The Future of NFTs

Posted on April 11, 2023April 11, 2023 by Jean Chalopin

NFTs had their breakout year in 2021, bringing to the art world a digital revolution. They became one of the year’s fastest-growing asset classes.

Non-fungible token technology has allowed artists to offer digital originals while cutting out art broker intermediaries, also being able to receive royalties on their work’s secondary sales. However, art is just the simplest of use cases of the growing functionality being realised with NFTs, blossoming into a new world of web 3.0.

NFTs have an evolving utility that is expanding daily. NFTs are already building communities, enabling novel and tradable assets for gaming, and providing the foundations for ownership and identity outside the coming metaverse. This article will delve into several aspects that NFTs will be used in our lives going forward and why they are beneficial in these roles.

NFTs and Digital Ownership

Because of their blockchain-based immutable nature, NFTs provide a complete history and proof of ownership, what the art world calls provenance, for digital assets and for any other class that is represented by a non-fungible token.

This functionality allows for the creation of unique digital assets or items that anyone can buy or sell freely with confidence in an open marketplace.

NFTs of today have already evolved, creating further utility spanning a variety of industries:

Digital community keys
Ownership of a username and assets in the metaverse
Ownership of game assets, including avatars and virtual real estate

As our online world shifts from web 2 to web 3, NFTs will form the foundations of digital communities, assets, and economies.

NFTs as Entry Keys

One of the first use case evolutions of NFTs is as a form of ‘membership pass’ for a digital community. The ownership of NFTs that were part of a collection, like the Bored Ape yacht Club (BAYC) or the CryptoPunks, became the keystones that were required for membership in the communities that holders built.

More recently, the picture NFT collections such as Oni-Ronin have expanded on this idea, giving owners exclusive access to workshops and events as well as free airdrops of additional NFTs and even private raffles for a trip to Japan.

This type of entry is moving beyond the digital space, with NFTs now being used to provide their holders access to in-person events. Because NFTs are an immutable proof of ownership maintained on their blockchain, NFTs are in a position to solve some of the most common issues with event ticketing, such as digital theft and forging.

Digital Identities and Assets Redefined

There is no need to worry about someone taking your username in the metaverse. Some NFTs already allow for the ownership of custom “.eth” Ethereum wallet addresses (Ethereum Name Service).

So far, there have been nearly 3 million names created by over 600,000 participants.

Being in NFT form, these custom addresses can be integrated into other decentralised applications or Dapps, and they simplify the previously complex wallet addresses, allowing them to be personalised and much easier to remember. Rather than a long string of numbers and letters like ‘0x0078784ef055b06FC5A76B90c26’, it would be a much simpler address, like an email address or Instagram name such as ‘johnsmith.eth’.

Additional projects, such as NFT.com, use NFTs to provide the custom ownership of a personal profile like www.nft.com/johnsmith. The owner can share and display their NFTs on a decentralised social media network.

Tradable and Exportable NFTs

Gaming is a nascent sector where NFTs are already proving their utility. NFTs allow players to own in-game assets. There are some crucial differences between the typical ‘owning’ of assets in games and what NFTs provide. Projects such as DeFi Kingdoms, which is on the Harmony blockchain, have their own ‘NFT heroes’. These heroes can be bought, sold, and even rented out on an open market.

Along with providing ownership of these in-game assets, these Heroes can be productive assets. They can be sent on quests and earn in-game items (also in NFT form). The gained in-game assets can be exchanged for cryptocurrency or used to build other items to ‘power up’ the heroes.

The integration of NFTs into blockchain-based games like DeFi Kingdoms, Axie Infinity, and Crabada have created new and vibrant in-game economies where the NFTs are valued based on their attributes and statistics. The amount of time played is rewarded by these games, resulting in increased earnings and greater chances of finding rare item drops.

The Metaverse Economy

Beyond usernames, Ethereum wallet addresses and in-game characters, NFTs are becoming the technology used as a foundation for assets in the metaverse. The Sandbox already uses NFTs to represent the ownership of digital land, virtual spaces, as well as furniture, décor, and other metaverse assets. In November of 2021, the Sandbox saw a peak monthly sale of NFT assets totaling $47.4 million changing hands.

However, transactions have since plummeted to only about 1.1-1.2 million per month. Buyers have run the gambit of companies and celebrities, including Snoop Dogg, the South China Morning Post, and Atari, all purchasing their own real estate within The Sandbox’s metaverse.

NFTs have only just started to revolutionise the ownership and trading of digital assets, providing the foundations of digital communities and blockchain gaming, but they are poised to move well beyond these digital borders.

Blockchain is the Key

NFT’s utility is based on the use of blockchain tech. These decentralised digital ledgers are almost impossible to hack or alter. Beyond their use in proving the ownership of unique digital assets, NFT technology has nearly limitless applications beyond 8-bit art and in-game swords.

It is easy to imagine a world with a deed to a home existing as an NFT. Rather than having to conduct a title search every time a property is sold, the NFT deed would be a ledger of all changes, showing who is the current owner, when they took ownership, from whom, and the price paid. Closing would be as simple as fulfilling the requirements of a smart contract.

Such a process would be much more secure–no one could forge the ownership of a home because the log of ownership would be transparent and unalterable on the blockchain.

Not Just Real Estate

The real-life applications go far beyond real estate. NFTs would be helpful in any environment where the ownership of something should be tracked and proven. Rather than keeping paperwork needed to prove that you purchased and have ownership of something, an NFT could provide a record of the ownership history of an item and could be used for either a sale or a warranty.

NFTs could be applied to the bidding process of any job or project, ranging from simple gig work to government infrastructure projects. NFTs can also allow for built-in timekeeping and pricing mechanisms, which can make them a digital work order which can be changed in real-time as a job progresses.

A prospective college student could mint an NFT which represents their application profile, allow colleges to bid on them, offering admission and scholarships, turning the college acceptance process on its head.

A Secure Transaction Platform

Paper-based legacy transactions are called red tape for a reason. They are inefficient, require human intervention, and can be misplaced or lost. However, paper transactions have one advantage over more recent cloud-based documentation that is being used today; a paper document’s authenticity is often easier to prove. Cloud-based documents have the potential to be altered, hacked, or duplicated, costing companies millions in losses yearly.

NFTs can solve both of these problems. They provide documentation and digital transactions with a new layer of security while concurrently improving transaction efficiency. Those involved with the transaction can see the life of the NFT from creation to the current version.

NFTs form a virtually unhackable, encrypted system that is easily distributed and unalterable. Identity theft could be greatly reduced or eliminated. The NFT’s underlying asset is tracked and verifiable, providing confidence and security.

Closing Thoughts

Widespread NFT adoption could bring us many benefits. As businesses incorporate more blockchain technologies into their operations and a wider adoption happens among consumers, the sum of benefits is hard to limit.

NFTs will likely become the ‘how’–how we are identified, how we transfer personal data, and how we engage in digital commerce, particularly as the metaverse increases in popularity. Instead of overpriced art, NFTs will be seen as digital objects bringing much-needed ease to everyday business and to our daily lives.

Disclaimer: The information provided in this article is solely the author’s opinion and not investment advice – it is provided for educational purposes only. By using this, you agree that the information does not constitute any investment or financial instructions. Do conduct your own research and reach out to financial advisors before making any investment decisions.

The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech, and entertainment. Mr. Chalopin is Chairman of Deltec International Group, www.deltecbank.com.

The co-author of this text, Robin Trehan, has a bachelor’s degree in economics, a master’s in international business and finance, and an MBA in electronic business. Mr. Trehan is a Senior VP at Deltec International Group, www.deltecbank.com.

Blockchain and Supply Chain Management

Posted on March 22, 2023March 22, 2023 by Jean Chalopin

One industry for which blockchain tech has been particularly beneficial is the management of global supply chains. With more connected devices, this will become even more prevalent. This article will introduce the basics of supply chain management, and then explain how blockchain technologies aid in its optimisation.

Supply Chain Management

The goal of all supply chain management is to streamline a company’s supply-side operations, from the planning to its after-sales services, to reduce costs and enhance overall customer satisfaction.

Supply chain management, or SCM, is the control of the complete production flow, beginning with raw materials and ending with the final product or service at the destination. SCM also handles material movement, information storage and movements, and finances associated with the goods and services.

While supply chain and logistics can be confused, logistics is only one part of the complete supply chain. Supply chain management traditionally involves the steps of planning, sourcing, production, delivery, and post-sale service for the central control of the supply chain.

That said, the SCM process begins with selecting suppliers that source raw materials that will eventually be used to meet the needs of customers. Next, a decision of, if the manufacturer will deliver themselves or outsource these tasks. And once delivered, the seller must decide if and what after-sales services will be provided, such as return and repair processing, which may or may not be needed to ensure customer satisfaction.

Modern SCM systems have software management helping to decide everything from goods creation, inventory management, warehousing, order fulfilment, product and service delivery, information tracking, and after-sales services.

Amazon, for example, uses numerous automated and robotic technologies to store goods in the warehouse as well as pick and pack orders for shipment. They are now beginning to use drones to deliver packages weighing less than five pounds in selected test regions.

Supply Chain Evolution

The digital supply network is beginning to combine new technologies, like artificial intelligence (AI), blockchain, and robotics, into the supply chain, adding additional information from several sources to deliver valuable data about goods and services along the supply chain.

The supply chain starts with a strictly physical and functional system but then links to a vast network of data, assets, and activities. By using AI algorithms, businesses are now extracting insights from massive datasets to manage their inventory proactively, automate warehouses, optimise critical sourcing connections, reduce delivery times, and develop customer experiences that will increase satisfaction.

Additionally, AI-controlled robots can help automate manual tasks such as picking and packing orders, delivering raw materials and manufactured goods, moving items during distribution, and scanning boxed items.

Amazon claims that by using its robots, it can hold 40% more inventory, which allows it to fulfil its on-time Prime shipping commitments.

Blockchain’s Impact on Supply Chain Management

Blockchain-based supply chains differ from traditional supply chains, and they can automatically update the transaction data when a change occurs. This attribute enhances traceability along all parts of the supply chain network.

Blockchain-based supply chain networks excel with private-permissioned blockchains carrying limited actors rather than public, open blockchains that are better suited for financial applications.

There are four key actors in blockchain-based supply networks:

1. Standard organisations. These develop blockchain rules and the technical standards, such as Fairtrade, to create environmentally friendly supply chains.

2. Certifiers. These certify individuals for their involvement in supply chain networks.

3. Registrars. These provide network actors with their distinct identities.

4. Actors. These are producers, sellers, and buyers that participate on the blockchain that are certified by a registered auditor or certifier in order to maintain the system’s credibility.

*Key actors in a blockchain-based supply chain courtesy of* *Cointelegraph*

Ownership of a product and its transfer by a blockchain actor is a fascinating feature of the structure and flow of a blockchain-based supply chain. But we must ask if blockchain-based supply chain management makes the system more transparent?

As the related parties are required to fulfil the conditions of smart contracts and then validate them before transfers or exchanges are complete, ledgers are updated with all the transaction information after the participants have completed their duties and processes. This system means that there is a persistent layer of transparency in any one blockchain-based supply chain.

Further, the chain can specify the nature, quality, quantity, location, product dimensions, and ownership of the goods transparently. This results in a customer having a view of the continuous chain of custody, potentially from raw materials to final sale.

Blockchain-Based Traceability

When referring to supply chains, traceability is the capacity to pinpoint previous and current inventory locations and a record of product custody. Traceability involves tracking products while they move through a convoluted process, from raw material sourcing to merchants and customers, often passing through several geographic zones.

Traceability is a significant benefit of blockchain-driven supply chain innovation as a blockchain consists of a decentralised open-source ledger recording data. This ledger is replicable among users, and transactions happen in real-time.

The result is a blockchain-built supply chain that is smarter and more secure because it means that products can be tracked through a robust audit trail. Concerned parties can access the origin, price, date, quantity, destination, certification, and additional data using a blockchain.

By connecting supply chain networks through a decentralised system, blockchain has the potential to enable frictionless movement between suppliers and manufacturers.

*Benefits of blockchain-based traceability, courtesy of* *Cointelegraph*

Producers and distributors can record information such as the product origin, quality, purity, and nutritional value securely using the collaborative blockchain network. Additionally, having access to the product history gives buyers further assurance that the items purchased are from reputable producers, making the supply chain more sustainable.

Finally, if any health concerns or non-compliance with safety standards issues are discovered, the needed action can be taken against the manufacturer, aided by the information stored on the blockchain’s ledger.

Tradeability

Blockchain technology in SCM has a unique advantage over traditional supply chains, which is tradeability. Blockchain platforms can ensure tradeability by using tokenized assets. Blockchain tokenization converts a tangible asset, digital asset, product, or even a service, into a token on the blockchain. A token is a thing that digitally represents ownership of that single product that it tracks, and the token can be exchanged in that market.

Blockchain participants can transfer ownership of these tokens without needing to exchange the physical assets because they are tradeable. Additionally, automated smart contract payments can help identify ownership of licence software, services, and products accurately and immutably on the blockchain.

Ownership consensus is provided via blockchain participants. There is no disagreement over transactions on the chain by design. Every entity on the chain uses the same ledger version. There are no disagreements possible, the ledger is the rule of law.

Companies prefer the tokenisation of assets over direct payments in fiat currency because smart contracts enable peer-to-peer payments, which are generally faster and more cost-effective than traditional currency transfers. Also, token payments prevent fraudsters from using chargeback situations and stealing from companies.

Closing Thoughts

The demand for blockchain-based supply chains is related to the need for information demanded by the supply chain’s participants, as is the case for the production of goods using ethical standards. Blockchain tech in supply chain management can address concerns that traditional supply chains cannot manage, or require the preparation of burdensome paperwork or certifications.

Additionally, a decentralised, immutable record of organisations and transactions combined with the digitisation of physical assets makes it possible to track products all along the supply chain from source to manufacturing, and then to delivery to the final consumer.

Like all things blockchain and crypto, blockchain-based supply chains have yet to reach mainstream adoption. Because blockchain technology remains in its infancy stage, it is governed by different laws for each nation, affecting the supply networks.

Despite these barriers, we expect blockchain-based solutions to replace conventional supply chain networks. Large companies have shareholders that demand sustainability and ethical sourcing information, as well as cost savings. The benefits of blockchains will push businesses toward their use for supply chains, and they will likely become the more common management solution.

Blockchain, AI, and IoT

Posted on March 8, 2023March 8, 2023 by Jean Chalopin

Artificial intelligence (AI), the Internet of Things (IoT), and blockchain are the most promising and rapidly evolving technologies of our time.

Combined, these three technologies solve many problems across many different industries, including supply chain management, finance, healthcare, and manufacturing. We will explore how this combination can change many aspects of our lives.

Supply Chain Management

One potential use case for combining AI, IoT, and blockchain is tracking and managing goods moving through a supply chain. By using IoT sensors to gather data on the location and condition of goods and blockchain to create a transparent and immutable record of that data, it is possible to create a real-time, end-to-end view of the supply chain.

This system can help to improve efficiency, reduce the risk of fraud, and increase transparency for all parties involved.

Another potential use case for combining these technologies is optimising logistics and transportation. By using AI to analyse data from IoT sensors and make predictions about demand, shipping routes, and other factors, logistics companies can make more informed decisions about how to move goods more efficiently. Being immutable, blockchain can also create a tamper-proof record of shipping data, which can help improve transparency and reduce the risk of fraud.

Additionally, these technologies can be combined in smart contracts, which can automate and streamline supply chain transactions by using AI to identify and execute contract terms and blockchain to ensure that the contract terms are executed transparently and securely.

Financial Services

In financial services, the first potential use case for the combination of AI, IoT, and blockchain is in the field of fraud detection and prevention.

By using IoT sensors to gather data on financial transactions, and blockchain to create an immutable and transparent record of that data, it is then possible to use AI algorithms to identify patterns and anomalies that indicate fraudulent activity. This combination helps financial institutions detect and prevent fraud more quickly and effectively, reducing costs for the company and the client.

Another potential use case for the combination of these technologies is risk management. By using AI to analyse data from IoT sensors and other sources, financial institutions can gain a more comprehensive view of the risks they are exposed to and make more informed decisions about managing those risks.

Finally, like with the supply chain, these technologies can be combined in intelligent contracts. Financial institutions can automate and simplify the contract execution process, reducing the need for manual intervention and increasing efficiency. The cost-benefit of such a solution could be significant by preventing human error, creating a trustless environment, and providing nearly minute-by-minute updates.

Healthcare

Combining AI, IoT, and blockchain technologies can also significantly impact the healthcare industry.

One potential use case for combining AI, IoT, and blockchain in healthcare is the management of electronic medical records (EMRs). Using IoT sensors to collect and transmit data to the blockchain makes it possible to create a secure and tamper-proof patient data record. AI algorithms can then be used to analyse this data and identify patterns that can help improve patient care on the individual level and speed up the discovery of new treatments for all.

Another potential use case is in the field of personalised medicine. Personalised healthcare is a new concept that could turn the medical world on its head. For example, the way cancer drugs are currently tested, a group of patients with a particular type of cancer is given a drug, and its effectiveness for the overall group is determined. A patient’s cancer cell DNA would be tested with personalised medicine, and a cocktail of drugs effective at treating cancer that fit that genetic profile could be prescribed.

Using IoT-enabled devices to collect data on a patient’s health, combined with blockchain to create a secure and transparent record of that data, AI can analyse the data and make personalised treatment recommendations. This can help doctors provide more individualised care to patients, leading to better health outcomes.

Additionally, blockchain tech can create secure and transparent medical supply chains, allowing for the tracking and traceability of medical products and devices from manufacturer to patient. While all supply chains are essential, ensuring that patients receive safe and effective treatments that have been shipped adhering to required standards and reducing the risk of counterfeit drugs and medical devices will save lives.

Manufacturing

Combining AI, IoT, and blockchain technologies can significantly impact the manufacturing industry. By leveraging these technologies, manufacturers can create more efficient and cost-effective operations and improve the overall quality of their products. In addition, these technologies can provide significant benefits by improving the manufacturing process’s efficiency, transparency, and security.

One potential use case for combining these technologies in manufacturing is in the field of predictive maintenance. By using IoT sensors to collect data on the performance of manufacturing equipment, AI algorithms can then analyse massive amounts of data and predict when equipment is likely to fail.

This system can help manufacturers schedule maintenance timely and cost-effectively, reducing downtime and increasing overall efficiency. Such information is already being applied to advanced systems such as aeroplanes, blurring the lines between manufacturing and services.

Additionally, blockchain tech can create secure and transparent traceability systems for products, from raw materials sourcing, production, and logistics to product traceability and warranty management. This can help to ensure that products are safe and of high quality and can help to protect a company’s reputation and brand.

With the increasing significance of environmental, social, and governance (ESG) issues, manufacturers and the consumers of their goods care more about the sustainable practices of companies. A clear and transparent trail that can be followed on an immutable blockchain will give confidence to those who value ESG issues.

Ongoing Concerns

As organisations look to implement AI, IoT, and blockchain technologies, it is crucial that they also consider the potential risks and challenges associated with these technologies. One of the essential considerations is data privacy and security.

Collecting and storing large amounts of data through IoT sensors and blockchain technology can present significant privacy and security risks. Personal information, including health and financial data and other compassionate information, can be vulnerable to breaches, hacking, and cyber-attacks. Organisations must take the necessary steps to protect this data, such as implementing robust security protocols, encrypting data, and regularly monitoring potential threats.

A study by PwC highlights that the growing use of IoT in healthcare has raised privacy concerns among patients and healthcare providers and regulatory challenges for organisations that handle patient data. Furthermore, another study by Deloitte states that blockchain technology can be used to implement robust security protocols and data encryption, as well as data sharing and access controls, which can help to mitigate these risks. The correct balance of these technologies will be needed.

Another vital consideration is regulatory compliance. The use of these technologies is subject to a range of laws and regulations, including data protection and privacy laws, financial regulations, and healthcare laws. Organisations must comply with all relevant regulations and have the processes and procedures to meet regulatory requirements.

A report by the World Economic Forum highlights that regulations and standards are needed to ensure the safe and responsible use of these technologies while also enabling innovation and growth.

To address these concerns, organisations should work with data privacy and security experts and legal and regulatory compliance experts to develop a comprehensive strategy for technology implementation. This strategy should include a thorough analysis of the potential risks and benefits of the technologies and a plan for mitigating those risks. Additionally, organisations should be prepared to invest in the necessary infrastructure and resources to ensure the security and privacy of their data.

Closing Thoughts

Combining AI, IoT, and blockchain tech significantly benefits various industries. For example, in financial services, they can be used to improve fraud detection and prevention, risk management, and brilliant contract execution. In healthcare, they can be combined to manage electronic medical records, improve personalised medicine, and secure medical supply chains. Finally, in manufacturing, they can be used for predictive maintenance, supply chain management, and product traceability.

Each use case demonstrates how combining these technologies can improve transparency, security, and efficiency in different industries. By leveraging the power of AI, IoT, and blockchain, organisations can gain a more comprehensive view of their operations and make more informed decisions, leading to better outcomes for their customers and an improved bottom line.

These systems are now being considered even more significantly, with proposed smart cities taking advantage of them for optimised infrastructure. Furthermore, it is easy to imagine using the data created and analysed by these technologies to be further combined for other uses, some of which may still be unseen.

It is important to note that while these technologies have the potential to bring significant benefits, there are also challenges to be addressed. For example, ensuring data privacy and security and addressing regulatory concerns are significant challenges that need to be addressed. Nevertheless, with the right approach and partners, organisations can successfully implement these technologies and reap the benefits they can offer.

Combining these three new technologies represents a significant opportunity for organisations across various industries. As their use in transparency, security, and efficiency expands beyond business sectors, they will begin to help society and the earth.

What Are Wrapped Tokens?

Posted on February 15, 2023February 15, 2023 by Jean Chalopin

If you’ve been investing in cryptos, you may have likely heard the term “wrapped” Bitcoin or wrapped tokens. This article will explore the types of wrapped tokens in the crypto space, why they exist, and what benefit they have to you as a crypto trader or long-term investor.

Blockchains Are Separated

Different blockchains like Ethereum and Bitcoin use different protocols and have different functionalities. Moreover, due to the fundamental differences in their algorithms, they cannot talk to each other. While this independence preserves the blockchain’s sovereignty and increases security, it makes the existence of an interoperable distributed ecosystem with easy data exchange challenging.

The ideals of decentralized finance, or DeFi, is a smooth, efficient, and speedy movement of the value, and this is why wrapped tokens can find a place as a practical application. Newer blockchains, such as Polkadot, were developed to solve the interoperability issue that plagues separate blockchains. However, the need for communication between blockchains became apparent, and this communication was possible through the development of wrapped tokens.

Wrapped Cryptocurrency Basics

Wrapped cryptocurrencies and crypto tokens are cryptocurrencies and assets pegged to the value of another cryptocurrency or asset, such as a precious metal, stock, or real estate, and then minted on a DeFi platform. They have become popular as retail crypto brokers made this asset class more accessible and more advanced in tandem.

The original asset gets “wrapped” into a digital vault, with a newly minted token created, which can be used to transact on another blockchain. These wrapped tokens allow non-native assets to be used on any blockchain, building bridges between different networks and creating interoperability in the crypto space.

Wrapped tokens can be created from any asset, art, commodities, collectibles, equities, real estate, and even fiat currencies. However, because wrapped tokens get “pegged” to another asset, it’s required for them to be managed by a custodial entity that wraps and unwraps the asset. We will be discussing why this is a limitation in the crypto world.

The First Wrapped Cryptos

Bitcoin was the first crypto to be wrapped, and the space is dominated by wBTC, which took bitcoin and put it on the Ethereum blockchain using smart contracts. This allowed investors to earn a passive fixed income. There are now many wrapped tokens, most of which use Ethereum’s ERC-20 format or the Binance Smart chain BEP-20 format.

Interestingly, though ERC-20 tokens are issued on Ethereum, the native ETH token is not compliant with ERC-20 standards because ETH was developed before ERC-20. Therefore, Ether must be wrapped to comply with other ERC-20 token standards. A tokenized wrapped Ether has therefore been created on the Ethereum platform.

Cardano, Solana, and Polkadot have begun experimenting with wrapped tokens, facilitating their access to DeFi applications. More recently, projects included the bETH, a wrapped ETH token, which can be traded freely or used as collateral on protocols of the Ethereum network.

Wrapped Token Types

Stablecoins were, in fact, the first wrapped “tokens.” As a result, they have a significant difference from the more established wrapped “coins.” A stablecoin such as the USDT, the Tether, is, for example, backed by a value of approximately one dollar.

However, Tether does not keep the exact amount of USD fiat currency for each USDT minted; its reserves include other assets besides cash, including cash equivalents, T-bills, and more.

There are two general wrapped token types:

Cash Settled

It is impossible to settle these for their underlying asset, only for their cash value.

Redeemable

These wrapped tokens can be exchanged for their underlying asset.

Non-native blockchains will host these two types of wrapped tokens.

Inner-Workings of Wrapped Tokens

Merchants such as Airswap, AAVE, Ox, Maker, and CoinList will mint the number of original tokens sent on platforms such as Ethereum and act as custodians of that value.

A similar process is used when the wrapped token must be converted back into its original coins, such as Bitcoin, Ether, or the asset. The holder of the wrapped token will request the custodian to release the token from the reserves. For every wrapped BTC, there is a Bitcoin that a custodian is holding.

The process employed for minting and managing wrapped tokens remains a limitation in crypto, as a trusted custodian who holds the funds is required. Unfortunately, this requirement needs to be revised for a decentralized distributed network that is supposed to be trustless.

A custodian is required because traders cannot independently use their wrapped tokens for cross-chain transactions. The technology is, however, evolving, and the potential for decentralized options that solve this problem are appearing.

Wrapped Bitcoin (wBTC)

“Wrapped Bitcoin” was first launched in January 2019 and was the first wrapped Bitcoin. The protocol was designed to bring the potential and liquidity of Bitcoin to the Ethereum network and, in doing so, an ERC-20’s flexibility.

The native BTC was unsuitable for decentralized finance (DeFi) transactions; the wrapped version could be used in place of the original asset to transact within the growing DeFi ecosystem and other Dapps within Ethereum’s network.

The wrapped Bitcoin is a significant addition to the cryptocurrency space. While a wBTC’s value is equivalent to the original Bitcoin, the added functionality accrued with the change to wBTC increases its value allowing it to be used in DeFi applications.

A holder of BTC can lend their Bitcoin via smart contracts by simply connecting their crypto wallet to a decentralized lending platform and earning a fixed interest rate each year. Concurrently, borrowers can use their crypto (BTC) as collateral which could automatically go to the lender in case of a default.

Using this type of financing, holders of the currency can still see returns on their holdings even in bear markets if the value of their asset drops.

Wrapped BTC, Unwrapped

There are three primary actors in wBTC’s creation and management.

The DAO

wBTC’s Decentralized Autonomous Organization comprises 17 members, all from the DeFi space, who hold a multi-signature contract allowing them to add to or remove from the list of wBTC merchants and custodians.

Merchants

These administrators trigger the minting of wBTC by sending a defined amount of BTC to the custodian and requesting the mining of an equivalent amount of the wrapped tokens, defined by the investor’s and trader’s demands.

Custodians

These trusted agents act as vaults who provide reliability and security for wBTC, ensuring that all the wBTC will be backed and verified via an on-chain proof of reserves. Custodians mint the wBTC and send that equivalent amount of wBTC (a one-to-one pegged value of BTC) back to the requesting merchant.

In essence, the merchant transfers the real BTC to the custodian’s address on the Bitcoin blockchain, which is then locked. Once the real BTC is received, the custodian’s address mints the equivalent amount of wBTC on the Ethereum network.

The reverse will happen, and the wBTC will be converted back into real BTC through the burning (destroying) of the ERC-20 BTC token, at which point the locked BTC will be released. The minting and burning of wBTC tokens are tracked and verified on the Ethereum blockchain.

Why Is There wBTC?

wBTC was created because of the growth of DeFi applications which are now valued in the billions of dollars. These tokens are sent to lending platforms, options, derivatives, and other financial applications.

The demand for BTC use as an underlying asset in DeFi was such that it needed to be converted to ERC-20 compatible tokens to participate in Ethereum ecosystem Dapps.

Are They Safe?

From a technical viewpoint, a wrapped Bitcoin token is safe. The original BTC will be in the custody of safe platforms like Ethereum or the Binance Smart Chain. When it is converted to an ERC-20 or BEP-20 token, it will maintain the security of the interconnected network.

A flaw with the wrapped BTC tokens is the need for trust in a custodian that holds the underlying asset. If that custodian unlocks and releases the Bitcoin to someone else, the ERC-20-compatible wrapped Bitcoin holders would be holding a worthless asset.

How the original Bitcoin is held determines the security level provided.

Centralized Custodial Bridge

For example, this organization promises to mint the ERC-20 tokens. The centralized entity must be trusted to hold BTC and not abscond. Users must ensure that these organizations are backed with guarantees and insurance in case something terrible happens.

Decentralized smart contract bridge

These would be the best choice in the crypto world. There would be no need to trust a third party, only the immutable time-stamped intelligent contract coding.

The security of wrapped BTC bridges, crossing different chains, has resulted in several arguments in the DeFi community because of the need to rely on custodians to keep the real BTC locked and their financial incentive not to.

Closing Thoughts

Arcane Research reports that the amount of Bitcoin currently locked on the Ethereum blockchain has grown to $3.5 billion as of Dec 2022 (similar to the 3.6 billion Coinbase estimate above). In addition, it is estimated that over 1% (215,800) of Bitcoin’s current supply of 19.2 million coins is now being used in DeFi, all through wrapped tokens of various types.

Wrapped tokens increase the liquidity and capital efficiency of centralized and decentralized exchanges due to their capability to move assets across multiple blockchain platforms that otherwise would have remained isolated.

Additional advantages wrapped tokens provide speedy transaction times and lowered fees possible with newer blockchains, exceeding the capabilities of older blockchains like Bitcoin and Ethereum’s first generation.

Wrapped tokens also offer fractionalized ownership which is not usually possible for some underlying assets such as art, collectibles, or a classic car. We might see wrapped tokens appearing with discount trading platforms or as part of greater liquid portfolios.

These asset-packing solutions make bitcoin and, more importantly, other assets more useful. We will see many items wrapped into fungible and nonfungible tokens that can be used in the DeFi and metaverse moving forward. The ERC-20 and BEP-20 token formats make the world of DeFi possible.

Stablecoins vs. CBDCs

Posted on February 11, 2023February 11, 2023 by Jean Chalopin

Stablecoins are crypto assets whose values are pegged to fiat currencies, such as the US dollar. Stablecoin operators generally maintain a reserve of fiat currency which equals the token’s circulating supply.

With the rapid rise in stablecoin circulation over the past few years, central banks have increased their efforts to develop their stable digital currencies. These centralized fiat copies are called Central Bank Digital Currencies (CBDCs), or cryptos backed by a country’s central bank.

Rather than being pegged to a fiat currency, CBDCs are a digital form of the country’s legal tender. This article will explain some of the critical differences between Stablecoins and CBDCs, and why CBDCs add very little to the global economy.

The Past Decade

Cryptos have come a long way since the inception of Bitcoin in January 2009. While still a speculative asset, cryptos are evolving into an asset class that is a legitimate investment opportunity as respected investing apps continue to onboard crypto trading.

The technological foundation of cryptocurrencies, the blockchain, has been shown to have utility in several public and private applications. Blockchain is now being applied in fields from the supply chain to medicine, gaming, ticketing, art, and finance.

What has also changed is crypto, and blockchain’s favorability with governments. Different crypto projects have garnered different levels of openness to regulation, and different governments have different perceptions about the advantages or threats of cryptos.

With these recent advances, two unique kinds of digital currencies have resulted. Stablecoins and CBDCs have emerged as potential options that could be widely used for commerce and trade in the future. Being related to fiat, these digital currencies may, at first glance, be similar, but there are significant differences between them.

What Are Stablecoins?

Stablecoins represent a type of tokenized asset whose value is pegged to a real-world asset, generally a fiat currency like the USD, but there are stablecoins pegged to gold and other assets too. They’re vital for removing almost all transaction fees and enabling the liquid trading of those using advanced crypto brokers.

Stablecoin operators usually maintain a reserve of the fiat currency and other assets (including cryptocurrencies) equal to the token’s circulating supply.

If the project mints more stablecoins, an equal amount of the pegged fiat currency should be added to the project’s reserves, and if “burned” (the process of unminting the coin and removing it from circulation), the reserve is reduced by an equal amount. This method is how many stablecoins maintain their value with the pegged currency.

What Are CBDCs?

On the other end of the spectrum, Central Bank Digital Currencies (CBDCs) are digital assets (not specifically a cryptocurrency) backed by a country’s or region’s central bank. Rather than being pegged to the fiat currency, these digital assets would be a digital form of the legal tender of the region or country such as China, which is probably the furthest ahead in its CBDC rollout program.

Similarities Between CBDCs and Stablecoins

The most significant similarity between stablecoins and CBDCs is that they are both digital currencies that can be used for payment. In addition, the speed by which a digital currency can be transmitted and a transaction completed makes these useful for domestic and international trade.

Depending on the CBDC, if they are blockchain-based, they can be stored pseudonymously in a crypto wallet like any other crypto. The transactions are all stored on a publicly distributed ledger. However, CBDC programs are generally authorized as (private) blockchain-based.

A second similarity between the two concerns their volatility. Most cryptocurrencies are volatile; changing 5 to 10% or more in a month is not uncommon, even for Bitcoin and Ethereum, which have the highest market caps. However, while stablecoins and CBDCs are digital assets, most of them are much more stable.

The final similarity between the two reflects their regulation. Both stablecoins and CBDCs are regulated. Third-party auditing firms regulate stablecoins, and central banks regulate CBDCs. The chance of a rug pull occurring for both digital currencies is minimal.

Differences Between Stablecoins and CBDCs

The first significant difference between CDBCs and stablecoins is their governing authority. Stablecoins are usually governed by private companies such as Circle or Binance. Still, there are also stablecoins, such as DAI, that are governed by DAOs (decentralized autonomous organizations), or a group of governance token holders that have a vote in the management of the coin.

CBDCs, on the other hand, are created, controlled, and regulated by the central bank of a country or region that releases the CDBC. Any country can develop a CBDC of its fiat currency and manage its monetary policy just like physical fiat.

The second difference is that stablecoins are (generally) backed by an equivalent amount of fiat currency. You can exchange your stablecoins for an actual dollar stored in the stablecoin’s reserves. CBDCs don’t have any assets backing them; they only have the promise of the country and its central bank. Governments used to use a gold standard that backed the currency with a supply of gold, but this was given up with the change to fiat.

Stablecoins fall under the crypto blanket. This designation means that there is a potential for national governments to ban them, and they can be taxed as digital assets. Alternatively, CBDCs would be considered the same as a country’s currency and, therefore, would be neither taxed nor banned.

Stablecoin’s Issues

Stablecoins have become the standard for international transactions and investments in decentralized finance (DeFi). Stablecoins have chosen to peg with only the most traded currencies, such as the USD, Euro, and Yen, and generally have strict auditing to preserve their international trust. However, there are two primary issues with stablecoins.

First, there is a need for stablecoins to trust the organization that is managing the coin and the organization that is auditing the coin’s reserves. For example, Terra (now known as Terra classic UST) is a famous algorithm stablecoin that fell from grace because the system, which included a management token Luna, that it relied on to keep its peg with the USD faltered when a significant amount of the coin was traded out at one time. Its holders lost $60 billion.

Similar algo-based stablecoins could have similar issues yet to be tested or discovered. There must also be trust in the reserves held by the stablecoin to ensure that the peg is sufficiently being met and that the auditors are doing their job; any break in this system could cause the coin to falter.

Second, a stablecoin is only as good as the fiat currency to which it is pegged. If the country falters in its currency management, the coin’s value will fall, which is out of the control of the stablecoin management and its investors.

CBDC’s Issues

CBDCs will only be as strong as the fiat currency of the minting country. If a country’s currency is banned from commerce by a nation, government, or organization that does not accept that currency, then they would not accept the CBDC form of it either. A fiat, in cash or CBDC form, is not backed by anything and is at the mercy of its central bank’s control.

CBDCs are not cryptocurrencies. They don’t even have to be on a blockchain or other distributed ledger. They are controlled by a central authority and can be minted and burned at that authority’s whim. True cryptos are decentralized and controlled by rules that cannot be easily changed. The benefits of blockchain are what make cryptocurrencies unique. They are trustless and immutable.

CBDCs, if on private blockchains, cannot benefit from these. They don’t incorporate all crypto aspects.

Closing Thoughts

Central bank digital currencies have the potential to “partially” transform economies, making transactions safe, bringing greater transparency and inclusivity to those that have been unbanked.

However, this is where the benefits of CBDCs stop. CBDCs are not a replacement for cryptocurrencies and stablecoins, which are the basis for DeFi applications allowing them to have a set of uses that CBDCs cannot fathom.

Nearly all countries have turned over their financial controls to central banks. This is the reason that actual cryptocurrencies are of potential benefit. Cryptos are not under the control of any central authority. However, it is unlikely that a country would take back its monetary policy control from its central bank.

Every CDBC will likely be on its blockchain; that is the only way to guarantee control. This system would then require bridges between different countries’ blockchains, such as what Polkadot, Visa, and PayPal are trying to do. The best solution may be a single global cryptocurrency that is not controlled by any central authority and is fully decentralized.

What is Somnium Space?

Posted on January 21, 2023January 21, 2023 by Jean Chalopin

Somnium Space started in 2017 and is by area one of the largest virtual blockchain worlds (VBWs). Like with other VBWs, on Somnium Space, users can create fully customizable environments and programmable independent VR experiences within its larger connected world. These environments are possible through Somnium’s four key offerings:

An SDK to create avatars and property
An NFT marketplace where game-based assets can be traded
A module for building environments and structures within them
Virtual reality experiences

Somnium Space allows creators to build and monetize VR experiences for their users that are from their own imaginations while also integrating blockchain technology. This quality means that the creators are the designers and main recipients of value. Let’s take a deeper look into this second-largest take on the metaverse.

Somnium Space Basics

Somnium Space is a VBW built on the Ethereum blockchain. Somnium is an open-source platform with an immersive VR world that allows users to buy digital real estate, including land, homes, buildings, and several other in-game assets that have value. Somnium’s immersive dynamics allow its players to build and monetize their environments or visit other users’ creations like swimming pools, museums, restaurants, or nightlife and casinos. The possibilities for building within Somnium are nearly limitless, allowing for the construction of unique experiences, worlds, and assets.

While traditional multiplayer VR games have their users divided into mirrored instance rooms via sub-servers, Somnium hosts all the players in a vast interconnected world. Within its broader VR universe, users can create Somnium environments, customized and programmable independent VR experiences.

What’s more, the NFT assets from within Somnium are compatible with other metaverses and platforms throughout the Ethereum blockchain (and potentially other blockchains) ecosystem.

Somnium has its four main elements that are listed in the introduction, and it has deeply incorporated NFTs into its technology, allowing players to bring NFTs from outside its universe (from other parts of the decentralized ecosystem) inside.

Somnium’s Tokenomics

With traditional gaming, the users generate value, which goes to the developer. Players will purchase the game, or with freemium games, they will buy upgrades, access, and customizations a la carte.

They can’t generally take in-game assets out of the game. For example, if the player buys upgraded armor, unlocks a new vehicle, or gains access to a new world, that value remains in-game only. You cannot take the armor or vehicle to another game nor unlock the asset’s value for use in another platform.

However, in Somnium and other blockchain-based games and metaverses, the opposite is true, and assets are valued with tokenization, increasing the benefit to their owner. Being an Ethereum application, Somnium allows for tokenizing in-game assets such as real estate, avatars, wearables, and collectibles, decoupling those assets from Somnium, the company. Allowing for player-generated value allows players to access the token value created in Somnium elsewhere in the broader crypto and token economy.

The Somnium economy is based on three token assets:

Somnium’s Cube Token (CUBE)

The CUBE is an ERC-20 (Ethereum) token that works as Somnium’s native utility token. The CUBE streamlines in-game player transactions and is most similar to tokens bought at an arcade. With an Ethereum wallet, players can hold ETH, CUBE, and NFTs (in ERC-721 form).

CUBE is the bridge between assets for in-game commerce. As Somnium’s universe expands, CUBE will develop in-world utility, allowing players to exist in their VR world.

CUBE’s price, courtesy of Coinmarketcap.com

Somnium’s Land Parcels (PARCELs)

Somnium Space had two “Initial Land Offerings” (ILOs) to issue PARCELs to stakeholders via the OpenSea NFT marketplace. Players who want to build their own Somnium worlds must obtain at least one land PARCEL. Players can also put any NFT on their PARCEL and explore the PARCEL in VR.

Somnium’s Avatars

At the end of 2020, the Somnium team expanded the CUBE’s utility with AVATAR tokenization. Players can mint full-body VR avatars onto the blockchain via CUBE. Players purchase an AVATAR with CUBE, and it’s part of their inventory. AVATARs are compatible with other virtual worlds across many digital platforms.

CUBE tokens can be used to purchase another player’s avatar in NFT form. The buyer’s CUBE is exchanged for the NFT AVATAR of the seller. The ability to create avatars within Somnium exemplifies CUBE’s growing utility.

Somnium’s Karma Levels

The Karma level indicates how VR citizens perceive each other. Somnium will calculate the Karma level of a player with three main metrics:

Rating: how other virtual citizens perceive them based on on-platform interactions.
Engagement: each player’s economic activity value, referring to a score including their time spent gaming, land ownership, and world discovery rate.
Other factors: these include building, public participation, and event organizing.

Players will earn CUBE based on their Karma level, and those that act as instructors or guilds, providing value to the community, will too.

User Opportunities

Somnium offers its Software Development Kit (SDK), Unity, to create customization and personalization for the development of property and avatars, with the avatars interoperable with other platforms and virtual worlds.

The SDK includes a builder mode so that complex and intricate structures can be designed. Once developed, these can be listed as assets on the NFT marketplace and become part of the metaverse.

Somnium is now interoperable with Polygon so users can transfer their NFTs in and out of Somnium, saving on fees. These NFTs can be any of the following:

Cars or other vehicles
Unique avatar wearables
Event tickets for entry to a parcel
Teleportation hubs to travel across the metaverse
Treasure hunts leading to CUBEs

There will be a maximum of 100 million CUBE tokens minted, limiting the availability and generating value for holders. The fees charged by Somnium are minimal, making it easier to gain from a democratized metaverse economy.

Closing Thoughts

VR platforms, such as VRChat, AltSpace, and Rumii, are popular platforms for distanced social interaction and corporate meetings. Concurrently, Ethereum-based blockchain metaverses like Somnium Space have built multiplayer ecosystems, unlocking value in a novel way. The true idea of the metaverse is an entirely decentralized world where we interact using blockchain technology.

By integrating blockchain, Somnium users can create experiences from their imaginations and monetize these VR experiences in a way other platforms do not allow. While the play may be virtual in Somnium’s version of the metaverse, it has created a real economy that moves beyond the space that Somnium inhabits and potentially blurs the lines into the augmented and real worlds.

Somnium could be a hit if it is able to attract the right users that will create exciting experiences that others will be enticed to partake in and, more importantly, pay for. Its potential success is hard to determine. It relies on users for content creation, which is a dangerous proposition, and while it allows creators to gain, it’s always taking its cut.

Somnium has yet to gain a significant following, even though by digital area, it has the second largest metaverse environment, behind Decentraland. At the end of 2021, Decentraland hosted 300,000 monthly users, while in the same period YouTube had 2.6 billion monthly users. Immersive and original content is vital to Somnium’s success. Let’s see what the inevitable future of VR brings.

What Are Dynamic NFTs?

Posted on December 30, 2022March 11, 2023 by Jean Chalopin

Non-fungible tokens, NFTs, are finally making their way into the mainstream after achieving widespread adoption among the Web3 community. Despite the recent boom and bust of crypto and the accompanying spotlights from media outlets, digital influencers, public figures, and professional athletes have continued to jump on the bandwagon of NFT collections.

As a result, there remains an interest in NFTs as a prominent application of blockchain technology, which retains the speculative asset moniker. However, the first NFTs were simple: often 8-bit style pictures that could be considered novelties and may or may not “boom” in the future.

Yet that was just the beginning of the NFT evolution which may change the broader financial markets as we approach 2023. Dynamic NFTs (dNFTs) are pushing the boundaries of the design space that NFTs address through their ability to adapt and change, responding to external data and events.

This article gives a brief NFT overview and then explains how dNFTs can take the blockchain space to the next level by highlighting current and potential uses for dNFTs.

NFTs in Brief

NFTs are unique digital assets held, managed, and exchanged on one or more blockchains. “Non-fungible” means that every NFT is differentiated from every other NFT, having a one-for-one token ID and unique contract address. From there, data, such as images, video, or other metadata, can be attached to the NFT, meaning it’s possible to own an NFT representing a unique digital object.

The most common use case for an NFT has been digital art. An artist will mint a token representing a digital artwork, and a buyer can purchase the token giving them ownership. Once an NFT is minted, its token ID doesn’t change. In its most simple form, an NFT is a transferable token with a unique token ID.

The metadata ascribed to the NFT, including the image, description, and much more, is 100% optional. As a result, this primary (static) NFT model can provide various benefits for digital artists worldwide.

Before NFTs, digital artists could not stop or track the unauthorized distribution of their work because there was no method to distinguish the difference between digital files. Thus, no single authentic file could be “owned.” Now, digital creators can sell their art to fans and give them verifiable ownership.

Dynamic NFTs

Static NFTs are still the most common type of NFTs available and in circulation, used primarily for art projects and gaming collectibles, such as with NBA TopShot. But, beyond these uses, static NFTs provide a unique value proposition for digitizing real-world items like real estate deeds, patents, other intellectual property, and unique identifiers.

However, the static NFT model is limited by its permanence. Once the metadata is attached to the token and minted on the blockchain, it cannot be changed. The data may require frequent updating, such as with real-world assets, progression-based video games, or blockchain-based fantasy sports leagues.

A dNFT provides the best of both worlds, allowing the retention of a unique identifier while enabling an update to its metadata. In simple terms, a dNFT changes attributes based on external conditions.

dNFTs can be upgraded in several ways based on external conditions. The changes to a dynamic NFT are generally through metadata changes triggered by a linked smart contract. This is accomplished by encoding the automatic changes within the NFT’s smart contract, which instructs the underlying NFT on how and when the metadata should change.

Other dynamic elements beyond metadata changes are possible. For example, dynamic NFTs can be automatically minted when certain conditions are met, such as when a player finds a hidden spot in an augmented-reality game. dNFTs also include “hidden traits,” which are manifested through user interactions rather than within the NFT’s metadata. dNFTs are wholly customizable.

Use Cases of Dynamic NFTs

An NFT’s name is specified in its metadata. This is also where its traits are assigned, including any relevant file links. While its token ID provides a permanent identifier that verifies ownership, the metadata is the soul of the NFT. The metadata contains the elements that make the NFT useful.

Artistic projects using NFTs often have a variety of traits, some rarer than others. These traits are placed within the NFT’s metadata and a link to a corresponding image or video. And with a dNFT, these traits can change based on external conditions.

Progressive Gaming

This functionality benefits character progression, a core tenant of several blockchain game models. When a new player creates their playable, NFT-linked character, the character’s base-level statistics are reflected in the NFT’s metadata. However, as the player continues to level up, the metadata on their dNFT changes to reflect their progression, choices, and growing stats.

Real-World Assets

A second use case for shifting metadata is the tokenization of real-world assets. For example, a dNFT reflecting a property reflects its age, maintenance history, sales history, market value, and so on. A static NFT could only take a single snapshot of the property at one point in time.

Popular Examples of Today

Two prominent examples demonstrate to us the growing potential of dNFTs.

Regenerative Resources’ Short Film dNFTs

Regenerative Resources Co (RRC) is focused on transforming degraded coastal land into highly productive seawater landscapes. RRC has announced that it will launch five short films in dNFT form, designed by prominent artists.

The proceeds from the dNFTs will be used to grow 100 million mangroves within the space afforded by RRC’s current projects.

Each dNFT will have a short film in its metadata, starting with a single frame of the film. Every time the dNFT is bought and resold, more frames of each movie will be added to the respective metadata. This addition will continue until the dNFT holder can view the short film. The metadata will also include the “producers,” or those who buy limited-edition posters.

LaMelo Ball dNFTs

LaMelo Ball, a rising star of the NBA’s Charlotte Hornets, is one of the first professional athletes to create a pioneering dNFT linked to the Chainlink Sports Data Feeds oracle. According to Playground Studio, this dNFT is redefining player-fan relationships.

Before his NBA award of 2021’s Rookie of the Year, fans minted 8,070 dNFTs of four different tiers. However, eight dNFTs recorded the player’s stats, including points, rebounds, and assists.

Holders receive special access to raffles and specific perks based on Ball’s season and lifetime performance. One of the premium eight NFTs, the “Gold Evolve,” came with a promise from the player that if he won the Rookie of the Year title, it would reflect a new image. When Ball won, the NFT image changed.

These LaMelo Ball dNFTs are examples of how dNFTs can continuously change based on oracle-provided external data. With Ball’s dNFTs, the player’s stats are constantly updated on-chain, triggering updates, rewards, and more.

Closing Thoughts

NFTs are highly speculative assets, and dynamic NFTs have just started to appear. They’re more of a novelty for programmers and collectors, adding more functionality to the current generation of static NFTs containing mainly altered pictures or briefly shifting video.

However, dNFT’s underlying abilities have immense potential, especially when more oracles are added to blockchains, increasingly able to provide relevant and curated data. Furthermore, these oracles providing external data can effectively supercharge dNFTs as programmers learn to fuse changing data with NFTs. Mastering this foundation opens new doors for finance, insurance, real estate, gaming, investing, and more as we expand.

Web3’s Infrastructure

Posted on December 27, 2022December 27, 2022 by Jean Chalopin

After covering all things blockchain for a few years, we’ve seen how the move toward Web3 is much more than the “magic” of digital money that many think on when they discuss cryptocurrencies. Web3 has the potential to solve the significant issues that plague the web and our world, regarding privacy, self-autonomy, and economics.

The infrastructure behind Web3 will be a service that helps Web3 apps and their underlying blockchains perform better with amplified capabilities, and which is going to be a foundational pillar of Web3. There are now over 1,000 blockchains. This requires massive infrastructure. And infrastructure makes or breaks new projects.

Inside Web3

We have previously written about Web3 and the pathway to get there from Web 1.0 that began in the 1990s.

Web3 websites continue to be hosted on traditional web servers. However, the users own and operate some parts of the project, unlike the corporate oligarchy inherent in Web2. Web3 websites directly connect to underlying blockchain networks to facilitate user ownership. Typical blockchains used for this purpose are Ethereum, Binance, Solana, and Fantom.

Let’s work through an example using a decentralized finance (Defi) website on the Fantom blockchain, SpiritSwap.

The SpiritSwap web application is hosted on a traditional Web2 server, which is running on Amazon Web Services(AWS). However, when a user wants to interact with SpiritSwap, they need to have a browser extension wallet, such as MetaMask, or a Coinbase Wallet, which connects to and authenticates their use of the web application.

These wallets can be thought of as a universal single sign-on tool. Rather than a user logging onto SpiritSwap with their username and password under SpiritSwap’s control, the wallet itself logs in. The wallet also contains all the user’s digital assets (cryptocurrencies and NFTs) while simultaneously acting as the digital identity, represented by a user’s hexadecimal address that starts with “0x.”

Once the wallet is connected, the user can exchange digital assets like a trader on the NYSE floor.

Behind the scenes (on the backend), the user’s wallet is connecting directly with an additional server running the blockchain’s application, or a node. This stores data about the blockchain and communicates with the other blockchain network nodes, including the validators that create blocks.

These application nodes use the same amount of electricity as a typical Web2 server. However, there is a need to access two servers: one running the web application and the other running the blockchain.

At this point, digital infrastructure providers become essential. They must devise efficient and innovative server solutions.

Web3 Demands Strong Infrastructure

Physical Servers

Although Web3 requires access to many servers, the Web3 movement is opposed to using the public cloud due to centralization concerns.

Various Web3 projects, such as Solana, have been renting and buying several thousand “bare metal” (physical) servers from a variety of players. The leasing of these servers attracted the attention of Equinix Metal, who hosted “Uncensored,” the Infrastructure Blockchain event, to promote best practices in this growing space.

Ankr’s Remote Procedure Call (RPC) service has served over 700 million monthly requests from Argentinian users, with similar numbers from Vietnam and Argentina. An RPC occurs when a computer program executes a procedure in a different address space, such as one a different computer in a shared network.

Hetzner has a competitive infrastructure hardware product available for German and Finnish clients through its AX101 and AX161 configurations. Unfortunately, most bare metal servers stocked by providers do not match the ideal specs needed for Web3.

Lower Redundancy

As peer-to-peer networks, blockchains are decentralized and distributed by their nature. This means that redundancy (backups) exists seamlessly within the network. If some physical hardware fails or a network outage happens, the blockchain itself remains virtually unharmed.

In a traditional enterprise environment, it’s not uncommon to have multiple power supplies with layers of hardware to ensure network redundancy.

Greater Disk Speed, Size, and Storage

We can imagine a blockchain like a growing stack of connected Lego bricks. The first brick is the “genesis block.” The stack will constantly grow from one side, and each block contains the group of transactions that form the distributed ledger. This is a huge amount of data that usually runs in LevelDB (an open-source NoSQL database), and it grows larger with every epoch (brief span of blockchain time).

Unfortunately, Ankr demonstrated that most network-attached storage options and virtualization technologies were insufficient to keep up with the needs.

This deficit means that most bare metal configurations using regular solid-state drives with less than 4TB of storage will not be sufficient for a high-traffic Web3 workload.

According to Ankr, 4TB of NVMe (non-volatile memory) solid-state storage is a minimum requirement. However, 8TB of NVMe per server for RPC nodes is preferable. In the case of archive nodes, which store entire copies of blockchains, between 12 and 30TB of NVMe per physical server is needed. Yet for some chains, even more is required.

Web3’s Node Types

RPC Full Node	Archive Node	Validator Node
The most common node type. Used by developers/projects to connect and interact with a blockchain. Every use case for Web3/Defi/Metaverse needs access to other RPC full nodes.	Used by market research/analytics apps to track a blockchain’s activity. Requires a lot of fast storage, starting with 12TB of NVMe.	Validators create the next block. For this, they receive crypto rewards from the network.In proof-of-stake (PoS) blockchains like Ethereum 2, Binance’s Smart Chain, and Solana, validators replace miners (i.e., Bitcoin). Uses an enterprise-grade bare metal server or virtual server.

Low Latency and Speed Are Critical

For most Ethereum-based chains, a typical RPC full node uses about 50mbps of bandwidth. This usage means that 30TB of data transfer per month and per server is sufficient.

In the last year, the Argentine peso fell 36% in value against the US dollar.

This has resulted in a switch from the peso to other currencies (many of them cryptos), and therefore 700 million RPC requests.

As DeFi supplements or even replaces traditional finance, connections to proximity nodes, and low latency (low delay) connections become critical parts of financial infrastructure. Blockchain gaming applications that adopt NFTs for in-game purchases and other transactions demand low latency for their applications.

Closing Thoughts

Web3 is the promising frontier of this decade. To be successful, digital infrastructure providers must offer new bare metal configurations which are quick and able to hold massive amounts of data while maintaining low latency.

Web3 demands a new breed of digital infrastructure providers maximizing the utility of bare metal configurations for faster, larger, and more efficient data processing. Web2 shall likely and finally yield to Web3, but only after the infrastructure is built, and that depends on the forward-looking innovators amongst us.

Disclaimer: The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech, and entertainment. Mr. Chalopin is Chairman of Deltec International Group, www.deltecbank.com.

The Web3 Race

Posted on November 24, 2022November 24, 2022 by Jean Chalopin

The race to create the future internet, Web3, is heating up daily. Providers are competing against each other, demonstrating a healthy, expanding, and decentralized Web3 ecosystem to come.

The Basics

Users interact through various open-source applications such as MetaMask, Web3 gaming, the metaverse, and DeFi protocols. However, they don’t usually stop and think about what happens behind the Web3 scenes, or what is piecing the blockchain-based web together. If we imagine Web3 as a burgeoning new metropolis, it’s the providers of the underlying infrastructure and power grid that make all these operations possible.

Every Dapp relies on communication with one or more blockchains. Daily, full communication nodes serve billions of requests from Dapps to read and write data onto a blockchain. We require a massive node infrastructure to keep up with the ever-expanding Dapp ecosystem.

However, the running of nodes is both time- and capital-intensive. Dapp builders must turn to external providers for remote access to nodes. This requirement results in extreme monetary incentives for infrastructure providers to serve as many of the Web3 ecosystems as possible. But, who are the ones winning this race?

The Problem of Centralization

The most expeditious way to provide the reliable infrastructure that can power Dapp ecosystems is for centralized companies to set up a web of blockchain nodes, which would commonly be held in data centers such as those of Amazon Web Services (AWS). They would allow the developers to access these from anywhere for a subscription.

This system is precisely the method that a few players in the Web3 space did, but it resulted in centralization, which is against the ideals of the self-named decentralized space.

Centralization is a significant issue for the Web3 economy because centralization means that first, the ecosystem becomes susceptible to 51% attacks, and second is at the mercy of a few powerful players.

Let’s consider that 81% of Ethereum beacon chain nodes are located in the United States and Europe. Additionally, if the three largest mining pools were to come together, they could conduct a 51% attack on the Ethereum network. Today’s blockchains are less distributed and more centralized than we think them or would like them to be. This structure starkly contrasts the vision expounded by Satoshi Nakamoto’s Bitcoin white paper.

If the large node providers were to collude, then the advantages Web3 has over Web2 would be lost. What’s more, the reliance that users would have on centralized providers can increase the chances of system outages. The Ethereum outage that occurred in 2020 due to Infura, one of the larger node providers, shows the problems of a centralized system. The outage caused several crypto exchanges, including MetaMask, Coinbase, and Binance, to suspend their withdrawals of Ethereum and ERC 20 tokens because the exchanges could not entirely rely on the Infura nodes.

It must be noted that Amazon is often the backbone of these centralized providers. It has suffered from several past outages, which now creates a second, severe layer of vulnerability.

The Infura outage was not the only such outage, with the Ethereum network’s move to Ethereum 2.0 or “The Merge.” The move to ETH 2.0 was interrupted by a 7-hour outage resulting from a single-node hardware failure on the network. A genuinely decentralized network would not have these types of worries.

Solana’s Problem

Decentralization remains a crucial tenet of Web3 and its economy, and a centralized blockchain infrastructure is a threat capable of undermining it. The Solana blockchain has suffered through multiple outages, all due to a lack of decentralized nodes. The network was insufficient to handle a spike in traffic.

Solana’s problem is common for many blockchains that are trying to scale their operations and throughput. Many of the top decentralized blockchain protocols continue to struggle with a pathway to scale while also being decentralized. The largest blockchains, Bitcoin and Ethereum, are steadfast in their part in the decentralized war, but ETH is still vulnerable.

In the early days of blockchain, on June 8^th, 2013, Feathercoin (FTC) was the victim of a 51% attack. One entity was able to control over half of the FTC network’s total processing power. This strategic move allowed them to reverse the confirmed transactions on the chain and even prevented new transactions from going forward. FTC has fallen into blockchain obscurity with a price that plummeted, alongside a delisting from all major exchanges.

The reason for the ongoing centralization is due to the overreliance on Web2 cloud providers such as AWS and Infura, which have continued in their roles from Web2 and have provided the infrastructure for Web3 and its economy. However, the current strategy to avoid centralization and blockchain’s problematic “single point of failure” is gaining significant steam. This change is good news for the future of Web3 ecosystems that wish to remain healthy, secure, and decentralized.

Better Solutions With Decentralized Infrastructure

With the advent of novel innovations, there is a rise to a new breed of decentralized provider. These node providers are running their services on-premises or even in users’ homes instead of relying on centralized cloud providers.

The Architecture of Web2 vs. Web3

The key advantage that decentralized nodes provide is that they cannot be taken down in the same way as a single point of failure. They can also provide faster connections for global users. Additionally, providers of decentralized node infrastructure create new economies, where these independent providers serve requests for data and earn rewards in their native tokens.

Increasing Competition

Several providers in the decentralized Web3 space, such as Flux, Ankr, and QuickNode, compete for market share. This competition ensures that providers are consistently motivated to improve their services and provide the best possible user experience for their customers. Such a competitive environment is good for the Web3 economy because it leads to innovation while also lowering prices.

Investors are seeing great returns acting as pooled node providers as well. Yieldnodes sets up decentralized nodes for investors and has paid 10% returns a month for over two years, with a high of over 19% in February 2021.

What’s even more important is that competition for blockchain infrastructure results in a more decentralized Web3 economy. The more decentralized the network, the more resilient it is to censorship, and 51% attacks will remain an issue of the past.

Closing Thoughts

The idea behind Web3 is not just to create a better internet but a better world. Decentralized infrastructure providers are building an internet foundation that is more equitable, censor-resistant, and secure.

By shaking things up, they are supplanting the status quo of giant, centralized hosting providers that are carryovers from Web2 and which make blockchains more susceptible to attacks, outages, and censorship. The new decentralized providers are on the cutting edge and have an incentive to push innovation, providing their users with both the best possible service and the greatest level of integrity.

The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees. This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service, or offering. It is not a recommendation to trade.

The Future of NFTs in Web3 and Web4

Posted on November 15, 2022November 15, 2022 by Jean Chalopin

The market for non-fungible tokens, or NFTs, was valued at $232 million in 2020, increasing to $22 billion in 2021. Because of its growing popularity in collectible trading and the developing significance of Decentralized Finance (DeFi), this market is anticipated to expand by around three times by 2031 as Web3 comes into being.

This article delves into why NFTs are an essential part of the future and how they fit into the evolution of the internet, known as Web3 and, eventually, Web4.

What Are NFTs?

NFTs are digital coins that operate similarly to cryptocurrencies on a blockchain. But they differentiate from crypto tokens because each one is bespoke. This means they can grant “uniqueness” to other assets to which they are connected. Digital art has proven to be the most common initial use for NFTs, with pieces made by artists like Grimes and Beeple being well-liked with online collectors, frequently fetching high prices.

*Source:* *https://www.designboom.com/art/grimes-crypto-art-nft-6-million-03-02-2021/*

NFTs are most frequently stored on the Ethereum blockchain. However, they may also be kept on other blockchains, including Polygon and Binance.

What Is Web3?

The phrase Web3 represents the notion of an innovative, improved internet. In essence, Web3 leverages blockchains, cryptocurrencies, and NFTs to return ownership and authority to the consumers. As put by a tweet from 2020: Web1 was read-only, Web2 is read-write, and Web3 will be read-write-own.

Some Web3’s core virtues are:

Decentralized. Ownership of the internet is distributed among its builders and users, rather than with a controlled entity.
Inclusive. Everyone has equal access to participate.
Merit-driven. Web3 uses economic mechanisms and incentives rather than relying on third parties.

Let’s give a contextual example of how Web3 works.

Web3 offers you control of your digital assets. Let’s take the scenario of playing a web2 game. An in-game item that you buy is linked to your account immediately. You will lose it if the game’s developers terminate your account, or if you quit the game.

Direct ownership is possible with Web3, thanks to (NFTs). Nobody, not even the game designers, has the authority to revoke your ownership. Additionally, you may sell or trade your in-game possessions on open marketplaces to recuperate their worth if you decide to stop playing.

What Is Web4?

The semantic web, where computers instead of people will generate new information, is commonly seen as the result of “Web 3.0.” The Internet of Things (IoT), or a web of intelligent links, will be what we refer to as “Web 4.0.”

The core features of Web4 include:

A hazy, blurred gap between man and machine
Information transmitting from every part of the worldArtificial intelligence capable of human-like communication
Completely transparency and traceability
Incredible speed and resilience

*Source:* *https://bamert-consulting.ch/f/an-update-on-the-web-40*

Everything around us is changing because of Web4, including the economy, logistics, and even medicine. The customer would have complete control over the internet and unbridled access to their activities and data. Web4 expands the potential of any internet-related sphere of activity by enabling a connection between man and machine.

NFTs in Web3 and Web4

Web4 will be synonymous with the digital economy and all digital assets. The impending metaverse will bridge the digital gap, making “tokenomics” seem like nothing.

*Source:* *https://dcxlearn.com/economics/tokenomics-a-guide-to-utility-business-and-value/*

In this context, NFTs will prove key to online communities, events, exchangeable assets, digital identities, and more. They will also greatly add to the rising popularity of retail cryptocurrency trading, which has already produced its fair share of mavericks and winners. In essence, NFT technology protects the integrity of the growing digital asset space.

NFTs have been utilized to grant exclusive access to offline events in addition to online groups and events. The permanent evidence of ownership provided by NFTs on the blockchain makes the technology well suited to address significant problems in the realm of event tickets, such as forging and digital theft.

NFTs have been integrated into blockchain games like DeFi Kingdoms, Axie Infinity, and Crabada, resulting in the development of thriving in-game economies where NFTs are valued according to their characteristics and statistics. In these games, playing more is highly rewarded since leveling up NFT assets increases profits and boosts the likelihood that uncommon and expensive item drops will occur.

Source: https://news.coincu.com/29875-crabada-ido/

Concerned that someone could take your metaverse username? Through the Ethereum Name Service (ENS), NFTs have already made it possible for users to possess unique “.eth” Ethereum wallet addresses. The network is attracting a huge number of new addresses each day.

These unique addresses, which are NFTs, are linked to other decentralized services and make complicated wallet addresses more individualized and much simpler to remember.

Closing Thoughts

Usernames and wallet addresses are no longer the primary means of identifying assets in the metaverse–non-fungible tokens have taken their place. The Sandbox’s metaverse project already uses NFTs to represent virtual locations, furnishings, and other objects.

The Sandbox generated more than $24 million in revenue in March 2022 from selling NFTs representing real estate in the metaverse. Leading companies and well-known individuals from various industries, including Atari, Snoop Dogg, and the South China Morning Post, all own land in the metaverse.

NFTs are building the groundwork for digital communities, tradeable in-game items, and the greater metaverse economy while also revolutionizing the ownership and exchange of digital assets.