Today’s post is heavily inspired by Linda Xie’s post on Mirror. I’d highly recommend that you follow her or read her work directly.
Problem: Real-world goods are not automatically dynamically priced and digital goods (i.e. in-game add-ons or items that exist within virtual worlds). If one wants this functionality, they must build the infrastructure from the ground up themselves.
Solution: This business would aim to make creating a non-fungible token (NFT) on the blockchain as easy as buying a website domain. It helps to start by understanding what exactly NFTs are. For that I’ll turn to the quote below, this video, this more-in depth description, and a great image.
“Non-fungible token (NFT) is a term used to describe a unique digital asset whose ownership is tracked on a blockchain, such as Ethereum. Assets that can be represented as NFTs range from digital goods, such as items that exist within virtual worlds, to claims on physical assets such as clothing items or real estate. In the coming years, we will see NFTs used to unlock entirely new use cases that are only made possible by crypto.
While the Ethereum ecosystem is where most NFT activity has taken place to date, NFTs can exist on other smart contract platforms too. This is because, at their core, NFTs are just digital abstractions used to represent assets that are one of a kind. Non-fungible token isn’t the most intuitive term since we don’t commonly refer to the fungibility of objects in the physical world, but this is an important technical distinction when it comes to how an asset is represented on a blockchain.” — Linda Xie, Managing Director of Scalar Capital Management, LLC
Understanding NFTs: Quick Overview of the NFT Ecosystem by Andrew Steinwold; The Non-Fungible Token Bible by Devin Finzer; Social Tokens Year in Review by Cooper Turley
Keeping up with NFTs: DeFi Arts Intelligencer newsletter by William Peaster; Zima Red newsletter by Andrew Steinwold; Forefront newsletter on social tokens
In short, non-fungible assets are those that cannot be represented through other means (e.g. The Mona Lisa, which is unique) while fungible assets can (e.g. $10 of cash is two $5 bills). A NFT takes this one step further by focusing purely on the digital abstractions of non-fungible assets.
There are a few notable use-cases for NFTs:
Art: NFTs are able to support actions like supporting fractional ownership (e.g. NIFTEX) which makes expensive art works more accessible to the masses. “NFTs can make fractionalized ownership more accessible, so if there is a valuable item that otherwise wouldn’t have been accessible for someone to own, now they can own a piece of it.” The art is also verifiable and can be seen as a digital variant of the physical art work that is often sold for millions already.
Gaming: Digital in-game assets. “One of the most popular games in crypto is Axie Infinity. You battle with a team of pet Axies and level them up. There's no aspect of the gameplay that feels like a blockchain game but there is the added benefit of being able to openly trade the Axies on NFT marketplaces such as OpenSea. The game has become popular in the Philippines and earning tokens from the game has become a viable source of income for players even beating minimum wage in many countries. There is also a decentralized autonomous organization (DAO) called Yield Guild Games which leases Axies to players that want to get started with the game but don’t have the funds to purchase them. Several rare Axies were even purchased for $159,000 total.”
Real-world Goods: Companies like Uniswap have shaken up the world of Decentralized Finance (DeFi) by “doing away with the concept of order books, replacing them with an automated market maker mechanism that incentivizes liquidity providers… Every SOCKS sold increases the cost of the next, but they can be sold back into the liquidity pool at any time.”
Social tokens: As Linda describes, “Social tokens enable creators and communities to have more ownership in what they are building which is extremely exciting… Early experiments of social tokens involved people tokenizing their time. For example Reuben Bramanathan, who previously worked on legal and product at Coinbase, tokenized his time where 1 $CSNL token equaled 1 hour of his time and was freely traded. We also saw people attempting to tokenize part of their future income. Platforms like Roll and Coinvise make it easier for people to issue their own token… The interesting part about social tokens is that it can represent anything from a person’s time to specialized access to collective ownership of a community.”
The business would be at the forefront of a new industry that is projected to grow multi-exponentially in the next decade. The business in that sense would be a first mover, with a primary motivation of marketing the opportunity and packaging it in an easily conceivable way.
Monetization: Flat-rate fee for platform participation or percentage of tokens created on the platform (.01%?)
Contributed by: Michael Bervell (Billion Dollar Startup Ideas)
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