NFTs Explained, Jack vs Web 3, Stablecoin Printing Press Terra
NFTs Explained, Jack vs Web 3, Stablecoin Printing Press Terra
Stablecoins as key feature in DeFi Growth, Are NFTs the last ICO, Glimpse of Automated Yield Compounder
Are NFTs “just a JPEG” or the “next ICO”?
Jack versus Web 3 Fans
The Stablecoin Printing Press
1. NFTs Explained
This week, we’ve cut through the noise around NFTs to share the signal and addressing the commentary like it’s “just a JPEG” or that it’s just a hype.
NFTs are blockchain-based records that uniquely represent pieces of media. The media can be anything digital, including art, videos, music, gifs, games, text, memes, and code. NFTs contain highly trustworthy documentation of their history and origin, and can have code attached to do almost anything programmers dream up (one popular feature is code that ensures that the original creator receives royalties from secondary sales). NFTs are secured by the same technology that enabled Bitcoin to be owned by hundreds of millions of people around the world and represent hundreds of billions of dollars of value.
NFTs have received a lot of attention lately because of high sales volumes. In the past 30 days there has been over $300M in NFT sales:
So what does it mean to own an NFT? And why some NFTs like CryptoPunks worth millions? There is no doubt.. a ton of money has been made in NFTs.
To answer that question, the one thing about NFTs is that it is unique, trackable and there is no question there is a hype-cycle going on in recent months.
For instance, the Gartner curve.
How do we assess what is working and what is not working there’s no doubt the current NFT boom is a reminiscence of the ICO boom back in late 2017-2018. According to Annissa, head of operations at $WHALE, the NFT in NFT art is not a trend, but rather a necessary cornerstone to the emergence of digital art as a commercially viable asset class.
The better question we should be asking ourselves is what is valuable, and which NFTs are valuable and the answer to that question is kind of like answering the question of what is art. To explain is we are seeing creators, and other builders to big companies leverage NFTs to distribute art to their true fans.
Right now, we are seeing a lot of niche groups that want to own art that has cultural references not because they want to speculate. When there are a lot of subcultures who want to support the work of independent artists.
Kevin Kelly wrote an article about 1,000 true fans in 2008 and it fascinated us to be creating content like this for you the audience.
To be a successful creator you don’t need millions. You don’t need millions of dollars or millions of customers, millions of clients or millions of fans. To make a living as a craftsperson, photographer, musician, designer, author, animator, app maker, entrepreneur, or inventor you need only thousands of true fans.
Crypto, and specifically NFTs (non-fungible tokens), can accelerate the trend of creators monetizing directly with their fans. Social platforms will continue to be useful for building audiences (although these too should probably be replaced with superior decentralized alternatives), but creators can increasingly rely on other methods including NFTs and crypto-enabled economies to make money.
The DeFi for the Masses NFT are 1,000 uniquely generated pieces for our 1,000 true fans of Innovation. We are giving away the first 500 (worth $360 each) for FREE for a limited time only where you can own a piece of “DeFi History” as Traditional Finance is getting disrupted by DeFi. Click here to Claim Your First NFT for Free, 410 left.
2. Jack versus Web 3 Enthusiasts
The block CEO Jack Dorsey was blocked on Twitter by Marc Andreessen after his Web3 comments
“You don’t own ‘web3.’ The VCs and their LPs do. It will never escape their incentives. It’s ultimately a centralized entity with a different label. Know what you’re getting into…” Dorsey tweeted
In our previous post, we explained how Web3 was supposed to democratize and decentralize, well, everything from finance to gaming.
It all started when Tesla’s CEO Elon Musk asked his 67 million Twitter followers if any of them had seen Web3, Dorsey responded with a tweet “It’s somewhere between a and z.” (a.ka Andressen Horowitz)
The tweet appeared to be aimed at Andreessen Horowitz, which has been both Web3’s biggest backers and biggest stakeholder with billions invested in the space.
Beyond Web 2, we are seeing a big push to Web 3 dApps (Decentralized Applications) especially decentralized finance (DeFi) being led by cryptocurrency entrepreneurs and fans of coins like Bitcoin and Ethereurm.
Marc Andreessen did the sensible thing and blocked Jack (the creator of Twitter) on Twitter. Shortly after Dorsey responded. “I’m anti-centralized, VC-owned, single point of failure, and corporate-controlled lies,” Dorsey said. “If your goal is anti-establishment, I promise you it isn’t ethereum.”
Singular’s Take: We are seeing a global wave of entrepreneurs building decentralized protocols and application in an open, trustless and permissionless networks in Web 3.0 environment. We believe edge computing, decentralized data networks and ariticifical intelligence will be the rocket fuel for this existing fabric of Web 3,
Singular’s Action: Long DeFi ! DeFi is just a small but fast growing subset of Web 3.
3. The Stablecoin Printing Press
The crypto economy is still relatively small by most metrics. The question, which has been the subject of countless crypto conference panels and webinars, is “how does crypto go mainstream?”
One of the use cases of stablecoins is payments, and the go-to-market product will be any fiat currency like USD or Euros, a basket of currencies or a price index like the CPI mirrored by Stablecoins.
So why use Stablecoins compared to existing fintech solutions like (Venmo, PayPal, AliPay, etc). Althought the existing solutions already provide an efficient payment processes, stablecoins function within a financial system like DeFi that’s being built in a crypto-native environment.
To provide context, the first stablecoin Tether pegged to the US Dollar is the first Trojan Horse of Crypto with an average of $48 Billion a day. Tether solves many of the volatility issues as Bitcoin or Altcoins are notoriously volatile.
Tether is being used on popular crypto exchanges like Binance, BitFinex, Kraken etc.
More importantly, the current volatility of Bitcoin, Ethereum is not a good medium of value transfer and with the inherent currency risk to the transaction, picture this, you ordered a top of the line MacBook Pro for 1 ETH ($4,058 today), then two weeks later the price of ETH dropped by 50% ($2,029) , you realized you just paid $4,058 when you could have paid $2,029 so you canceled the order.
Now, this is problematic for a variety of reasons. Firstly, most merchants today are comfortable accepting currencies denominated in fiat currency, so transacting in cryptocurrencies like BTC or ETH exposes the merchant to currency risk. On the consumer end, volatile cryptos provide a bad buying experience as there is a mismatch that adds uncertainty to decisions made today and about prices in the future.
So, how does one create a stablecoin? The first stablecoin was Tether and the idea was simple. Take US Dollars, put them in a bank account and then issue tokens 1:1 for each dollar in the account. Presto, dollars on-chain.
Another model is to back the stablecoin with collateral that’s already on-chain. MakerDAO is a great example. This model solves many of the trust issues that plague fiat-backed stablecoins since all the value flows are transparent and immutable.
But for the purposes of this article we’re going to focus on a model that doesn’t use collateral: seigniorage, which is the construct that Terra employs.
So how does Terra Work? Picture this, if you own a money printing press, you can generate a profit every time you print new money and the profit equals the difference between the value of units you print and the cost of production.
Terra can be pegged to a variety of currencies like TerraMNT (MNT) pegged to the Mongolian tugrik, TerraKRW (KRT) pegged to the Korean Won, TerraUSD(UST) pegged to the dollar and Terra SDR (SRT) pegged to the International Monetary Fund’s SDR which is a basket of five major fiat currencies.
Consider Bitcoin, where a fixed supply of 21 million, where it is subject to increases in demand and supply making Bitcoin subject to volatility. In Terra’s use case of pegging to the USD like TerraUSD, it is unaffected by demand and supply.
Putting this in two scenarios
If you hold 1 BTC and demand spikes, your 1 BTC price is now higher resulting in an increase in your welath
If you hold 1 TerraUSD and demand spikes, The price remains at $1.00 and you still hold 1 Terra USD, your wealth is unchanged.
One of the things that make Terra special compared to the previous generations of stablecoins like Tether is that it allow holders of Terra stablecoins to redeem their units against the protocol called LUNA. As a result, the more holders of Terra would means more minting of LUNA for redemption where you can always redeem 1 TerraUSD for $1 of LUNA.
But why would you want to keep LUNA? The investment thesis for LUNA is centered around tax revenue, most importantly transaction fees. Everytime Terra is being traded within the ecosystem, a small fee accrues to LUNA holders. If you compare what credit card companies or Visa is currently charging merchants 2.0% , Terra transaction cost is only 0.5% which makes a strong use case for Terra.
In short, Terra is adding new users of about 6,000 per day to its platform and we expect that to double by end of 2022. Here’s a short Youtube Video of a Mongolian burger restaurant using Terra as its everyday blockchain payment system.
There is a lot of exciting opportunities in this space as blockchain and stablecoins is being used in more geographies where the composability of stablecoins is proving to be a key feature in the growth of Ethereum DeFi ecosystem.
Singular’s Take: We are big fans of technology-enabled disruption helping the smaller guys, way too long Visa, Mastercard been taking a huge chunk out of mom and pop shops, and what Terra is building could be a game changer in the other parts of the world like Korea, Mongolia or South East Asia.
Singular’s Action: Why do we love Terra? We’ve been big proponents of stablecoin seignorage model like Terra and the current model of incentives in Terra could act as a good economic moat while driving more stablecoin adoption in a HyFi (Hybrid Finance) world.
Our favourite Bill Joy’s quote, the smartest people won’t always work for you, and the greatest companies embrace open innovation to attract the best talents and distribute ownership.
Closing Thoughts
NFTs enable anyone, not just technologists, but consumers and creators as well.
References:
NFTs and a Thousand True Fans — evolution of the internet and better economics for creators
by Chris Dixon
https://a16z.com/2021/02/27/nfts-and-a-thousand-true-fans/
Life Is Non-fungible: The Evolution of Ownership, Assets, and Us — ownership is deeply human; collectibles for self-expression, identity, money, trade
by Roham Gharegozlou
Life Is Non-fungible: The Evolution of Ownership, Assets, and Us — ownership is deeply human; collectibles for self-expression, identity, money, trade
by Roham Gharegozlou