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2020-06-14

To Be Fungible or Not

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Non-Fungible Tokens, otherwise known as NFT’s, represent unique objects on the blockchain and use the ledger technology to provide authenticity for this uniqueness. Although they may exist as a limited edition or multiple of one another, the digital signature of the ledger still provides each item it’s very own unique certificate of authenticity.

Taking a step back then, we can differentiate that which is fungible to that which is non-fungible by drawing parallels to authenticity and exchangability. Originally derived from the late medieval Latin, the 17th century fungibilis represents the notion that some good or item such as money or commodity can be replaced by another equal part of the same quantity for value. To be fungible then means that the substitution of any such item in equal quality or parts has no bearing on the overarching value of the parties participating in the exchange. Examples of this exist in various forms and include such things as money, gold, bitcoin and other cryptocurrencies, and commodities of the same grade.

So, if I borrow 10 dollars from you for lunch, even though the exact note will not be the same, the value of that note will be equal to value as the original loan. Likewise, when depositing EOS into REX, the principal value of EOS returned when the contract is redeemed will never be less than the amount initially deposited as EOS is a fungible token (*note: it will actually be more as the final tally of the redeemable contract is the base principal plus the interest gained over time).

Non-Fungible on the other hand works on an entirely different principle of authenticity. For example, if I loan you an individual piece of art for display in your gallery and you return a copy, the value of the original is not the same. Or, let’s say you borrow an antique gold watch given to me by my father with a special engraving on the back for a special event you’re attending, and unfortunately you happen to get robbed on the way home. Even though you replace the watch with an exact replica, the intrinsic value will still vary from that of the original no matter how well replicated the replacement and engraving may be as the original certificate of authenticity is no longer tied to that watch.

Non-fungible items then are such things that are unique, irreplaceable, limited in differentiation from others that exist, and non-interchangable. Other such real world examples include antiques, diamonds and other jewels, comic books, classic cars, fine wines, and limited edition physical coins, stamps, or other collectors items.

In a similar way that non-fungibility provides value that cannot be transitioned through a fungible exchange metric beyond certificates of authenticity or verified signatures, NFT’s or Non Fungible Tokens comprise within their very existence a digital immutable signature that can track, verify, and distinguish the authenticity, ownership, and inherent value attached of a number of unique identifiable assets through individuality, batches, rarities, and other metrics of proof right stored right on the blockchain.

Enter WAX.io

WAX, or Worldwide Asset Exchange was developed by “the founders behind OPSkins, the world’s leading marketplace for online video game assets” [1] using EOSIO as a base coding layer in an effort to bridge the gap into the world of virtual goods providing a marketplace for gamers, artists, and a number of other collectables beyond the limited space they presently exist.

“WAX is a safe and convenient way to create, buy, sell, and trade virtual items - to anyone, anywhere in the world. Hundreds of millions of people around the globe already trade digital and physical items. But the problems that plague the digital goods and trading community have stunted its growth far beneath its full potential. WAX is creating a full suite of blockchain-based tools that allows anyone to trade digital or even physical items instantly and securely, to anyone, anywhere. Participants of the Worldwide Asset eXchange gain access to a global community of collectors and traders, buyers and sellers, creators and gamers, merchants, dApp creators, and game developers.” [2]

NFT’s on WAX have recently caught the attention of collectors and traders with a slew of recent announcements and releases such as the partnership announcement with Topps, a leading sports and entertainment provider of trading cards and other collectibles including such fan favorites as MLB, Star Wars, Garbage Pail Kids, Marvel, and Disney.

As a first rendition release for the Topps-WAX partnership, the pop culture Garbage Pail Kids NFT’s might have surprised even the hard core believers in the potential of this conceptualization of onchain digital collectables. Sticking to the authentic spirit of real physical trading cards, the initial release of these cards was in the form of purchasable packages that could be opened right there on the blockchain. Featuring all 41 characters from the original card based series, GPK NFT’s also include more uncommon Prism, rare Sketch, and super rare Collector’s Edition cards with built-in animations.

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Of course because of the nature of how trading cards have always worked, the cards also come complete with a backside giving further insights into the individual characters and themes associated with the brand and a catchy 3D toggle online viewing vantage experience..

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When all was said and done, a total of “12,000 GPK card packs containing 110,000 cards were scooped up by collectors in just 28 hours.” Of course, being on WAX has the advantage of being able to buy and sell these NFT’s on secondary markets such as SimpleMarket.io [3] simply by logging in with your WAX Cloud Wallet (https://all-access.wax.io/). [4]

The WAX version of SimpleMarket.io is actually chalked full of FT’s and NFT’s for a variety of applications and games within the WAX space. A quick look at what is available and we can see quite a few games running entirely or partially on WAX and the promise that this could provide to the future of the space.

What This All Means for the Future of NFT’s on WAX and for the World

Prospectors offers up a really good example and contrast to what has happened with the launch of Garbage Pail Kids NFT’s on WAX. For those not aware, Prospectors.io is an MMO strategy game plunging players into the 19th century Gold Rush atmosphere granting players the opportunity to live and play in a full scale economy virtual world that transitions value through blockchain and crypto currencies into the real world.

Initially launched on EOS, Prospectors added the Yukon WAX land to their debut Wild West not so long ago. The game operates on the principle that players can find, earn, and trade Fungible Token real world assets such as gold, wood, and tools through various in game mechanics of completing jobs or launching businesses. This fungible token economy is operational within the game worlds as well as third party marketplaces in the same way that real world or local economies operate. Differentiating between fungible and non-fungible assets within the gaming or collector space all comes down to a determination of uniqueness.

“All of the assets within the game of Prospectors, including everything from the resources like Wood and Stone, to the tools and materials used to produce them , are fungible tokens, or “FT’s”.Everything the players produce within the game, as well as even the buildings used to produce those items, are all FT’s that can be bought and sold within the game. For example, one KG of iron ore mined from the ground will be exactly the same as one KG of iron ore mined by another player, and can be exchanged via the marketplace. The two KG of iron ore are completely interchangeable and fungible, unlike their “NFT”counterparts which are unique. The FT’s may have properties which allow them to do many interesting things such as allowing the items to degrade over time, or combining them to form new assets.” - Bonz Manifest, Prospectors.io

Although at present Prospectors operates entirely on fungible assets, there are plans to introduce NFT’s into future iterations of the game a little further down the road.

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Talking with Bonz in fact, is very informative and enlightening when it comes to the recent hype and future potential into the value proposition of NFT’s in general, particularly on WAX. As he noted in an exclusive with EOS Go on the topic, the most exciting thing to come out of the GPK launch was simply that as a trial run, bringing these NFT’s to market, the WAX Topps partnership has blown everyone in the space and the team away. With 5$ packs now going for 150 to 200 bucks, and the more premium 25$ packs upwards of 700 to 800 dollars unopened, those that took the time to login with the WAX cloud wallet and scoop some up are already potentially sitting on a gold mine.

As Bonz also noted, one distinction between the initial foray into the WAX NFT space with the Garbage Pail Kids as opposed to other future launches such as Marvel or Star Wars is that Topps owns GPK outright, meaning that they don’t pay royalties. This was a great way for the WAX Topps partnership to begin as it allowed both parties the ability to test out any glitches in the system, how the overall launch process would work, and the demographics of those both within the space and beyond that are/were interested and still participating.

Some interesting observations can be gleaned by looking around various portals surrounding the hype. In a recent GPK telegram poll, the majority age demographic was about 40-45. Maybe not that surprising considering that often collectors items like this are somewhat generational, but when looking to the idea of digital assets being for the younger generations, it shows that the potential market is far greater than just those born with smartphones and video games in their hands. Another interesting thing to note is that even though the WAX release of GPK was the lowest number of issuance in any series yet and seemingly focused on those already in the blockchain and crypto space, an estimated 5% or so of investors are the GPK OG’s that went the WAX wallet route for their first venture into the NFT space. Although we cannot verify these numbers exactly, it seems more than plausible as still to this day when new physical cards are released places like eBay light up with a speculative market focused on unopened packs and individual cards that traders and collectors think will make them money. Ironically enough, with everything that blockchain and WAX has to offer, head on over to eBay this very day and you’ll be amazed at how many listings there are for the new WAX GPK NFT’s selling for what seems like crazy amounts of money compared to the initial 5 or 25 dollar packs.

It’s actually quite an interesting thought experiment when it all comes full circle. Thinking back to the early 80’s and the ‘Junk Wax Era’ of trading cards, not to be confused with the WAX blockchain operating on EOSIO, we can see a lot of parallels to what is happening now in the present crypto space. Because of previous evaluations of cards and comic books, the ‘Junk Wax Era’ was comprised of almost infinite printing and hoarding of just about every card and comic book to hit the market similar today with what the crypto space experiences with the majority of alt coins. Of course as we all know, with mass printings or supply and dried up demand, the valuation of these items never really materialized as planned for the majority of these collectables. In many cases actually, cards and comics from this era actually became valued at less than what they were actually paid for as everyone had them and no one really wanted them by the time the early 90’s rolled around. Uncannily similar to a great number of false promises by a plethora of alt coin projects in the prior 2017 bubble; too much supply for limited to almost no demand.

In a way though, this very issue of oversupply of the Junk Wax Era of trading cards is solved through the utilization of blockchain. With partnerships such as WAX, Topps collectables are verifiable on the blockchain in every respect. Beyond ownership of certain NFT’s, blockchain can keep a record of things such as release numbers, total issuance supply, and where any ‘card’ resides at any given time. WAX in a sense has brought provable scarcity and accountability back to the spectrum of trading cards and collectables. [5][6]

Although it’s undeniable that Garbage Pail Kids has retained an almost cult-like following since their physical inception so very long ago, the re-imagination of digital asset release has more than likely not trickled into the mainstream nearly as much as it will especially pertaining to what other NFT’s have yet to be released via this partnership. Younger generations these days practically live on line with games, where once there were children playing with such things as Pokemon in parks after school, now children throughout the world dive into their portable gaming devices side by side with their friends in a frenzy to grab and obtain that next digital item which will elevate them among their peers.

Everything in fact in the real world can be transferred to the blockchain and given a real world value beyond the confines of a game, sometimes even better than it existed in the past. A great example of this is by the creators of Dark Country, an American gothic style Collectable Card Games (CCG) with the vision to capture the beauty of what was so popular in the past with the power of what WAX and blockchain brings to the table.

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Not only does Dark Country bring the Collectable Card Games of previous generations to the online generations with some absolutely outstanding artwork, but being on the blockchain offers real evaluations and metrics of scarcity beyond that of just the local playground. The project itself will offer a variety of game modes, allow for the trade and transfer of in-game digital cards or assets, engage with the community via a game co-creation platform, host regular tournaments offering prizes, and support a multichain framework supporting a variety of crypto and fiat currencies.

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Images courtesy of https://darkcountry.io/

Of course, NFT’s will exist for gaming in other places around the space both within EOSIO and beyond, but there seems something a little special about WAX compared to all the rest. As Bonz noted, imagine trying to play something like the soon to be released Blankos on Ethereum or other proof of work chains as opposed to EOS. Realistically even though it might be possible, that is just not going to work considering every action in the game is ‘a transaction’ on the blockchain, and every transaction on proof of work Ethereum costs the user a transaction fee. But looking even deeper, even though both the mainnet and WAX are built using the EOSio software and code, there is good reason for new projects in the space to consider WAX over the mainnet - that being quite simply the cost. As Dallas Rushing of Karma noted,

KARMA migrated to the WAX blockchain in late 2019 to quell congestion issues on the EOS mainnet for app users which became almost unusable for anything relying on an on-chain transaction. This in turn hiked the price of CPU costs for users, and as Karma was paying for those costs on behalf of all of it’s users it just became no longer a viable option. In addition, the move to WAX had a serious effect on lowering the account creation costs substantially and better enabled a focus of capital on marketing and future app developments. [7]

In fact, although any number of chains could have been chosen, one of the driving factors behind Karma’s choice of WAX besides the insanely easy account creation and transfer process for all existing users was the future potential of NFT support and integration. Thinking about it a little more deeply, the idea of being able to own exclusive Karma based NFT’s to be used inside comments, replies, or the chats as well as those coming down the road from Topps and other players in the WAX space seems like something that would make almost every social site out there better.

All in all, this appears only a scratch on the surface of what is to come out of the WAX NFT space. For many of the above reasons new projects and new target markets seem to be constantly popping up with either plans to utilize NFT’s on WAX, implement WAX NFT architecture for use within their existing apps, and even build out entirely new projects and marketplaces revolving around the NFT space on WAX.io. Take Atomic Assets being built on WAX for example. Essentially looking to integrate all that has been accomplished by those first movers to improve the NFT experience by bringing together a full fledged ecosystem minimizing and even cutting RAM costs to zero, allowing for issuance of token backed NFT’s and NFT burning to store and release value, implementation of P2P decentralized marketplaces, a trade interface, simple and intuitive NFT creator, and even future development and release of games taking advantage of all Atomic Assets has to offer.

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Whether it be trading cards of past and present era’s such as Garbage Pail Kids, Major League Sports, or Marvel, game pieces such as Dark Country allowing for people across the world to collect, trade, play, and connect, or in game experiences that mimic historical, present, or fantastical worlds that used to be relegated to board games around the kitchen table with family and friends such as Prospectors, WAX.io and those working on various projects behind the scenes have and is continue to build out a blueprint of viability to draw the masses in. With the new release of the WAX cloud wallet, NFT incorporation into pre-existing frameworks already with a plethora of users, and new marketplaces and games just around the corner, not to mention all the potential partnerships that ride in on the tails of the already signed big guns like Topps, it’s only a matter of time before mainstream collectors and gamers onboard and into the new Wild West cross-chian cross-worlds of the digital 21st Century that is the WAX.io bandwagon of unlimited potential.

References:

-[1] https://everipedia.org/wiki/lang_en/wax-worldwide-asset-exchange

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