GameFi

Posted on September 14, 2022September 14, 2022 by Jean Chalopin

With the advent of blockchain, a new space has been created for the world of video games. GameFi has rapidly been expanding into the more traditional video gaming industry since its first appearance with Axie Infinity.

Axie attracts gamers to its universe by offering them opportunities to make money while they are enjoying the game. We will be explaining GameFi and the differences between it and the more familiar traditional video games we know, how one can get started on a particular GameFi game, and potential income streams they provide players and investors.

GameFi in Brief

GameFi starts with combining the words game and finance, similar to DeFi for decentralized finance. GameFi refers to a blockchain-based game model that has a play-to-earn feature that incentivizes players. In a GameFi ecosystem, blockchain technologies with cryptocurrencies and NFTs (non-fungible tokens) create a virtual gaming environment for the players.

Players can earn in-game rewards by completing in-game tasks, winning battles with other players, or reaching new game levels. These assets earned during play are owned and controlled by the player and can even be traded on crypto exchanges or NFT marketplaces.

GameFi’s Inner-Workings

GameFi player rewards come in many forms. Anything such as native cryptocurrencies or in-game assets like avatars, avatar features and costumes, weapons, virtual land, and virtual building materials.

Every GameFi project will create its own different game model and economy built around that model. Generally, a game will create its in-game assets as NFTs running on a blockchain project or sidechain, while in other cases, the in-game assets would need to be converted to NFTs before players could trade them. This second model can be a cost-saving method for the game’s project, putting the fees to create the NFT on the trader.

In-game assets will generally provide a specified benefit to the game’s players, which allows them to make additional rewards. However, some games will feature player avatars and cosmetic changes, which are purely visual and have no impact on either gameplay or the in-game earning.

Depending on the game’s model, players can earn rewards through the completion of tasks, winning battles against other players, or constructing and monetizing structures on their owned plots of land. Some games will allow their players to generate passive income, not even having to play the game. This can be through staking or lending of their owned game assets to other players.

Common GameFi Features

Let us look at GameFi’s most common features.

Play-to-Earn (P2E)

Nearly every GameFi project will have a Play-to-Earn or P2E model as a novel gaming mode at its core. This P2E model turned the gaming world on its head, which has relied on a Pay-to-Play (P2P) model that started with the video game arcades of the 1970s.

The Pay-to-Play model requires a gamer to invest before they can begin playing the game, putting money into the Astrids game at Dave and Busters, or nowadays purchasing a Call of Duty license or recurring membership subscription for their Xbox.

In the majority of cases, traditional video games with the Pay-to-Play model will not generate any financial rewards for their players, and any in-game assets that the player obtains are controlled and held by the gaming company only for use by that player. The P2E model, in contrast, will give players complete control over their in-game assets and will also provide them opportunities to make money for their play or passively.

The economics of the game will depend on the GameFi project’s chosen model. Games built around a decentralized blockchain technology can and should give their players complete control over their acquired in-game assets. However, this is not always the case. Players should understand how the chosen game works, its economics, and who is behind the project before devoting time to any P2E game.

One notable feature of P2E games is that they can be free to play but still have the ability to generate financial rewards for their players. However, some GameFi projects will require players to purchase NFTs or other crypto assets before being allowed to play.

Axie Infinity

Axie Infinity has gained the spot of one of the most popular Play-to-Earn games. Axie is an Ethereum-based game with NFTs that has grown in popularity since its release in 2018. Players can use their NFT pets, called Axies, to earn Smooth Love Potion (SLP) tokens.

Graph courtesy of coinmarketcap.com

These can be earned by completing daily tasks and by battling other players. Players can also get the rewards of another coin, the AXS, if they are able to achieve a defined player versus player (PvP) rank.

Graph courtesy of coinmarketcap.com

On top of this, Axie Infinity players can use both AXS and SLP to breed new Axies, and these new Axies can be used in-game or traded on the Axie Infinity NFT marketplace.

Beyond buying and selling Axies, players have the ability to lend their Axies to other players, in a process known as scholarship, allowing NFT owners the ability to earn without having to play the game. This model of lending gives the borrowers called scholars the use of the Axies to earn rewards during play without having to pay anything up front.

This passive model is a way for players with strong Axies to earn without investing other than what they made through their own play beforehand. Rewards earned with the borrowed Axie are split between the scholar’s student and the Axie’s owner.

Ownership of Digital Assets

Blockchain technology allows for digital asset ownership, and this makes it possible for owners to monetize their in-game assets in several ways possible for a project.

With traditional video games, a player can own pets, houses, avatars, weapons, tools, construction materials, and much more. But with GameFi, these assets can be issued in NFT form and minted on the blockchain. With this GameFi system, the player will have full control over their in-game assets. The ownership of these assets can be verified, are transferable, and can be authenticated.

With the rise of metaverse games such as Decentraland, TheSandbox, and a few other lesser-known games, the focus on virtual real estate has grown, and its ownership has grown as well. These games allow players to purchase and monetize their virtual real estate like it was property in the real world.

The Sandbox allows its players to buy plots of digital real estate and then develop these plots so that they can generate value through revenues. One popular form of development has been the creation of casinos in these metaverses. Some of the developed lands will charge other players to visit when they are the venue hosting content or events like virtual concerts bringing in thousands of visitors all paying to see the event, or they can also rent this customized land to other players who will monetize it.

Applications for DeFi

There are some GameFi projects that provide DeFi features like staking, liquidity, and yield farming. With these GameFi projects, a player can stake their game tokens to earn rewards, unlock special items, or gain access to new gaming levels.

The introduction of these DeFi elements can make blockchain gaming more decentralized. Traditional game companies will have centralized control of the game and its updates; some GameFi projects allow its community to participate in the game vision process, proposing future updates via DAOs (decentralized autonomous organizations).

Using MANA, the native governance tokens of Decentraland, players can vote on a project’s organizational and in-game policies if they lock their tokens in the DAO. The more tokens they lock, the stronger their voting power. This system allows gamers to have a direct influence on the development of the game they are playing.

Traditional Games and GameFi

With traditional games, a player can earn in-game currency that is used to purchase assets and upgrade characters. However, these tokens cannot generally be traded outside of the game space. They will also not have any value beyond the game’s scope, and even if they do, most games will prohibit players from monetizing and trading the earned/purchased assets in the real world.

Blockchain-based games have in-game tokens and assets in cryptocurrency or NFT form. Some games will use virtual tokens rather than crypto or NFTs. However, players can usually convert their in-game assets into NFTs if so desired, allowing the gamer to transfer their earnings to a crypto wallet and trade the crypto on exchanges and the NFTs on marketplaces. The crypto profits from in-game can be converted via an exchange or marketplace to fiat currency as well.

Joining the World of GameFi

There are already thousands of blockchain games available to play, and each has its own tokenomics system. Players should be careful of fraud projects or spoofed websites. Downloading a game from the wrong website or connecting a wallet to the wrong site can be detrimental.

It is best to create a new crypto wallet for the GameFi game and only use funds that can be lost in a worst-case scenario. Once you have found a Game you are confident with, you can begin.

Create a Crypto Wallet

Accessing a game will require a compatible crypto wallet. MetaMask and Trust Wallets are commonly used.

The chosen game may use a different wallet or connect to a specific blockchain network. Blockchain games on the BNB Smart Chain (previously the Binance Smart Chain) will require that a Metamask wallet be first connected to the BSC network. A Trust Wallet or other supported wallet could potentially be used.

Games running on the Ethereum network can be accessed when you connect your wallet to the Ethereum blockchain. Some games like Gods Unchained and Axie Infinity have built their own wallets, reducing costs and improving performance, so you may need to create one of these.

Connect the Wallet to the Game

A wallet will need to be connected before gameplay can occur. Connect with the official website only. Find the website and look for the wallet connection option. Most blockchain games will use your wallet as your account username and password, so most games will ask you to sign a user message to your wallet, allowing you to connect to the game.

Check Game Requirements

Most projects will require the purchase of some native cryptocurrency or an in-game NFT to begin. The upfront requirement will vary from project to project, and you should consider this purchase’s earning potential and overall risk before moving forward. Include in this estimate the time needed to get your initial investment back, and any profits that can be obtained.

3 Axies are needed in a wallet to play Axie Infinity, which can be purchased in the marketplace. This purchase will require wrapped ETH (WETH) in a Ronin Wallet. ETH can be bought elsewhere, and the Ronin bridge can be used to transfer the ETH to your Ronin Wallet. If you do not have the upfront funds, you can look for a scholarship program. Allowing you to borrow NFT Axies, but you will share your earnings with the Axies’ owners.

GameFi’s Future

In the past year, GameFi has grown tremendously and will likely continue with the spread of more blockchain projects. In July 2022, DappRadar lists nearly 1750 blockchain games, up from about 1400 in March of the same year–25% in four months.

There are now popular games crossing multiple blockchains beyond Ethereum and the BNB Smart Chain, including Solana, Polygon, Harmoney, and more. The ability for players to own and earn from their in-game assets is especially attractive in developing countries. With the continued growth of blockchain tech, the GameFi world will continue its speedy growth.

Final Thoughts

Browser games have hoped to make Bitcoin profits since the beginnings of blockchain tech. Ethereum was created from a desire of a young man to have control over his in-game assets. The advent of smart contracts has changed the potential of the gaming world, with decentralized novel experiences and opportunities.

GameFi can attract gamers, providing an entertaining escape and a financial incentive. The growing popularity of blockchain-based games will continue and will likely be a driving force behind the development of the metaverse.

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 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.

When Is the Ethereum Merge?

Posted on September 9, 2022September 9, 2022 by Jean Chalopin

After some delays and much anguish, the upcoming “Ethereum Merge” is set to happen. Bellatrix, the first stage of this process, happened on September 6th. Yet one question on millions of minds across the world remains: When is the Ethereum merge?

Paris, the second and final stage, is set to be complete by the next week, likely around September 15th. After this French foray, Ethereum – the world’s second-largest currency following Bitcoin – shall fundamentally change from its very core. Meaning, its blockchain “proof of” protocol shall shift from Bitcoin’s original proof of work to the new, more centralized, and extremely energy efficient, proof of stake.

The waves of change coming from the behemoth that is Ethereum shall not only shape the future of cryptocurrencies, but of finance itself in a time of “Web3” as retail investors across the world have joined in through massive crypto exchanges like Binance or Coinbase. First, let’s get into the basics of Ethereum, the jargon, and then some of the changes we can all expect.

How Blockchain Works

When investors and crypto enthusiasts throw around the term “blockchain,” they’re referring to the engine driving a coin itself. It’s an immutable public ledger, decentralized and democratized.

In contrast, a centralized ledger of traditional banks or gambling parlors retained this information, but privately. And therein lies the problem – trust. This method forced consumers to trust an institution’s efficiency, integrity, and infallibility.

Instead, the block of each blockchain contains records of transactions for time immemorial, decentralized for the benefit and trust of the general public. The same public maintains any blockchain’s integrity through what’s known as a consensus mechanism.

The Consensus Mechanism

Unlike a centralized ledger, a consensus mechanism follows the tradition of a democratic parliament. A simple majority (51% or more) changes the accepted blockchain, or the blockchain which everyone agrees is true.

Yet with the “miners” or “stakers” (validators) across the world incentivized to take part in the blockchain’s validation process by way of additional income, a single bad actor would need an absurd amount of energy and processing power.

This formed the backbone of proof of work’s astounding success, although the energy consumption feels crippling in a time of rampant global warming and record heat waves. Proof of stake solves this issue.

Proof of Stake

This new consensus mechanism requests that crypto holders deposit their own digital assets as collateral for the opportunity to have their transaction record (their copy of the blockchain to date) used by the blockchain as parts of its goings on. In return, the holders of those deposits, or staked assets, receive rewards.

Proof of stake relies upon mathematical randomness and the power of groups. Stakers are selected randomly, although higher stake amounts add to any one staker’s chances. Therefore, the mechanism requires multiple stakers to verify any one transaction before it becomes blockchain canon.

When Is the Ethereum Merge?

Bellatrix served to prepare Ethereum for its merge by acting as its “hard fork.” This translates into a radical change requiring all Ethereum actors and users to upgrade to the latest protocol software.

Specifically, it prepared the consensus layer of the cryptocurrency for a merge with its execution layer. That merge is what we call “the Ethereum merge.”

Paris occurs when the Terminal Total Difficulty (TTD) reaches 58,750,000,000,000,000,000,000. This figure represents the cumulative total difficulty of all mined Ethereum blocks under the proof of work consensus mechanism.

After hitting this difficulty, mining, or solving the next hash puzzle for the next block, becomes impossible. And thus proof of stake takes over like a default recourse.

So to answer the question – when is the Ethereum merge? – predictions suggest September 15th on the dot.

Bottom Line

Shifting to proof of stake is necessary due to crypto’s increasing regulation in a world suffering from overheating. Critics argue that the difficult hash puzzle remains the most secure blockchain invention to date. However, a stake-based mechanism succeeds in getting the job done while eliminating over 99.9% of the current energy usage and laying the groundwork for a similarly massive decrease in transaction fees through another process dubbed “sharding.”

In our next article we will describe the benefits of staking and the world changing benefits of the second largest cryptocurrency switching to it. These implications stretch from an increased price valuation to the removal of all mediums of exchange consuming far too much energy, be they crypto or fiat.

The co-author of this text, Conor Scott, CFA, has been active in the wealth management industry since 2012, continuously researching the latest developments affecting portfolio management and cryptocurrency. Mr. Scott is a Freelance Writer for Deltec International Group, www.deltecbank.com.

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 History of Stablecoins

Posted on September 1, 2022September 1, 2022 by Jean Chalopin

Stablecoins, especially fiat-backed stablecoins, seem poised to dominate online currency exchanges across the world. Tether grew by approximately 82 billion USD in five years and USD coin by approximately 54 billion USD in two years. How did this happen? What is the history of stablecoins?

In a word, brief. In several words: expansive, incredible, awe-inspiring, somewhat confusing.

This article follows the history of stablecoins from its first origination only five years after Satoshi Nakamoto’s Bitcoin, 2014, through to today. In other words, this article describes the creation of hundreds of billions of market capitalization of a new asset class in eight years.

BitUSD

The world’s first stablecoin was released on July 21, 2014. As a crypto-backed stablecoin, BitUSD was issued on the BitShares blockchain, which is now mired in obscurity.

Dan Larimer (EOS) and Charles Hoskinson (Cardano) envisioned these pioneering digital assets before they went on to become cryptocurrency rockstars today.

However, BitUSD lost its 1 to 1 parity with the US dollar in 2018 and has been unable to recover since. BitMEX’s research brilliantly highlighted the stablecoin’s weakness in their detailed analysis of BitUSD. BitUSD was collateralized with an obscure, volatile, itself-unbacked asset, BitShares.

In the event of a fall in the price of BitShares, a single BitUSD can be used to purchase more of Bitshares and thereby encourage mass arbitrage similar to traders of traditional asset classes. However, the opposite was not guaranteed. There was only an implied pile of reserves from BitShares alone. Therefore, BitUSD operated much more like a volatile security than a stablecoin.

Yet it did succeed in putting the concept of pegged stablecoins on the radar and beginning the history of stablecoins.

NuBits

Also launched in 2014, the second stablecoin provided ample lessons to the fledgling, but growing crypto community. NuBits was crypto-collateralized, similar to BitUSD, but this time using Bitcoin.

Ultimately, that failed to help in any way. Since Bitcoin was and is a volatile asset trading according to the tune of speculators across the world, Nubits reserves could not be high enough nor mature enough to withstand a rout. As Bitcoin fell, the coin’s reserves fell.

Like with traditional investing, the primary method to reduce the impact of volatility is to diversify. However, not only were the reserves of NuBits fairly volatile, they were insufficient and undiversified.

A lack of capital and diversification spelled doom for the second stablecoin, now trading around 0.04 USD.

TerraUSD

In May 2022, the TerraUSD (UST) algorithmic stablecoin crashed, hard, losing almost all of its value in days.

Source: How It Happened

TerraUSD relied upon an algorithm and the forces of arbitrage to fix the value of one UST to one US dollar. If it became too cheap, the (centralized) powers behind UST could retract supply or provide further incentives for holders of other cryptocurrencies to convert their holdings into UST coins. If it became too expensive, additional supply could be created.

However, demand would remain naturally occurring, even if incentivized. This translated into a glaring weakness.

Despite the Luna Foundation Guard, the body protecting TerraUSD’s reserves, once holding a warchest of over 70 thousand bitcoins, it failed to prop up the stablecoin in the face of a complete rout. Today, one UST is roughly 0.02 USD.

The Lesson

In the history of stablecoins, all three carry one essential lesson: unstable cannot back stable. In normal market circumstances, partial reserves and arbitrage mechanics probably do the job just fine in the context of fractional reserve banking. As long as all investors do not act all at once, a non-fiat-backed stablecoin should function normally.

This is why the headlines covering each of these three crashes also carry the same tone of: fine, until not fine. In each instance, too many investors piled into the selloffs and effectively broke the reserve assets.

Unless there is a 100%, stable reserve backing a so-called stablecoin, most investors feel weary of the street logic. Meaning, how can an idea of assumed stability or enough volatile reserves become enough to handle a total rout? It can’t. That’s all there’s to it.

Tether

Launched in 2014, Tether (USDT) came to extraordinary success with a current market capitalization exceeding 67 billion USD.

This stablecoin fixes the issues inherent in the previous three. It relies not upon volatile reserves or the idea of persistent arbitrage trading, but on hard reserves of fiat currency. For every Tether coin in existence, there is one US dollar in a vault backing its existence.

In this way, the stablecoin handles a complete theoretical rout with ease. Tether continues to serve the burgeoning digital asset space while garnering the implicit affection of regulators.

Dai

Launched in 2017, MakerDAO’s Dai is a decentralized, crypto-backed stablecoin capturing the hearts of DeFi (decentralized finance) investors.

The match in ethos feels all well and good, but is Dai secure? Is it at risk because of its crypto-backed nature?

Dai has yet to crash or break its 1 to 1 peg to the US dollar. The stablecoin is technically a hybrid of crypto-backed and algorithmic, employing a simple algorithm requiring 1.70 USD worth of Ethereum to be deposited in exchange for any 1.00 Dai.

The premise here remains simple and that is a very good thing in terms of handling potential crashes. MakerDAO is banking on (1) a 70% buffer in value and (2) diversified reserves. In addition to Ethereum, the stablecoin utilizes USD Coin (like Tether; 42% of reserves) and Wrapped Bitcoin amongst others.

And in these holdings we see a third, albeit clever safety mechanism. Approximately half of Dai’s reserves are fiat-backed through fiat-backed stablecoins.

Closing Thoughts

The history of stablecoins remains brief, but exceptional. In that time, entrepreneurs daring to transfer the global landscape of financial services learned key lessons.

BitUSD, NuBits, and TerraUSD failed due to an overreliance upon a volatile asset backing an intentionally stable asset. Volatility without diversification struggled under the weight of investor redemptions–something any bank could potentially encounter. The growing Dai stablecoin continues to succeed due to its steep algorithmic requirements and diversity in reserves.

Tether and USD Coin function remarkably well despite a “crypto winter” and leave regulators in begrudging awe of their efficacy. In eight years, stablecoins stand ready to disrupt traditional financial services on a global scale.

How To Create An NFT: A Step By Step Guide

Posted on August 2, 2022August 2, 2022 by Jean Chalopin

With the increase in popularity of cryptocurrencies and blockchain technologies, now a global phenomenon, many investors include them as part of their investment portfolios. Non-Fungible Tokens have also increased in their prominence.

We have previously discussed what NFTs are: one-off tokens built on blockchain tech, representing various rare and unique items in both the virtual and real worlds, such as digital art, virtual real estate, and collectibles like sports cards.

Many investors, traders, and collectors have both earned and lost a lot of money with NFTs–and with the stories seen in the media on a regular basis, creators and other artists are now making money from this new digital media. Its growing popularity is prompting many to wonder how they can create NFTs and join this ever-increasing club of digital artists.

This article discusses the benefits NFTs provide to an artist, answers some questions about the space, and gives you a simple guide to produce an NFT of your own.

Why Create an NFT?

Historically, artists have sold works and have not been the beneficiaries of any future appreciation. However, NFT art is different. Artists can gain from the creation of NFTs in three specific ways.

A Less Expensive Global Market. Because NFT art sales are generally conducted online via peer-to-peer marketplaces, an artist does not have to spend money for an auction house or a gallery.

Lifelong Royalties. NFTs can be coded so that the original artist not only makes money when they sell their digital art the first time, but they can keep earning with each subsequent sale of the token. This is generally a rate of between 2.5-10% of the next sale’s price, giving the artist a lifelong source of revenue.

An Authentic Verifiable Chain of Provenance. Though NFTs are famous for being “right-clicked saved as,” the valid owner of the art is the token holder at the time. Once part of the blockchain, this digital ownership certificate is considered authentic. The current owner, their acquisition price, as well as the previous owners and prices paid, are known. This results in market transparency not seen in the art world before.

Making an NFT, Step-by-Step

Creating an NFT now only involves a few steps, with the main part of the creation process done through a marketplace.

Select an NFT Marketplace

There are generally two types of marketplaces that you can use to create your artwork in NFT form.

Curated. This type of marketplace only allows authorized artists to create (or mint) their digital tokens. Curated marketplaces will focus on high-quality art, not simple low-quality collectibles. NFTcalendar.io is a famous curated NFT marketplace. Their transaction fees are higher, and the royalty percentage on secondary market transactions that can be programmed into the artwork is lower as well (usually a maximum of 5%).

Self Service. The more popular is self-service, or peer-to-peer marketplaces allowing any artist access to create NFTs with whatever they like. Artists can create a token with an image, video, or audio file, and set the royalty percentage as they wish. Unfortunately, being open, there are imitators and fraudsters that will use similar images and art to gain from a famous self-service platform artist.

OpenSea.io is the most popular marketplace for NFTs. OpenSea has risen to popularity, becoming the largest platform, because of its ease of NFT creation and extensive catalog.

Rarible.com is another self-service NFT platform. There are several to choose from.

Once your desired platform is chosen, you will need to open an account on that platform. We will be using Opensea.io for our choice, but the specifics for others are very similar.

Create a Digital Wallet

You must start by setting up a digital wallet that will store your cryptocurrency and your NFTs. In most cases, you will have to choose ETH, the native token for Ethereum, but other cryptos can be selected for some platforms. ETH is the only choice for the NFT creation process on OpenSea.io and has the most buyers and sellers of NFTs on any platform.

It helps if you already own some ETH because NFTs created on the Ethereum Blockchain will use ETH to pay for the “gas” (read: transaction) fee needed to list the token you create.

Opensea.io recommends using the MetaMask cryptocurrency wallet extension for the Google Chrome browser. With this wallet/extension, you can purchase a sufficient amount of ETH needed to mint your NFTs.

If you already have another supported crypto wallet with ETH, you can use it, or create a Metamask wallet and transfer it to the Metamask wallet. The gas fees will range from $15 to $200 in ETH.

Build your Digital Collection

You are not quite creating the NFTs yet. On the interface of your OpenSea account, there will be a MyCollections tab. This is where you store your gallery of digital art.

You will need to customize each collection, entering a name, writing a description, and then uploading a display image. This is the foundation for displaying your artwork once you have created them.

Create Your Token

Once your collection is finalized, you will begin the process of creating an NFT. Start by clicking “Add New Item” to your collection. The following will appear.

You can see that several types of digital media can be uploaded: images (JPG, PNG, GIF), Audio (MP3s), and 3D files (GLB), with a max size of 100MB. You will then supply a name for the token.

You can choose to mint an infinite number of tokens, but they must be done one at a time. You should note how many editions of that token you wish to mint as well.

Editions. This is a token with multiple copies of the same digital media. You will have edition numbers that differentiate the tokens. For example, #1 of 500 would generally be more desirable than #346 of 500.

Stand Alone. This is a one-of-a-kind token.

You then add properties (date created, etc.), levels, and relevant stats, which will enable potential buyers who are exploring your collection to filter the artwork, including social links, an image, an art description, and a name. Once complete, you will click “Create” to add this NFT to the blockchain. This is where you will need your ETH to pay for the gas fees.

From here, you can choose the payment tokens you will accept for your new NFT, and you will also designate the percentage of royalty you receive for any subsequent purchases.

List for Sale

Now that your NFT has been created, list it for sale. Sales can be earned either through an auction or a fixed price listing. If this is your first time selling an NFT, you will have to pre-pay for the gas fee.

Promote Your NFT

The final step is to promote your NFT. Sellers who don’t promote will not get a good price for their art, and you need to think of this as a business. Sellers with a substantial fan base do better. Therefore, you should share your direct link to any potential buyers through your fans on social media.

No Coding Experience Necessary

With the tools discussed previously, you don’t need to have any coding knowledge to create an NFT. You can easily create one with OpenSea in just a few minutes. They have experience helping beginners and will set you on the right path to the successful creation of your first NFT. If you can use the internet, you are likely skilled enough to make an NFT with their step-by-step process.

Are NFTs and Cryptocurrencies the Same?

No, they are not the same, but they are cousins. NFTs and cryptocurrencies are digital tokens. However, NFTs are one-offs, all completely different and not interchangeable; one piece of art is not the same as another, even if they are numbered copies. A cryptocurrency token is the same and has the same value as every other cryptocurrency of the same type. A bitcoin is a bitcoin, like a dollar is a dollar.

What Risks do NFTs Have?

Significant Speculation. NFTs have as much or more volatility as cryptocurrencies. They are highly speculative and can both produce and eviscerate profits in short order. There is a risk of losing funds with hyped, and pump and dump NFTs.

High Gas Fees. The rates for gas fees can change drastically on the Ethereum blockchain. This has an effect on the NFT’s price. Exorbitant fees can cause the NFT’s value to decrease, losing buyers and resulting in losses for the creator.

Competitive Market. There are many artists on the larger platforms, and your artwork may be hidden among the abundance of choices. This is why a solid social media presence can move you to the forefront, leading to profits from NFT sales.

Summary

Being a new market, NFTs have significant potential for growth. However, they also come with a familiar amount of risk and volatility.

The market has grown significantly over the past few years and is becoming more established with the NBA and many other organizations embracing NFTs, but it may be a while before the volatility reduces. If you are going to create a series of NFTs, watch the gas fees and make sure that your social media marketing behind them is already in place so you have the most success.

What Are Stablecoins?

Posted on July 7, 2022July 7, 2022 by Jean Chalopin

Stablecoins function as cryptocurrencies whose respective values are pegged to an underlying currency, commodity, or another financial instrument. Most often, stablecoins exist to maintain a stable value over time and provide a solid alternative to those unwilling to risk the elevated volatility of major coins such as Bitcoin or Ethereum.

The two largest stablecoins by market capitalization, Tether (66 billion USD currently) and USD Coin (56 billion USD), came to massive popularity through their mandates of remaining pegged to the US dollar.

They succeed by capitalizing on three central pillars:

1. Operate as a medium of exchange, not speculation

2. Maintain a peg to an external asset throughout all market situations or cycles

3. Hold reserve assets or utilize a tested algorithm able to maintain supply

When one of these fails, the stablecoin fails. For example, Terra Luna famously crashed after holders lost confidence in the coin’s ability to maintain its peg.

Speculations abound concerning the reason. Was it from a seemingly arrogant refusal to use fiat reserves? Or was it all down to an organized attack against one of its co-founders? Either reason remains possible, and each highlights the risk inherent to a digital asset yet to be perfected.

This article dives into the nuances of stablecoins against more popular cryptocurrencies and the types of stablecoins. Let’s get to it.

Understanding Stablecoins

Like the name, these coins operate with the primary intention of remaining stable. Their value derives not from the speculation of unbacked cryptocurrencies inherent to Bitcoin or Ethereum but from the performance of the pegged asset.

Any stablecoin forms a digital representation of something else, most often a fiat currency, and amongst currencies, most often the US dollar. It’s the digital copy of a hard asset.

Let’s break down the three pillars discussed above.

Medium of Exchange, Not Speculation

Within crypto portfolios, stablecoins form the “cash” portion. Stablecoins are currency. They must remain exchangeable to fiat currency, for example, at any time—with this conversion effectively guaranteed through sufficient reserves.

Popular cryptos enjoy no such banking. Instead, they grow or decline in value according to the general market’s sentiment towards them, the soundness or popularity of their underlying “proof-of” consensus mechanisms, the competition, inflation, money supply, and so on.

Since popular cryptos typically do not represent equities or similar assets having balance sheets, income statement, or cash flow statements, investing here translates to speculating.

Constant Peg

A peg refers to maintaining a constant ratio relative to an external asset. The most common peg remains “1:1” (one-to-one) against the US dollar.

How a stablecoin maintains this peg is up to the crypto, though the final say goes to the relevant regulator. There are algorithmic or crypto-based methods for keeping this peg, yet nothing surpasses actual fiat reserves. For example, if a hypothetical coin has 1 million coins in circulation, then it should have 1 million US dollars with an approved custodian.

Reserves Matter

Stablecoins earn their appeal by targeting risk-conscious yet crypto-friendly investors. Risk must remain limited.

With the advent of upcoming regulation in the USA and the EU, regulators intend to pressure stablecoins to adopt either a 100% fiat currency reserve or close to it. Any fractional reserve banking here shall ultimately be elevated well above that for a traditional fiat currency; above 100% is also likely in this competitive and developing space.

Types of Stablecoins

While stablecoins do vary, there are four common types of underlying collateral structures: fiat-backed, crypto-backed, commodity-backed, and algorithmic.

Fiat-Backed (Off-Chain)

This is typically 1:1 against fiat currency, the most popular form, and the one likely to earn regulatory approval. Since the backing remains a non-crypto asset, it’s also referred to as an off-chain asset or coin.

Fiat collateral remains in reserve within a financial institution, giving this stablecoin a centralized proponent. For more casual investors, centralized vs. decentralized matters little. Yet stronger crypto enthusiasts may want to stick to the guide ethos of crypto that is decentralization.

Crypto-Backed (On-Chain)

These coins are backed by another cryptocurrency instead of fiat. Since everything stays within crypto, this type of stablecoin is referred to as on-chain.

However, the reserve cryptocurrency is likely prone to higher volatility. The target stablecoin is then over-collateralized. Instead of keeping 100% of its value in reserve, you’ll often find 150% to 200%.

For example, MakerDAO’s Dai stablecoin is pegged to the US dollar at a 1:1 ratio but 150% of the value of the Dai coins issued is retained by MakerDao through Ethereum. It’s best to think of it as a loan of Dai coins granted only after sufficient Ethereum is received.

Algorithmic

These coins may or may not utilize reserve assets. Instead, they rely upon supply and demand factors to control its price through contracting or expanding supply when needed. The algorithms behind their respective coins determine supplies and drive prices.

However, this approach remains by far the most risky. If the algorithm fails, then the coin becomes virtual trash overnight, like with Terra Luna.

Further, algorithmic coins may utilize a reward-based system paying returns when above their set pegs. What happens then, if a coin

Courtesy of DeFi, NFT & Web3 Insights by The Defiant

Commodity-Backed

Like with fiat, these coins use external assets to safeguard their values. You can have collateral such as gold, oil, real estate, or another underlier.

Naturally, the values of these coins fluctuate more widely than seen with fiat-backed counterparts. For this reason, the most popular commodity continues to be gold. Paxos Gold enables holders to exchange their coins for cash or physical gold with each coin representing one ounce.

Wrapping Up

Despite their emerging nature, stablecoins continue to showcase a bright future ahead. Newer crypto investors may see algorithmic coins as too speculative—and rightly so—but fiat-backed coins are earning their way into modern portfolios.

This year’s bear market provides an opportunity and the first real test for stablecoins worldwide. While Bitcoin falls by more than 50% year-to-date, Tether continues to uphold its peg and the case why it should be part of your portfolio.

Web 4.0: The Semantic Web

Posted on April 25, 2022May 9, 2022 by Jean Chalopin

Imagine a time before Facebook (Meta) and Google, way back in the middle of the dot.com bubble. The real inventor of the World Wide Web, Tim Berners-Lee, coined the term Semantic Web in 1999. It represents a web of data being processed by machines, especially since the data is uniquely machine-readable. Stating in his book, Weaving the Web:

I have a dream for the Web [in which computers] become capable of analyzing all the data on the Web – the content, links, and transactions between people and computers. A “Semantic Web,” which makes this possible, has yet to emerge, but when it does, the day-to-day mechanisms of trade, bureaucracy, and our daily lives will be handled by machines talking to machines. The “intelligent agents” people have touted for ages will finally materialize.”

His vision was better outlined in a 2001 Scientific American article, where Berners-Lee described an evolution of the (then) current Web to a Semantic Web. The Semantic Web, or “Web 3.0,” is an extension of the World Wide Web with its standards by the W3C. Because the Metaverse has taken the moniker of Web 3.0, the Semantic Web has been relegated to Web 4.0.

Critics continue to question Semantic Web’s feasibility. Proponents argue that several applications remain proven, and the original concept is valid. We shall discuss the current and future potential of the Semantic Web.

What Is the Semantic Web?

So beyond “machine-readable,” what does the term mean? The definition of the Semantic Web differs significantly from person to person, but for our purposes, the Semantic Web is a virtual environment in which information and data are arranged so that they are processed automatically.

The machines then read content. Meaning, they interpret data automatically. Artificial intelligence (AI) functionality derives itself from these automated machines, now enabling users to interact with them in a “human” way.

The machines’ goal is to replicate the experience of engaging with another person. They interpret your data, your meaning, through bodily actions, words, or clicks. Two great examples here are Alexa and Siri, both programmed to record your preferences.

The Semantic Web’s Ongoing Evolution

The foundation of this evolution depends upon data: sharing, discovery, integration, and reuse.

One of its main components is the creation of ontologies. The Web is a web: the components draw connections from each other and exist as a compilation of interlinked units. Starting in 2006, “RDF” (Resources Description Framework) graphs were used to make data sharing organized.

Ontology: a set of concepts and categories in a subject area which shows their properties and their interrelations.

*Graph courtesy of* *communications of the ACM*

The Linked Open Data Cloud’s RDF graphs represent only a small portion of the 650,000 data documents being used in the ongoing research of ontologies.

After combining ontologies, it was discovered that they possessed significant limitations. General interest in linked data waned as researchers discovered that utilizing data required much more of it. The result: knowledge graphs, presenting ready-to-share data efficiently.

*Image courtesy of* *Towards Data Science*

From this moment, the inner workings of the Semantic Web grew to be increasingly complicated. It is not driven by certain methods inherent to the field, distinguishing it from other data-related areas such as machine learning–which is more focused and easier to improve.

The Semantic Web is foremost a conceptual vision: that all components far and wide should speak to one another in the same language. Its broad mission but lack of specific focus means it is far less organized than more widely accepted innovations.

What is Web 4.0?

A good analog is an umbrella. It must combine augmented reality with distributed tech with Big Data, or the major components of Web 3.0, in an overarching web, pun intended. This linking is the essence of Web 4.0.

Users will have their own avatars, or digital alter egos, for interacting with AI or humans. AI digital assistants do not only respond to requests but remain proactive.

Let’s take a simple example. You’re on the way to LaGuardia airport, and your driverless Uber is stuck in traffic. Your digital assistant will inform you that with the current traffic patterns, and you’re going to miss your booked flight. However, the assistant already pre-booked a different flight out of JFK airport and can automatically send you there. It changes the route of your Uber, while also informing your family that you will be home only 15 minutes later than expected. All this would be done after receiving your initial “okay.”

Some may see this is great, while others find it a dystopian future where there is too much access and control over your information.

Challenges

Despite the advances going into 2022, the Semantic Web remains difficult to implement given current technology. Computers do not yet fully understand the nuances of human languages, such as tones, mannerisms, phrases, changing in pitch, and so on.

Specific challenges the Semantic Web must contend with are deceit, inconsistency, uncertainty, vagueness, and vastness. Any system will need to effectively deal with all these issues simultaneously.

Deceit: when the information’s producer intentionally misleads its consumer. Cryptography does reduce this threat. However, additional processes supporting information integrity, or lack thereof, are required.

Inconsistency: when information from separate sources is combined, resulting in contradictions in logic, flow, or meaning. The deductive reasoning employed by computers fall apart when “anything follows from a contradiction.” Two techniques known to deal with this inconsistency are defeasible reasoning and paraconsistent reasoning.

Uncertainty: computers don’t like precise concepts with uncertain values. Rather, one should be one, nor two or three too. For example, a medical patient might present symptoms belonging to a range of possible diagnoses. Uncertainties such as these can be addressed with probabilistic reasoning.

Vagueness: imprecise questions such as, “how many grains of sand make up a pile?” or even concepts like tall and young are complex for a computer to deal with efficiently; everyone has their definition. Matching query terms with different knowledge bases that provide overlapping but subtly different concepts help. Fuzzy logic is as an additional remedy for the issue of vagueness.

Vastness: With billions of pages on the Web already, it’s difficult to determine what is specifically needed for certain contexts. SNOMED CT dictionary has 370,000 terms, a relatively small amount, yet the existing system has been unable to eliminate semantically duplicate terms. Future automated reasoning systems will have to deal with inputs on the level of billions or trillions.

While this list does not cover all the issues in creating the Semantic Web, it demonstrates the most critical challenges to be solved first.

The World Wide Web Consortium’s Incubator Group for Uncertainty (URW3-XG) lumps these problems all together in their report under a single heading, “uncertainty.” The techniques of possible solutions will require an extension to the Web Ontology Language (OWL) to, for example, annotate conditional probabilities. This is an area of ongoing research which is yet to “solve” anything yet.

Feasibility of the Semantic Web

Companies which have historically invested in the Semantic Web for decades are still hurdles in bringing it to life. Recently, IBM sold off much of its Watson Health program. Sadly, many of the same problems affecting the Semantic Web 20 years ago remain.

Scalability
Multilinguality
Reducing information overload with visualization
Semantic Web language stability

The Semantic Web’s promise virtually ensures mainstream adoption, but not without more efficient data management solutions. AI remains away from reaching the point of human comprehension and interaction.

Summary

The potential of the Semantic Web is incredible. Semantics is a slow-moving field, and as new discoveries are made, even more pain points will be discovered. Yet we are making progress. Companies have spent fortunes on Semantic Web development and will continue to do so. It will eventually happen. There is a light at the end of the tunnel. We just don’t know the length of that tunnel.