Very few truly understand the promising future of NFTs and the potential complexities of this interesting market. Firstly, most people don’t have a clue what NFTs are, or are too quick to dismiss their potential. Secondly very few have the vision to recognize that NFTs are a stepping stone to something bigger. Thirdly, NFT regulatory oversight is unclear, which means many market participants are at risk of operating illegally.
What is an NFT?
Saturday Night Live’s skit titled “what the hell’s an NFT?” is proof that NFTs have become mainstream. In the skit, Jack Harlow raps a fairly good description of NFTs.
HERE’S THE THING ABOUT NFTS IT IS A NON-FUNGIBLE TOKEN YOU SEE. NON-FUNGIBLE MEANS THAT IT’S UNIQUE, THERE CAN ONLY BE ONE – LIKE YOU AND ME. NFTS ARE INSANE, BUILT ON A BLOCKCHAIN. A DIGITAL LEDGER OF TRANSACTIONS, IT RECORDS INFORMATION ON WHAT’S HAPPENING. ONCE IT’S MINTED, YOU CAN SELL IT AS ART.
When trying to understand what NFTs are, it may help to think of unique collector items such as baseball cards or Pokémon cards. However, in the case of NFTs, these items are represented by a digital token. Similarly to trading collector items, digital tokens can be traded, but doing so is commonly done inside digital market places such as Opensea.io.
What makes NFTs more interesting is that these tokens can be used to to represent assets of any kind. And when considering that assets can be anything of value that is digital or physical, then one can begin to grasp the promising future of NFTs. The market for tokenized assets could be worth trillions, if not quadrillions of dollars.
For now, most think of NFTs as it relates to digital art, music, movies, etc. But the market for NFTs continues to expand. This is why it isn’t surprising that visionary investors such as Mark Cuban want a piece of the NFT action. See Mark Cuban: The Dallas Mavericks are thinking about turning NBA tickets into NFTs’ and Mark Cuban Creating NFT Digital Art Gallery
What do SNL, Mark Cuban, Tzero and Ravencoin Have in Common?
As we’ll elaborate below, they all recognize the NFT popularity, and perhaps with the exception of SNL, they also recognize the promising future for NFTs. However, as much as people are excited about NFTs, only a few comprehend the potential legal implications surrounding this new market.
Are NFTs Digital Securities?
The Securities and Exchanges Commission (SEC) has not commented much on NFTs. However, it seems clear that some NFTs are or will be at risk to be classified as securities. If Mark Cuban intends on collecting royalties on NFTs representing Mavericks tickets, chances are such NFTs would be classified as securities. In some instances that could mean only accredited investors would be legally permitted to trade these assets. Such a scenario would be an administrative nightmare and currently a legal impossibility for an NFT marketplace such as Opensea.io.
This is where companies like tZero come into play. Tzero, is a subsidiary of Medici Ventures, which is a subsidiary of Overstock.com. The relationship between these companies may appear odd on the surface. Let’s just say that Overstock created a venture capital arm focused on blockchain technologies. In the end, Tzero emerged as the leading digital securities trading platform. Infact, tZero claims that its platform is responsible for roughly 90% of the digital security trading volume.
Indeed, the folks at Overstock, Medici Ventures, and Tzero understood the legal risks associated with securities, well before the Initial Coin Offering (ICO) fiasco that took place in 2018. As a result, these entities were careful to work closely with the SEC to obtain the necessary trading licenses and to build tZero so that it could successfully serve as a trading platform within this regulatory environment.
This positions tZero as one of the few entities able to capitalize on having the necessary licenses to trade digital assets, including NFTs, even if these are deemed digital securities.
What does Ravencoin have to do with NFTs?
In short, Ravencoin is a cryptocurrency that is also well position to capitalize on the NFT market. To begin, Ravencoin is a protocol based on a fork of the Bitcoin code. This crypto was created specifically for the purpose of tokenizing assets on its blockchain, including NFTs.
In fact, supporters claim that Ravencoin developers understood and wrote code for assets such as NFTs well before NFTs became popular. Ravencoin developers call these Unique Assets, rather than NFTs.
What is even more interesting is that Ravencoin also originated with Overstock and Medici Ventures. It is worth noting that Overstock and Medici Ventures had incredible foresight when it came to Ravencoin. First, Ravencoin was launched as an open source project. This means there is no actual company or entity that represents Ravencoin.
Second, the project founders were careful to ensure this cryptocurrency could not be deemed a security. This was done among other things, by ensuring it was created without any fundraising, pre-mine or ICO.
The fact that both tZero and Ravencoin share birth origins may very well explain the visionary alignment when it comes to asset tokenization. To illustrate this, consider that back in 2018 Medici Ventures announced it had purchased digital tokens representing shares from Chainstone Labs. These tokens were issued on the Ravencoin chain!
You can easily find the corresponding asset by browsing Ravencoin’s Asset Explorer, under the name CHAINSTONE. Oh, and by the way, Chaninstone Labs is a digital securities company – no surprise there.
Why isn’t tZero already using Ravencoin (RVN) for asset tokenization?
Despite the fact that these two projects complement each other so well, tZero does not yet support assets created on the Ravencoin platform. To be clear, the actual Ravencoin cryptocurrency RVN can be traded in the tZero crypto app, just like BTC and ETH.
Why doesn’t tZero support assets created on Ravencoin is a question the Ravencoin community has been asking. As an outsider, one can only speculate. I suspect one reason is that tZero prefers to be blockchain agnostic. It would make sense for tZero to prioritize building relationships with others in the blockchain space, regardless of blockchain preferences.
Another reason may be that other players looking to work with tZero were already utilizing tokens issued on the Ethereum blockchain. After all, up to this point, Ethereum has been the default blockchain for smart contracts and NFTs.
Finally, it may be that tZero and its parent entities wanted to avoiding the perception of continuing to fund the Ravencoin project.
The High Cost of Gas on Ethereum is an Opportunity for Ravencoin
Although Ethereum has been the default blockchain for minting NFTs. The problem with doing anything with Ethereum is the high gas costs. As such, users wanting to mint NFTs are now looking for other alternatives.
We want to make DeFi and NFTs easy for the mainstream.
— JP Richardson (Exodus) (@jprichardson) March 24, 2021
But we can’t while gas fees on Ethereum are insane for the person who just starting out on their crypto journey.
$50 to send an NFT?
$100 to exchange on a DEX?
Insane.
We need a better chain. Today, Ethereum is not it.
Ethereum high gas fees problems go well beyond NFTs. In a recent interview JP Richardson (founder and CEO of Exodus) discusses the idea of offering Exodus common stock on the blockchain. Richardson explains that Exodus had already decided to tokenize Exodus shares on the Ethereum network. However, he adds that doing so on Ethereum would cost Exodus more than $9 million due to gas fees. Naturally, Exodus is now looking to other alternatives.
Ravencoin NFTs Vs Ethereum NFTs
As mentioned earlier, Ravencoin was created for the purpose of tokenizing assets. Whereas Ethereum can be said to be a broader platform, capable of supporting different applications, including smart contracts. Therefore, Ravencoin supporters argue that Ravencoin is better suited for asset tokenization, including issuance of NFTs.
See Ravencoin — NFTs — Unique Assets vs. ERC-721
For Ravencoin and tZero NFTs are A Timely Opportunity, But Their Vision Is Much Bigger
Despite both Ravencoin and tZero being well positioned to benefit from the future of NFTs, neither project is focused on NFTs alone. Instead, both projects are focused on a much larger prize, the market of digital securties.
Ravencoin’s role, beyond NFTs, is that of asset tokenization. In this capacity Ravencoin doesn’t need tZero. RVN has already proven through existing projects and partnerships that it can function within a digital ecosystem void of tZero. See Ravencoin Mass Adoption.
tZero’s vision is that of becoming a one stop shop to trade all assets, including public securities, private securities and cryptocurrencies. As shown in the image below, no other entity is currently capable of serving these three markets.
Imagine a platform providing the services of a stock broker (à la E*trade), a crypto currency exchange (à la Coinbase), and a private securities market where you users can trade digital shares of the local restaurant. And of course, in such platform users would also be able to find an NFT marketplace (à la Opensea.io).
In such a vision, users would be able to access all of these markets from a single phone app. Such a platform would be a trader’s dream.
Imagine you want to buy a Mavericks season ticket token. You could chose to part with your Mona Lisa NFT and/or you may chose to sell some Bitcoin. The trading of these various assets could all be done within the tZero app, whether the involved NFTs are digital securities or not.
Conclusion on the Promising Future of NFTs
As with cryptocurrencies, NFTs have become hugely popular and are becoming mainstream. Few market participants truly understand the promising future of NFTs. And even less participants comprehend the potential complexities associated with this new market.
The few market participants that understood these complexities long before NFTs became popular are now in the enviable position of meeting regulatory compliance. And this is happening at a time most other market participants are seemingly operating at risk.
Although the future of NFTs looks very promising, in the bigger picture, NFTs may be a stepping stone to a larger market – the digital securities market. Time will tell.
Nothing in this article or website is intended to provide financial advice. As of this writing, the author holds long positions in Overstock (OTSK), Ravencoin (RVN), and Ethereum (ETH).
