Thursday, 24 March 2022
Didn’t get enough sleep last night. Today was obviously hell. It was so bad, I took a nap around 3 pm in the middle of the workday. In fact, I knew I wouldn’t have the energy or will to work on NFT stuff once I got back home, so I ended up doing the readings during the last hour of work when I was too tired to continue with work stuff.
Now, I plan to power through the next two hours before going to bed incredibly early.
As I had mentioned, today I went through the Zima Red newspaper. Don’t know why I hadn’t any sooner — Andrew Steinwold is an amazing author and member of this web3 community. I had a look at 3 articles.
Firstly, I looked at ‘AI + NFTs: What is an iNFT?’ by Arif Khan, founder of Althea.
1) Intelligent NFTs (iNFTs)
Since I entered the web3 ecosystem, ‘programmability’ was frequently the reason people would use to prove NFT superiority. It is really a game-changer. Th is why it’s unfortunate that most of our current NFTs barely uses this feature. Our current NFTs are practically just digital art put onto the blockchain, with no usage of the additional features that NFTs provide.
In iNFTs, AI is embedded into NFTs which gives it interactive and intelligently generative capabilities. It also makes the piece capable of sense-making. Technically speaking, Althea embeds a GPT-3 Prompt into the NFT (Hell if I knew what that meant). The NFT then becomes intelligent, scalable, generative and interactive.
iNFT characteristics include them being embedded with intelligence, self-learning capabilities as well as being permissionless, Metaverse agnostic, valuable and fractionable.
“iNFTs seem really cool. Personally, for me, AI is the biggest technological advancement that we will ever see in our lifetime and it is being applied to the much-loved world of web3. It’s all really interesting. I am interested to see the development of such NFTs as well as mainstream adoption. Not to mention, the uses cases will be at a whole different level than what we see now. I do wonder about the potentially negative impacts this could have as well…”
Next, I read ‘Nonfungible Token (NFT) Value Drivers’ by Andrew Steinwold.
2) Value Drivers of Different NFT Types
Andrew split the article up into sections, based on the different types of NFTs.
First, he talked about Collectibles — Assets with little to no utility, or very basic utility. They usually have traits indicating rarity. In addition, they are usually issued in limited supply which brings a certain level of supply-and-demand into the picture. However, most lack real utility.
Collectables’ can also be defined as things that are of personal interest to the Collector. The reason they are of personal interest is because of the story and narrative that the collector tells himself or others tell him.
The narrative comes from a couple of factors:
- Community — If I was to sum it up, it is basically the community’s opinion of the piece or the subject matter.
- Age — Most people like old and historical items
- Rarity — People like rare things because they are one of a kind or limited edition
- Provenance — This allows people to see if the item is increasing or decreasing in value over time & makes others comfortable with paying for the piece
- Condition of the item
Next, the discussion was about in-game items. They derive value from the asset’s utility within its universe (the game environment). The increased utility directly correlates to the value.
After that, virtual land was talked about. For virtual land, its value is derived from location, content and parameters (similar to real-life land). If the location is near an area with greater ‘foot traffic’, or near a guild, DAO, etc that are active and generate content, there will be greater value. Content is the type of structure existing on the land, including the quality of the build. Parameters refer to the zoning laws around the land.
Finally, he talked about Crypto Art, which derives value from the artist’s reputation and brand. A piece created by a world-renowned artist with more recognition and brand value has greater value because it is more culturally important, given the artist’s significance.
He also discussed Sotheby’s Valuation Criteria but didn’t go too in-depth in the article. That’s why I looked at the article that did go in-depth, ‘Sotheby’s Art Valuation Metrics Applied To Unique Digital Assets’. In the article, he adapted all of Sotheby’s criteria for the digital art world. Here they are:
- Authenticity: It is easy to look at the authenticity of a blockchain-based digital art piece, as you can search up the transaction data; It’s much harder with non-blockchain-based assets though
- Database (originally Condition): Condition doesn’t apply because a digital asset cannot change. Instead, the database is a more valid measure as the type of database (centralised vs decentralised) the asset is stored impacts how and if they can be sold and used by a different party.
- Rarity: People like rare things (as mentioned above). With blockchain-based assets, you can check just how many of the pieces actually exist so as to validate the rarity. The transparency increases buyer confidence
- Provenance: Owning an NFT previously owned by an important person gives it greater value because it indicates that the person saw it as valuable too. However, provenance can be hard to track even on the blockchain, as only addresses are identifiable, not people
- Historical Importance: As digital assets & NFTLand grow, the historical value of early projects will increase. This historical value is easily trackable because of the blockchain too.
- Data (originally Size): Refers to the relevant data around the piece, such as Creation Data, no. of transfers, etc.
- Visits/Views (originally Fashion): Fashion basically refers to what is trendy and what is not. For digital assets, it can be quantified using visits or views to the original source of the asset. If views increase, the asset is trendy.
- Subject Matter: Refers to what is in the NFT itself. The subject matter’s quality is subjective to the viewer
- Functionality (originally Quality): Refer to the distinct uses of the NFT. Has to be assessed on a case-by-case basis, as it comes in all shapes & sizes.
That’s the end of today’s entry. I need to post this and go to bed. Depending on my mood, tomorrow may be the day I finally formulate my NFT Thesis. I sure am looking forward to it. See you tomorrow!
