgrade to Ethereum’s underlying network, could give these apps a boost by chipping away at Ethereum’s scalability issues.

The most popular types of DeFi applications include:

  • Decentralized exchanges (DEXs): Online exchanges help users exchange currencies for other currencies, whether U.S. dollars for bitcoin or ether for DAI. DEXs are a hot type of exchange, which connects users directly so they can trade cryptocurrencies with one another without trusting an intermediary with their money.
  • Stable coins: A cryptocurrency that’s tied to an asset outside cryptocurrency (the dollar or euro, for example) to stabilize the price.
  • Lending platforms: These platforms use smart contracts to replace intermediaries such as banks that manage lending in the middle.
  • “Wrapped” bitcoins (WBTC): A way of sending bitcoin to the Ethereum network so the bitcoin can be used directly in Ethereum’s DeFi system. WBTCs allow users to earn interest on the bitcoin they lend out via the decentralized lending platforms described above.
  • Prediction markets: Markets for betting on the outcome of future events, such as elections. The goal of DeFi versions of prediction markets is to offer the same functionality but without intermediaries.

In addition to these apps, new DeFi concepts have sprung up around them:

  • Yield farming: For knowledgeable traders who are willing to take on risks, there’s yield farming, where users scan through various DeFi tokens in search of opportunities for larger returns.
  • Liquidity mining: When DeFi applications entice users to their platform by giving them free tokens. This has been the buzziest form of yield farming yet.
  • Composability: DeFi apps are open source, meaning the code behind them is public for anyone to view. As such, these apps can be used to “compose” new apps with the code as building blocks.
  • Money legos: Putting the concept “composability” another way, DeFi apps are like Legos, the toy blocks children click together to construct buildings, vehicles, and so on. DeFi apps can be similarly snapped together like “money legos” to build new financial products.

    Lending platforms

    Lending markets are one popular form of DeFi, which connects borrowers to lenders of cryptocurrencies. One popular platform, Compound, allows users to borrow cryptocurrencies or offer their own loans. Users can make money off of interest for lending out their money. Compound sets the interest rates algorithmically, so if there’s a higher demand to borrow a cryptocurrency, the interest rates will be pushed higher.

    DeFi lending is collateral-based, meaning in order to take out a loan, a user needs to put up collateral – often ether, the token that powers Ethereum. That means users don’t give out their identity or associated credit score to take out a loan, which is how normal, non-DeFi loans operate.

    Stablecoins

    Another form of DeFi is a stable coin. Cryptocurrencies often experience sharper price fluctuations than fiat, which isn’t a good quality for people who want to know how much their money will be worth a week from now. Stablecoins peg cryptocurrencies to non-crypto currencies, such as the U.S. dollar, in order to keep the price under control. As the name implies, stablecoins aim to bring price “stability.”

    Prediction markets

    One of the oldest DeFi applications living on Ethereum is a so-called “prediction market,” where users bet on the outcome of some event, such as “Will Donald Trump win the 2020 presidential election?”

    The goal of the participants is, obviously, to make money, though prediction markets can sometimes better predict outcomes than conventional methods, like polling. Centralized prediction markets with good track records in this regard include Intrade and Predict It. DeFi has the potential to boost interest in prediction markets since they are traditionally frowned upon by governments and often shut down when run in a centralized manner.

    DeFi FAQ (Frequently Asked Questions)

    How do I make money with DeFi?

    The value locked up in Ethereum DeFi projects has been exploding, with many users reportedly making a lot of money.

    Using Ethereum-based lending apps, as mentioned above, users can generate “passive income” by loaning out their money and generating interest from the loans. Yield farming, described above, has the potential for even larger returns, but with larger risks. It allows for users to leverage the lending aspect of DeFi to put their crypto assets to work generating the best possible returns. However, these systems tend to be complex and often lack transparency.

    Is investing in DeFi safe?

    No, it’s risky. Many believe DeFi is the future of finance and that investing in the disruptive technology early could lead to massive gains.

    But it’s difficult for newcomers to separate the good projects from the bad. And, there have been plenty of bad.

    As DeFi has increased inactivity and popularity through 2020, many DeFi applications, such as meme coin YAM, have crashed and burned, sending the market capitalization from $60 million to $0 in 35 minutes. Other DeFi projects, including Hotdog and Pizza, faced the same fate, and many investors lost a lot of money.

    In addition, DeFi bugs are unfortunately still very common. Smart contracts are powerful, but they can’t be changed once the rules are baked into the protocol, which often makes bugs permanent and thus increasing risk.

    When will DeFi go mainstream?

    While more and more people are being drawn to these DeFi applications, it’s hard to say where they’ll go. Much of that depends on who finds them useful and why. Many believe various DeFi projects have the potential to become the next Robinhood, drawing in hordes of new users by making financial applications more inclusive and open to those who don’t traditionally have access to such platforms.

    This financial technology is new, experimental and isn’t without problems, especially with regard to security or scalability.

    Developers hope to eventually rectify these problems. Ethereum 2.0 could tackle scalability concerns through a concept known as sharding, a way of splitting the underlying database into smaller pieces that are more manageable for individual users to run.

    How will Ethereum 2.0 impact DeFi?

    Ethereum 2.0 isn’t a panacea for all of DeFi’s issues, but it’s a start. Other protocols such as Raiden and TrueBit are also in the works to further tackle Ethereum’s scalability issues.

    If and when these solutions fall into place, Ethereum’s DeFi experiments will have an even better chance of becoming real products, potentially even going mainstream.

    Bitcoin as DeFi

    While Ethereum is the top dog in the DeFi world, many proponents of Bitcoin share the goal of cutting the middleman out of more complex financial transactions, and they’ve developed ways to do so using the Bitcoin protocol.

    Companies such as DG Labs and Suredbits, for instance, are working on a Bitcoin DeFi technology called discreet log contracts (DLC). DLC offers a way to execute more complex financial contracts, such as derivatives, with the help of Bitcoin. One use case of DLC is to pay out bitcoin to someone only if certain future conditions are met, say if the Chicago White Sox team wins its next baseball game, the money will be dispensed to the winner.

    Disclaimer

    This content is for informational purposes only and should not be considered as investment advice. 

     

Continue Reading

CryptoCurrency News

Non-Fungible Tokens – – What You Need to Know As a Trader!

Published

on

By

Non-fungible tokens (NFTs) seem to have exploded out of the ether this year. From art and music to tacos and toilet paper, these digital assets are selling like 17th-century exotic Dutch tulips—some for millions of dollars.

But are NFTs worth the money—or the hype? Some experts say they’re a bubble poised to pop, like the dot-com craze or Beanie Babies. Others believe NFTs are here to stay, and that they will change investing forever.

What Is NFT?

An NFT is a digital asset that represents real-world objects like art, music, in-game items, and videos. They are bought and sold online, frequently with cryptocurrency, and they are generally encoded with the same underlying software as many cryptos.

Although they’ve been around since 2014, NFTs are gaining notoriety now because they are becoming an increasingly popular way to buy and sell digital artwork. A staggering $174 million has been spent on NFTs since November 2017.

NFTs are also generally one of a kind, or at least one of a very limited run, and have unique identifying codes. “Essentially, NFTs create digital scarcity,” says Arry Yu, chair of the Washington Technology Industry Association Cascadia Blockchain Council and managing director of Yellow Umbrella Ventures.

This stands in stark contrast to most digital creations, which are almost always infinite in supply. Hypothetically, cutting off the supply should raise the value of a given asset, assuming it’s in demand.

But many NFTs, at least in these early days, have been digital creations that already exist in some form elsewhere, like iconic video clips from NBA games or securitized versions of digital art that’s already floating around on Instagram.

For instance, famous digital artist Mike Winklemann, better known as “Beeple” crafted a composite of 5,000 daily drawings to create perhaps the most famous NFT of the moment, “EVERYDAY: The First 5000 Days,” which sold at Christie’s for a record-breaking $69.3 million.

Anyone can view the individual images—or even the entire collage of images online for free. So why are people willing to spend millions on something they could easily screenshot or download?

Because an NFT allows the buyer to own the original item. Not only that, it contains built-in authentication, which serves as proof of ownership. Collectors value those “digital bragging rights” almost more than the item itself.

How Is an NFT Different from Cryptocurrency?

NFT stands for non-fungible token. It’s generally built using the same kind of programming as cryptocurrency, like Bitcoin or Ethereum, but that’s where the similarity ends.

Physical money and cryptocurrencies are “fungible,” meaning they can be traded or exchanged for one another. They’re also equal in value—one dollar is always worth another dollar; one Bitcoin is always equal to another Bitcoin. Crypto’s fungibility makes it a trusted means of conducting transactions on the blockchain.

NFTs are different. Each has a digital signature that makes it impossible for NFTs to be exchanged for or equal to one another (hence, non-fungible). One NBA Top Shot clip, for example, is not equal to EVERYDAYS simply because they’re both NFTs. (One NBA Top Shot clip isn’t even necessarily equal to another NBA Top Shot clip, for that matter.)

How Does an NFT Work?

NFTs exist on a blockchain, which is a distributed public ledger that records transactions. You’re probably most familiar with blockchain as the underlying process that makes cryptocurrencies possible.

Specifically, NFTs are typically held on the Ethereum blockchain, although other blockchains support them as well.

An NFT is created, or “minted” from digital objects that represent both tangible and intangible items, including:

•  Art

•  GIFs

•  Videos and sports highlights

•  Collectibles

•  Virtual avatars and video game skins

•  Designer sneakers

•  Music

Even tweets count. Twitter co-founder Jack Dorsey sold his first ever tweet as an NFT for more than $2.9 million.

Essentially, NFTs are like physical collector’s items, only digital. So instead of getting an actual oil painting to hang on the wall, the buyer gets a digital file instead.

They also get exclusive ownership rights. That’s right: NFTs can have only one owner at a time. NFTs’ unique data makes it easy to verify their ownership and transfer tokens between owners. The owner or creator can also store specific information inside them. For instance, artists can sign their artwork by including their signature in an NFT’s metadata.

What Are NFTs Used For?

Blockchain technology and NFTs afford artists and content creators a unique opportunity to monetize their wares. For example, artists no longer have to rely on galleries or auction houses to sell their art. Instead, the artist can sell it directly to the consumer as an NFT, which also lets them keep more of the profits. In addition, artists can program in royalties so they’ll receive a percentage of sales whenever their art is sold to a new owner. This is an attractive feature as artists generally do not receive future proceeds after their art is first sold.

Art isn’t the only way to make money with NFTs. Brands like Charmin and Taco Bell have auctioned off themed NFT art to raise funds for charity. Charmin dubbed its offering “NFTP” (non-fungible toilet paper), and Taco Bell’s NFT art sold out in minutes, with the highest bids coming in at 1.5 wrapped ether (WETH)—equal to $3,723.83 at time of writing.

Nyan Cat, a 2011-era GIF of a cat with a pop-tart body, sold for nearly $600,000 in February. And NBA Top Shot generated more than $500 million in sales as of late March. A single LeBron James highlight NFT fetched more than $200,000.

Even celebrities like Snoop Dogg and Lindsay Lohan are jumping on the NFT bandwagon, releasing unique memories, artwork, and moments as securitized NFTs.

How to Buy NFTs

If you’re keen to start your own NFT collection, you’ll need to acquire some key items:

First, you’ll need to get a digital wallet that allows you to store NFTs and cryptocurrencies. You’ll likely need to purchase some cryptocurrency, like Ether, depending on what currencies your NFT provider accepts. You can buy crypto using a credit card on platforms like Coinbase, Kraken, eToro, and even PayPal and Robinhood now. You’ll then be able to move it from the exchange to your wallet of choice.

You’ll want to keep fees in mind as you research options. Most exchanges charge at least a percentage of your transaction when you buy crypto.

Popular NFT Marketplaces

Once you’ve got your wallet set up and funded, there’s no shortage of NFT sites to shop. Currently, the largest NFT marketplaces are:

•  OpenSea.io: This peer-to-peer platform bills itself as a purveyor of “rare digital items and collectibles.” To get started, all you need to do is create an account to browse NFT collections. You can also sort pieces by sales volume to discover new artists.

•  Rarible: Similar to OpenSea, Rarible is a democratic, open marketplace that allows artists and creators to issue and sell NFTs. RARI tokens issued on the platform enable holders to weigh in on features like fees and community rules.

•  Foundation: Here, artists must receive “upvotes” or an invitation from fellow creators to post their art. The community’s exclusivity and cost of entry—artists must also purchase “gas” to mint NFTs—means it may boast higher-caliber artwork. For instance, Nyan Cat creator Chris Torres sold the NFT on the Foundation platform. It may also mean higher prices — not necessarily a bad thing for artists and collectors seeking to capitalize, assuming the demand for NFTs remains at current levels, or even increases over time.

Although these platforms and others are hosts to thousands of NFT creators and collectors, be sure you do your research carefully before buying. Some artists have fallen victim to impersonators who have listed and sold their work without their permission.

In addition, the verification processes for creators and NFT listings aren’t consistent across platforms — some are more stringent than others. OpenSea and Rarible, for example, do not require owner verification for NFT listings. Buyer protections appear to be sparse at best, so when shopping for NFTs, it may be best to keep the old adage “caveat emptor” (let the buyer beware) in mind.

Should You Buy NFTs?

Just because you can buy NFTs, does that mean you should? It depends, Yu says.

“NFTs are risky because their future is uncertain, and we don’t yet have a lot of history to judge their performance,” she notes. “Since NFTs are so new, it may be worth investing small amounts to try it out for now.”

In other words, investing in NFTs is a largely personal decision. If you have money to spare, it may be worth considering, especially if a piece holds meaning for you.

But keep in mind, an NFT’s value is based entirely on what someone else is willing to pay for it. Therefore, demand will drive the price rather than fundamental, technical, or economic indicators, which typically influence stock prices and at least generally form the basis for investor demand.

All this means an NFT may resale for less than you paid for it. Or you may not be able to resell it at all if no one wants it.

NFTs are also subject to capital gains taxes—just like when you sell stocks at a profit. Since they’re considered collectibles, however, they may not receive the preferential long-term capital gains rates stocks do and may even be taxed at a higher collectibles tax rate, though the IRS has not yet ruled what NFTs are considered for tax purposes. Bear in mind, the cryptocurrencies used to purchase the NFT may also be taxed if they’ve increased in value since you bought them, meaning you may want to check in with a tax professional when considering adding NFTs to your portfolio.

That said, approach NFTs just like you would any investment: Do your research, understand the risks—including that you might lose all of your investing dollars—and if you decide to take the plunge, proceed with a healthy dose of caution.

Source forbs

Continue Reading

Trending

Copyright © 2021 BULL AFRICA NEWS.

%d bloggers like this: