In recent weeks, the ApeCoin DAO has been actively discussing the launch of an Ethereum Layer-2 ApeChain. Proposed solutions include creating a standalone chain using either Polygon's zkEVM stack or Optimism's stack.

Read the full discussion for Polygon zkEVM here and Optimism here.

The goal of this article is to provide the community with an informed and unopinionated look into the two options and explore a few other potential approaches. Before we dive in, let's first take a minute to understand what a layer-2 blockchain is and why they exist in the first place.

TL;DR - Jump to Summary

Layer-2 Blockchain Background

What problem does a layer-2 blockchain solve?

When it comes to blockchains there is a technical problem called the blockchain trilemma.

The blockchain trilemma refers to the challenge of achieving a balance between three fundamental properties in a decentralized blockchain system. These three properties are:

1. Decentralization:

   • Definition: The distribution of control and decision-making across a network of participants, often achieved through a distributed consensus mechanism.

   • Importance: Decentralization is a key principle of blockchain technology as it enhances security, censorship resistance, and trustlessness.
     

2. Security:

   • Definition: The protection of the blockchain system against various attacks, ensuring the integrity and immutability (ability to prevent it being changed) of the data.

   • Importance: Security is crucial to prevent unauthorized access, double-spending, and other malicious activities that could compromise the trustworthiness of the blockchain.
     

3. Scalability:

   • Definition: The ability of the blockchain network to handle a large number of transactions per second (TPS) or to scale in terms of computational resources as the user base grows.

   • Importance: Scalability is essential for accommodating a higher volume of transactions, reducing confirmation times, reducing transaction fees, and enabling widespread adoption of blockchain technology for various applications.

The blockchain trilemma suggests that it is challenging to maximize all three of these properties simultaneously. Improving one aspect often comes at the expense of the others.

A Layer-2 blockchain’s primary purpose is to improve scalability and reduce transaction costs without compromising decentralization and security. Unfortunately, all Layer-2 blockchains still compromise some level of decentralization and security, but as time goes on and the tech behind them improves, they are getting much closer to solving the blockchain trilemma.

Types of Layer-2 Blockchains

Now that we understand what a Layer-2 blockchain is, let’s look at the different types.

1. State Channels

   State channels enable participants to conduct multiple transactions off-chain while only settling the final state on the main blockchain. Participants sign and exchange transactions among themselves without requiring on-chain verification for each step.

   • Use Cases: Micropayments, gaming transactions, and applications requiring frequent interactions between participants.

   • Examples: Ethereum Raiden Network, Bitcoin Lightning Network
     

2. Sidechains

   Sidechains are separate blockchains that can operate independently but are “pegged” to the main blockchain. Assets can be moved between the main chain and the sidechain, allowing for off-chain transactions with the option to settle back on the main chain.

   • Use Cases: Scalable smart contract platforms, private chains for specific applications.

   • Examples: Polygon’s Proof of Stake Network, Bitcoin’s Liquid Network
     

3. Plasma

   • Concept: Plasma is a framework for creating scalable blockchains with their own consensus mechanisms linked to the main blockchain. It allows for the creation of "child chains" with their own rules, and only a summary of the child chain's state is periodically submitted to the main chain.

   • Use Cases: Decentralized applications (dApps) and asset tokenization.

   • Examples: Ethereum Plasma, OPN (Formerly OmiseGO)
     

4. Rollups

   Rollups bundle multiple transactions off-chain and submit a single proof (rollup) to the main blockchain. There are two main types: ZK Rollups (Zero-Knowledge Rollups) and Optimistic Rollups.

   • ZK Rollups use zero-knowledge proofs to validate transactions without revealing their details.

   • Optimistic Rollups assume transaction validity initially and rely on a dispute resolution mechanism.

   • Use Cases: Decentralized Finance (DeFi), non-fungible tokens (NFTs), and general-purpose scalable applications.

   • Examples: Polygon’s zkEVM, Optimism, Arbitrum
     

5. Hybrid Solutions

   Some Layer 2 solutions combine elements of multiple approaches. For example, projects may use state channels for certain interactions and rollups for others, offering a flexible and adaptable scaling strategy.

   • Use Cases: Versatile scaling solutions that can accommodate various types of applications.

All of the options currently being discussed within the ApeCoin DAO are focused on Layer-2 Rollups or option #4. This is likely because Rollups currently dominate the Layer-2 market and are often accepted as the most optimal scaling solution for Ethereum to-date.

Zero Knowledge vs. Optimistic Rollup

To fully understand Rollups it’s important to know the difference between the two most widely-used versions of a Rollup. Both the ZK Rollup (Zero-Knowledge Rollup) and Optimistic Rollup share the goal of reducing transaction fees and increasing throughput, however, they differ in their approaches to achieving this objective.

ZK Rollup (Zero-Knowledge Rollup)

Alright, bare with us here but to understand a ZK Rollup you will need to have a basic understanding of a Zero-Knowledge Proof (ZKP).

Zero-Knowledge Proofs

A Zero-Knowledge Proof uses a mathematical proof to enable a prover to demonstrate the truth of a statement without revealing any additional information other than the statement's validity.

When used in a Zero-Knowledge Rollup, it means that the validity of the transactions that are being submitted can be proven without revealing the details of each transaction, thereby providing a high level of privacy.

Basically, it’s mathematical magic that compresses (rolls-up) transactions and ensures that the transactions remain private all the way up until they are “submitted” back to the layer 1 blockchain. If you are nerds like we are and want to dive deeper into ZKPs you can here.

Data Availability

As we briefly mentioned before, in a ZK Rollup, the transaction data is not published on the blockchain directly. Instead, it is stored off-chain in what is known as a "rollup chain," while only the cryptographic proof of the validity of the transactions is posted on the main blockchain.

Security and Finality

ZK Rollup’s achieve a high level of security through the cryptographic proofs. Once a proof is submitted and verified, the results are considered final, providing a strong guarantee of the correctness of the transactions and enabling instant withdrawals back to the L1.

Optimistic Rollup

Optimistic Rollups take an optimistic approach to transaction execution. Transactions are initially assumed to be valid, and only if a dispute arises will the system fall back on the underlying blockchain for a resolution. Optimistic rollups use a dispute-resolution system instead of mathematical proofs (ZKPs) to validate state.

Data Availability

Unlike a ZK Rollup, Optimistic Rollups publish the transaction data directly on the main blockchain. The main chain serves as a "data availability layer," ensuring that the information is available for anyone who wants to validate the transactions.

Dispute Resolution

In case of a dispute, anyone can submit a fraud proof to challenge the validity of a transaction. Typically there is a challenge period (generally 7 days) with which this is possible. This triggers a process where the system verifies the contested transactions, and if they are found to be invalid, the state is rolled back. This also means that unlike ZK Rollups, withdrawal times from the L2 back to the L1 can take days.

Additional Components

There are a few additional terms and components of Layer-2 chains that are important to understand.

EVM Equivalence

"EVM Equivalence" refers to compatibility with the Ethereum Virtual Machine (EVM). The Ethereum Virtual Machine is a crucial component of the Ethereum blockchain. It is a runtime environment for executing smart contracts, which are self-executing contracts with the terms of the agreement directly written into code.

When we talk about EVM equivalence in the context of other blockchain platforms or Layer-2 solutions, it means that these platforms or solutions strive to be compatible with the Ethereum Virtual Machine. In practical terms, this compatibility implies that smart contracts written for the Ethereum blockchain can potentially be executed on these other platforms without modification.

The following is a good outline of the varying levels of EVM Equivalence by Jarod Watts:

• Type 1: Fully Ethereum equivalent, i.e. they do not change any part of the Ethereum system to make it easier to generate proofs. ZK proofs take several hours to generate in this kind of system.

• Type 2: Fully EVM-equivalent, but changes some different internal representations like how they store the state of the chain, for the purpose of improving ZK-proof generation times.

• Type 2.5: Fully EVM-equivalent, except they increase the gas costs of some operations to "significantly improve worst-case prover times".

• Type 3: Almost EVM-equivalent ZK-EVMs make sacrifices in exact equivalence to further enhance prover times and simplify EVM development.

• Type 4: High-level language equivalent ZK-EVMs compile smart contract source code written in a high-level language to a ZK-SNARK-friendly language, resulting in faster prover times but potentially introducing incompatibilities and limitations.

When it comes to ZK Rollups, full EVM equivalence can be very challenging due to the complexity of the ZK proofs and the time needed to generate these proofs. All current ZK Rollups tend to fall into type 3 or 4 while striving to become type 2.

When it comes to Optimistic Rollups, it’s less challenging to obtain true EVM-Equivalence therefore Optimistic Rollups tend to be type 1/2.

Sequencers

Rollups typically use a sequencer that is responsible for ordering and sequencing transactions before they are submitted to the main chain. It ensures that the transactions are processed in the correct order and that the resulting state transitions are valid.

Sequencers introduce some centralization risk, however, they also provide a mechanism for operators to earn “Sequencer Fees”. In the event that ApeChain is running it’s own sequencer this could act as a source of revenue for the ApeCoin ecosystem.

Fin.

To summarize, ZK Rollups prioritize privacy and achieve finality through cryptographic proofs. These cryptographic proofs require more expensive hardware and add complexity and cost, however, they enable instant withdrawal times.

Optimistic Rollups take an optimistic approach, revealing transaction details on-chain and relying on a dispute resolution mechanism for security. This saves a lot of costs for data submission but because the transactions need to be validated during the dispute period, withdrawals can take days.

Each approach has its advantages and trade-offs, and the choice between them may depend on the specific use case and priorities of the blockchain network.

The Layer-2 Wars

Now that we understand the differences between the Layer-2 options, let’s dive into more details on each solution. Each option offers the ability to create a custom version of its stack (a copy) designed specifically for ApeCoin, alternatively the L2s can be used as-is by bridging assets directly to them.

To compare the chains across a consistent framework we are using four properties, a risk analysis done by L2Beat.com, and one general statement based on our research for each.

Total Locked Value (TVL): The sum of all canonically bridged, externally bridged, and natively minted tokens, converted to USD.

Avg. Daily Transactions: Average number of transactions on a daily basis for each chain since they launched.

Avg. Transaction Gas Fee: A rough estimate of gas fees required for a basic ETH transfer and a smart contract ERC-20 spending approval.

Github Stats: Simple statistics on Github for each chain to get a general sense of the developer community.

Polygon zkEVM

TVL: $106M

Avg. Daily Transactions: 33k

Avg Transaction Gas Fees:
Transfer (0.00003927ETH, $0.09)
Approval (0.00009ETH, $0.20)

Github Stats:
315 followers (0xPolygon)
740 followers (zkEVM)
380 stars
97 repository mentions

Risk Analysis (L2Beat )

Sequencer Failure

The Sequencer is currently a central point of failure for Polygon’s zkEVM. According to L2Beat research, “There is no mechanism to have transactions be included if the sequencer is down or censoring. Although the functionality exists in the code, it is currently disabled.”

Research Finding

Polygon excels at building strong technology and their business development initiatives; including their ability to establish and foster relationships with big brands in the Web2.0 industry.

Optimism

TVL: $3.7B

Avg Daily Transactions: 173k

Avg Transaction Gas Fee:
Transfer (0.00004ETH, $0.10)
Approve (0.00006ETH, $0.14)

Github Stats:
1.9k followers
4.7k stars
922 repository mentions

Risk Analysis (L2Beat)

State Validation

The state validation system is still under development which means that the system can technically permit invalid state roots. That said, all state is auditable and visible on-chain.

Upgradeability

The systems code can be upgraded at any time without delay. This means that the code that secures the system can be changed arbitrarily and without notice. However, the project has strong decentralized governance and updates are made by opensource contributors.

Proposer Failure

Only the whitelisted proposers can publish state roots on to Ethereum, so in the event of failure all withdrawals would be frozen.

Research Finding

Optimism puts significant emphasis on open source technology, non-plutocratic governance, public goods funding, and has one of the healthiest developer ecosystems in the industry.

Arbitrum

TVL: $7.3B

Avg. Daily Transactions: 331k

Avg Transaction Gas Fee:
Transfer (0.00006ETH, $0.14)
Approve (0.00009ETH, $0.22)

Github Stats:
860 followers
1.9k stars
815 repository mentions

Risk Analysis (L2Beat )

While Arbitrum has not mitigated all centralization risk, over recent years, it has made significant progress on decentralizing most of the system. This has been accomplished via deliberate technology decisions such as creating a mechanism where anyone can propose state in the event of proposer/sequencer failure, and the setup of a “security council” which acts independently and oversees certain operations of the system.

Research Finding

Arbitrum is the most developed Rollup from a technology perspective in the industry.

Wait, Do We Need an ApeChain?

Typically, the establishment of a standalone blockchain becomes necessary only when the demand for decentralized applications (dApps) and transaction throughput reaches a point where the migration of all activities to its own dedicated chain is justified. Examples include Ronin for Axie Infinity and Flow for CryptoKitties/NBA Top Shots. Both of these dApps were so popular that they were bogging down the entire Ethereum network and needed to move to their own chain to scale and keep up with the demand.

Under the current conditions, ApeCoin experiences fairly minimal activity, and there isn't a very compelling scalability need for a separate ApeChain. One factor to consider is that ApeCoin is currently struggling with an adoption problem, not a scaling problem, therefore a standalone chain may actually make the adoption problem harder due to the added complexity of on-boarding developers, building infrastructure, and incentivizing users to use the new blockchain.

A potential pragmatic approach towards both enhancing the scalability of the ApeCoin ecosystem and improving the UX through faster/cheaper transactions may involve simply bridging ApeCoin to an existing Layer-2 solution.

Bridging ApeCoin is a standardized process that would require only a fraction of the costs and resources when compared with launching a standalone chain. In addition, by using an existing Layer-2 it’s easier to leverage it’s current developer community, tools and infrastructure, and can act as an intermediary step toward a standalone chain.

Summary

Both Polygon zkEVM and Optimism have their trade-offs. Polygon zkEVM has a slightly more modern and complete technology stack and a proven track record of strong business development and growth. Optimism technology stack still has aspects under development which introduce some centralization risk, however, it has a strong developer ecosystem, emphasis on opensource, and built-in public goods funding initiatives. Outside of Polygon zkEVM and Optimism, Arbitrum offers a balance of strong technology, a healthy developer ecosystem, and a proven track record with a number of large gaming projects already using it.

However, a topic that is not being actively addressed on the DAO is if there truly is a need for an ApeChain at this time. In addition to launching a standalone L2 ApeChain, there are other potential options that may be a viable intermediate solution to the ApeCoin scaling problem, specifically, a simple bridge of ApeCoin to any of the aforementioned L2s.

Polygon zkEVM

• Semi Centralized Governance

• Strong Business Development

• Strong Technology

Optimism

• Some Aspects of Technology Still Under Development

• Emphasis on Opensource / Public Goods Funding

• Thriving Developer Ecosystem

Arbitrum L2 or L3

• Most Used L2 (Highest TVL & Daily Transactions) / Proven Track Record

• Strong Technology

• Thriving Developer Ecosystem

ApeCoin Bridge to One/Many L2’s

• Ability to Leverage Existing Developer Community and Infrastructure Instead of a Cold Start

• A Fraction of the Complexity and Cost of Deploying a New Chain

• Solves the Scaling Problem in the Short-to-Medium Term

Want More?

• Join the conversation on the ApeCoin DAO forum: Polygon zkEVM here and Optimism here and her.

• Build on Optimism

• Build on Arbitrum

• Build on Polygon zkEVM

• Learn more about token bridging
  

Sources

https://mirror.xyz/msfew.eth/JJudP_Kf-IS6VhbF-qU0BUor1Ap6SFEb0TzYOHZ34Rc
https://twitter.com/optimismFND/status/1727105321817219488
https://www.galaxy.com/insights/research/optimism-arbitrum-pt2-decentralization
https://community.optimism.io
https://wiki.polygon.technology
https://docs.arbitrum.io
https://l2beat.com

About Other Page

The Universal Avatar Profile. Earn rewards and flex achievements across the open metaverse.

Learn more at other.page.

EIP-6551 is an Ethereum improvement proposal created by the Future Primitive team in collaboration with many contributing developers. The standard proposes a method for adding smart contract accounts to every ERC-721 NFT. These accounts are referred to as Token Bound Accounts.

We believe this proposal will be one of the most impactful innovations in Web3 for a number of reasons:

1. It enables every ERC-721 NFT to own/hold an arbitrary amount of any other token (ERC-20, 721, 1155, etc.).

2. It doesn’t require any changes to existing NFTs or any new NFT contracts to be deployed.

3. It “automagically” adds these accounts to all existing NFTs without the NFT owner needing to perform any transactions (more on this later).

4. It is practically infinitely extensible.

5. It already supports Account Abstraction (ERC-4337) – read more about Account Abstraction in our previous post.

6. It enables new “stateful” use cases for NFTs, including “sci-fi like” concepts such as autonomous on-chain AI agents (more on this later).

7. It's a major step in the evolution of NFTs taking them from simple PFPs to Tokenized Avatars.

How does it work?

TL;DR - Skip to the interesting use cases

Token Bound Accounts (TBAs) are added to Ethereum via a registry contract that manages the deployment of each account. Every account uses a Proxy (ERC-1167) and an implementation Smart Contract.

The account Smart Contract is relatively simple, apart from a few administrative functions including permission management, a time lock, and nonce management, an account has one primary function executeCall. This function is able to execute any function on any contract. For example, transferFrom(from, to, tokenId) for an ERC721. executeCall can only be called by the owner of the NFT that the account is attached to or addresses permissioned by the owner.

Automagic Accounts

Due to the manner in which addresses are generated for new NFT accounts, the account can exist before it is actually deployed (”initialized”). This is because NFT account addresses are derived from properties which are already known including the Account implementation address, the NFT contract address, NFT token ID, and a salt. These accounts come enabled with deposit capabilities by default, however, in order to enable withdrawals from an account, a transaction must be submitted to initialize the account. Fortunately, this transaction can be performed by any external account and has a fairly low gas cost.

Downsides, Risks, and Mitigation

The following outlines some downsides/risks to Token Bound Accounts and the ways in which these risks are addressed.

1) Gas Costs

Thinking about composable NFTs, the first thought that comes to mind is the inherent added gas costs. Many previous attempts at composable NFTs (e.g. ERC-998) introduced additional gas costs to create NFTs with relationships to other NFTs.

For end-users, EIP-6551 mitigates added gas fees by treating composability the same as any other account. e.g. to “bind” an NFT to another, it costs the same as a typical token transfer.

For developers, gas costs are reduced by making use of the ERC-1167 minimal proxy pattern. This approach enables inexpensive deployment of clone contracts instead of deploying NFT contracts multiple times, which would require significant gas.

2) Delegated Permissions

The default permission capabilities within TBAs is to require all actions to be performed by the owner of the associated accounts parent NFT. There are often times that it’s critical to be able to delegate the management of specific NFTs or accounts to alternate wallets.

To account for this scenario, TBAs allow permissions to be set by the primary owner of the NFT to enable any address to manage the TBA on the primary owners behalf.

Another common use case, especially within communities with high-value NFTs such as Bored Apes, is the use of wallet delegation services like Delegate.cash and Warm.xyz. Our team created a TBA delegate extension to allow delegated hot wallets to manage an NFT’s TBA on behalf of a cold wallet.

3) Front Running

One of the main issues that occurs when NFTs become stateful (have relationships or ownership over other assets) is the risk of these assets being “front run” before a transfer occurs. This can occur due to Maximal Extractable Value (MEV) .

Example: As an owner of an NFT with a bound account, I could deposit several high-value NFTs into the NFTs account. I could then list my NFT for sale at a price equivalent to the NFT + all of the assets in its account. Once the NFT sale occurs, I can submit a transaction to withdraw all of the NFTs with a premium gas fee. Due to MEV, my transaction could be included in the same block that the sale occurs. The end result is I received my payment for the original amount, however, the buyer receives the NFT with an empty account.

To mitigate this issue, a time lock has been included in the account Smart Contract implementation. This simple mechanism enables a marketplace to require a seller to “lock” the account for several blocks prior to a sale, there-by preventing “front-running” scenarios.

In addition, the Token Bound team is working directly with major marketplaces, such as OpenSea, to create safeguarding mechanisms to further help with issues such as pre-existing token approvals.

4) Malicious Implementations

Using proxy contracts to create accounts mitigates gas and enables “auto-magic” NFT accounts, however, it also introduces a somewhat less obvious risk. As an NFT owner, I have permission to update/replace the underlying implementation Smart Contract for my NFTs account. As a hacker, this could allow me to introduce a “back door” to my NFTs Account, with the ability to withdraw assets from an account even after I no longer own the associated NFT.

To mitigate this issue, the Token Bound team introduced an AccountGuardian registry which contains an allow list of trusted implementation addresses. This registry is checked before an NFT’s Account implementation can be upgraded. Unfortunately, this introduces a small level of centralization to the upgradability of Token Bound Accounts. Ideally, this AccountGuardian registry will eventually be managed by several impartial and trusted third-parties.

Exploring Use Cases

Okay, so Token Bound Accounts are technically cool but what can we actually do with them?

There are many use cases for Token Bound Accounts (TBAs), but the most prominent ones are:

• NFT composability

• On-chain reputation

• Game avatar inventories

Composable NFTs

Composability is not a new concept in the NFT world, there have been many impressive composable NFTs and standards over the years. However, Token Bound Accounts change the composable NFT landscape due to one key differentiator–they do not require any changes to the existing ERC-721 standard.

Examples of composable NFT predecessors:

• Kitty hats

• ERC-998

• RMRK

• Moonstream Inventories

• Our Token Bound Tokens:

  • ERC-721

  • ERC-1155

Developers can use TBAs to create NFTs that serve as building blocks for larger applications. For example, Staple Verse, one of the first projects to make use of TBAs, is building an entire ecosystem around their primary NFT, Sapienz. Sapienz are NFTs with TBAs that enable the display of clothing, gear, and achievements within the Staple Verse “Workshop”.

Another practical example of composability outside the realm of the current digital artwork/web3 space is in logistics and manufacturing. For a simple example, imagine a car NFT with its own account. The account holds records about insurance, registration, sales tax, manufacturing data, part recalls, and more.

Unlike previous composable NFT examples, TBAs can hold nearly an unlimited number of assets, similar to a standard externally owned account (EOA) and are nearly infinitely extensible making TBAs extremely impactful for NFT composability.

On-Chain Reputation

Another compelling use case for TBAs is in the realm of on-chain reputation systems.

Let's consider the scenario of a loyalty program implemented through NFTs. With TBAs, it becomes possible to track and record all the contributions made by individuals to a DAO, organization, or similar entities. By sending soul/token-bound NFTs to the wallet associated with a loyalty NFT, it allows for seamless tracking of loyalty-related activities.

For example, imagine you are a devoted fan of a musician. You acquire an NFT album from that artist. For each concert you attend, you are able to redeem a proof-of-attendance token that is deposited into the album NFT’s TBA. This mechanism not only enables on-chain tracking and verification of loyalty but also enhances the value of the original album NFT over time. The artist could then reward loyal fans who attend every concert by simply tracking the contents of the NFT’s account.

Thanks to TBAs, it also becomes feasible to airdrop NFTs to existing NFT holders without knowledge of their wallet addresses (think back to those automagic account addresses). This functionality opens up new possibilities for fostering brand loyalty and creating engaging experiences for users in a transparent and secure manner.

Character Inventories

Our personal favorite use case for TBAs is game character inventories.

When playing a game, there is a significant distinction between the player and the avatar. Most players create numerous avatars with unique attributes, skills, achievements, in-game reputation, and more. TBAs enable every NFT to have its own character inventory and thus, its own agency that exists separate to the owners wallet (read our previous article on Avatar Centered Design).

Inventories for Existing PFPs

The CR3 Labs team recognized early-on that the current generation of NFT “PFPs” will ultimately evolve into game Avatars that become the center of the entire ecosystem. We call these evolved PFPs Tokenized Avatars. With the recent release of TBAs, the notion of Tokenized Avatars as game characters with inventories, a social presence, DEFI staking mechanisms, and more is beginning to surface. These avatars carry with them reputation, stats, achievements, and even provide access to IRL events.

As these assets evolve, it’s becoming increasingly important to have a central location to manage them.

Other Page

Our upcoming product release, Other Page, enables character inventory management for all Yuga Labs assets, as well as future ally projects.

By combining our Token Bound Token standard and a custom TBA delegation extension , we are able to bring on-chain inventory management to every existing NFT in a safe and secure way.

Having a central location to manage these assets is critical for several reasons:

1. Comprehensive NFT Profiles: Character profiles allow anyone to dive into the immersive world of Tokenized Avatars by showcasing their lore, licensing deals, game achievements, guild associations, and the collection of items they possess. This brings depth and context to NFTs like never before.

2. Seamless Ownership Transfer: When it's time to sell or transfer an NFT, Character profiles ensure a smooth transition. Every aspect of your NFT, including its associated in-game items and achievements, will seamlessly accompany it to its new owner or a different wallet without having to execute batch transfers of all associated items.

3. Enhanced Interoperability: Other Page harnesses the power of on-chain inventories to enable interoperability between games and provides a central location to define which items are equipped both visually and on-chain. Suppose you earned a specific set of gear in game "A" and want game "B" to recognize and equip it. With Other Page, you can effortlessly communicate your preferences across different gaming experiences, breaking down the barriers between virtual worlds.

4. Monetization: As Tokenized Avatars become ubiquitous, assets with significant IP, reputation, and equipped items will be sought after. This opens the door for new paradigms to license IP and even lend out access to individual slots within inventories.

View a live demo of a Tokenized Avatar:

https://app.apes.page/0x13f6e23a17a47603cca12cb3d2d48ce2926420e4/2338

Marketplace Support

“Stateful” NFTs with TBAs adds a new dimension of complexity to marketplaces. There are two primary challenges:

1. Price discovery: the current methods for price discovery rely on auction mechanics, rarity trait analysis, or simple floor price appraisal efforts. TBAs add a unique challenge when it comes to pricing assets not only based on the associated items in its account, but also the more ambiguous associated clout and reputation.

2. NFT immutability: Existing NFTs can only be managed by the original creator of the Smart Contract. In addition they are often intentionally immutable. This means that updating the visual display and metadata contextually based on the assets within the NFTs TBA is often not possible.

While the Token Bound team is working directly with marketplaces to promote support of NFTs with TBAs, it will likely take time for all marketplaces to adapt and the associated complexities to be resolved.

To overcome the second issue mentioned above, our team developed a novel approach to attaching new metadata to existing tokens through the use of our Token Bound Tokens. These assets can be used to add context and additional metadata, including updates to the animation_url (a metadata property that can be rendered as a video or embedded website iframe) to display the contents of an NFTs TBA and other associated information directly inside marketplaces.

See it in action on OpenSea:

https://testnets.opensea.io/assets/goerli/0xc9387f3c277fcef5e9c79113c54a00113bd72973/2338

Whats Next?

Autonomous AI NPCs

Web3 games, particularly massively multiplayer online games (MMOs), often suffer from what is known as the "empty world" problem. This refers to the lack of an engaging experience when there are few players logged-in due to limited player interactions and non-playable characters (NPCs) that lack depth and autonomy.

A potential solution to this problem lies in the combination of TBAs and artificial intelligence (AI). By integrating AI-powered autonomous NPCs with TBAs, the gaming experience is significantly enhanced. For instance, imagine encountering a shopkeeper NPC with a rich AI-driven backstory and an on-chain inventory, allowing you to purchase unique and valuable in-game items directly from the NPC. Each interaction with this NPC could morph its personality and affect the prices at which it offers items. Have a friendly interaction? Maybe the shopkeeper offers a discount the next time you visit.

The development of autonomous NPCs supported by AI and TBAs is not as far-fetched as it may appear, with many experiments already underway. The convergence of these technologies holds immense potential for creating immersive and engaging gaming worlds.

In addition to game NPCs, more generic “Virtual Beings” such as VTubers, AI Instagram and Twitter profiles all capable of earning their own income are also possible. In fact, according to Messari Research, “The global Vtuber (Virtual YouTuber) market alone was valued at USD $2.18 billion in 2022 and is expected to expand at a CAGR of 6.4% over the next seven years.”

If you're interested in exploring this concept further, we recommend reading a thought-provoking article on "Virtual Beings" by 1kx. The article delves into the topic extensively, providing valuable insights and analysis.

Supporting EIP-6551

To ensure EIP-6551 becomes a finalized Ethereum standard (ERC-6551) you can contribute to the relevant discussions on the forum. Additionally, showing your support and advocating for its official passage as an ERC can help drive its implementation and adoption within the Web3 community.

Using TBAs

• Create your own NFT accounts and read the docs on the Token Bound site.

• Check out and support the Sapienz project.

• Sign up for the Beta release of Other Page to level up your PFP to a Tokenized Avatar.

About Other Page

The Universal Avatar Profile. Earn rewards and flex achievements across the open metaverse.

Learn more at other.page.

What is Account Abstraction?

Account Abstraction is a new Ethereum standard that proposes a different type of account based on a smart contract instead of the former public/private key pair. This novel approach also referred to as "wallet abstraction" or "smart accounts", enhances the versatility of Ethereum accounts by segregating the account control logic from the account's public address. Account Abstraction is predicted to enhance the overall usability of Ethereum, thereby facilitating the next wave of user adoption.

What problem does it solve?

Account Abstraction will enable engineers and companies to drastically simplify the user experience of Ethereum. In addition, accounts will be more dynamic, making complex functionality easier to create.

Some examples and use cases include:

• Ability to create multifactor accounts, where a single account can have many owners and arbitrarily complex permission controls.

• Ability to sign transactions with phone thumbprint or facial recognition, reducing complexity for wallet management for end users (e.g. no seed phrase necessary).

• Ability to recover lost wallets via trusted third-party services or friends and family.

• Ability to streamline multiple transactions into a single bulk transaction, similar to the way a credit card works.

• Removes the requirement to have ETH in order to pay for transactions via a method called “sponsors” (more on this later).

How it works

Ethereum accounts currently work by using a public/private key setup called an externally owned account (EOA). This setup requires every user of Ethereum to keep track of a seed phrase (private key), all of the associated public addresses, and manage the execution and fees of a transaction.

How transactions currently work:

Account Abstraction lifts the requirement of maintaining keys and addresses up to only sophisticated users or organizations by introducing Bundlers and a new type of pseudo-transaction called a UserOperation.

Account Abstraction is based on a standard called ERC-4337. ERC-4337 defines a way to use a Smart Contract as an account instead of the current EOA model. Using Smart Contracts for accounts has been accomplished in the past with contracts such as the Gnosis Safe; however, ERC-4337 outlines a framework to scale this concept to all Ethereum users.

The primary components of ERC-4337 include UserOperations, EntryPoint Smart Contracts, Paymaster Smart Contracts, Factory Smart Contracts, Contract Accounts, and Reputation Scoring and Throttling. Luckily for end-users, all of these components are primarily handled by “Bundlers”.

Bundlers

Bundlers are a service run by trusted third parties that make use of EntryPoint smart contracts to execute UserOperations. Bundlers are responsible for handling all of the logic of Account Abstraction. A Bundler is able to execute transactions on behalf of users in a permissionless manner. With the inclusion of the PayMaster smart contract a bundler is even able to pay for transaction fees on a users behalf. To learn more about Bundlers checkout the article written by Stackup.

UserOperation: A type of psudeo-transaction, which defines the action a user is wanting to take. Things like “transferring funds” or “buying an NFT”. UserOperations are sent to a new MemPool which acts as a queue prior to execution.

EntryPoint: A smart contract that acts as an entry point for UserOperations. Its main function is to verify and implement UserOperations, and it can communicate with other contracts like Paymasters and Factories to assist in transactions.

Paymasters: Smart contracts that have the ability to pay for transaction fees on behalf of users.

Smart Contract Accounts: Smart Contracts responsible for managing a user's account.

Factories: Smart contracts that are able to create new smart contract accounts.

Reputation Scoring and Throttling: Measures for reputation scoring and throttling mechanisms to deter abuse and denial-of-service (DoS) attacks on entities like Paymasters and Factories. These measures require entities to stake a specific amount of ETH to guarantee that their actions do not compromise the validity of other UserOperations.

Thinking of Smart Contracts as wallets

Shifting the paradigm of an account from externally owned keys to Smart Contracts opens creates numerous possibilities for what an account truly is.

One interesting example is to think of an NFT as an “account”. Doing this enables agency for inanimate objects such as game avatars or even AI game NPCs. Last year, our team created a token standard called a token-bound-token which enabled an NFT to own other items. You can view a live example of this on OpenSea called FungyProof Cases.

EIP-6551 takes this a step further creating the concept of a token “inventory” which would allow a token to hold any number of other tokens similar to a game characters bag or inventory.

We believe this concept will be a significant theme in the coming years as blockchain gaming continues to expand and have several initiatives in this area:

• Avatar Centered Design

• Token Bound Tokens

• Ape Page

What’s next?

The adoption of Account Abstraction is gaining momentum, with several contracts already available on various chains including Polygon, Optimism, Arbitrum, zkSync, and more. On Polygon, 145 accounts have been created with a little over 1,000 UserOperations according to NiftyTable’s Dune analytics Dashboard.

One of the significant benefits of Account Abstraction is improved security and a reduction in lost funds. Based on onasouazan's analysis, nearly $25,586,868 worth of NFTs have been stolen to date. Account Abstraction offers a solution to mitigate these lost funds in the future, providing a safer and more secure environment for users.

Account Abstraction is an exciting development in the Ethereum ecosystem that promises to provide significant benefits to users, Dapps, and the network. With more platforms expected to adopt the technology soon, Dapps and wallet interfaces/mobile apps can provide a more seamless and user-friendly experience for their users. Additionally, we can expect to see innovative applications emerge as more developers explore the possibilities of the technology. Overall, Account Abstraction has the potential to revolutionize the way we interact with the Ethereum network and pave the way for a more secure and efficient future.

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The NFT Lore Layer (alternatively referred to as “Layer 2 NFTs”) is a conceptual framework to describe any community-driven project that builds off of existing NFT intellectual property (IP) and leverages pre-existing community enthusiasm to create a sub-community with a unique culture and identity. Lore Layer projects are composed of the following key elements:

1. On-chain assets: The project includes one or more on-chain NFT collections that act as the project's foundation. There are typically various types of NFTs, including PFPs, ticketing/access (factions), pets, items, and achievements.

2. Storytelling: Storytelling is the fundamental component of a Lore Layer project. The project's brand and NFTs are designed to tell a story that engages users and creates a sense of purpose, community, and longevity.

3. Sub-community: The project is focused on creating a sub-community within a broader ecosystem by leveraging existing intellectual property (IP). This sub-community is centered around its NFT collections and is built on shared interests, values, and goals.

4. Multifaceted: The project is all-encompassing and includes some or all aspects of a lifestyle brand, storytelling, social media community, IRL events, and gaming.

By leveraging pre-existing community interest and enthusiasm, building off of existing NFT IP, and creating a compelling brand that includes storytelling, social media, and gaming, Lore Layer projects are unlike any entertainment brand that has come before. These projects are creating vibrant and sustainable ecosystems that are highly valuable and engaging for their user base.

Evolution of the Lore Layer

The definition of the Lore Layer is evolving, but it can be traced back to the launch of one of the first NFTs, Crypto Kitties, in 2017. After the initial launch of Crypto Kitties, the Dapper Labs teamed explained the licensing rights of all kitty holders via their NFT license. This license enabled third-party projects to leverage the Crypto Kitty ecosystem and community to launch their own projects, provided the holders made $100,000 or less. This brought about hundreds of side projects and derivatives.

However, the true catalyst of the Lore Layer came later with 10k PFP NFTs, specifically, the Bored Ape Yacht Club (BAYC) created by Yuga Labs. After the launch of BAYC, a project which granted full license rights to its holders, projects leveraging the BAYC name and individual NFTs exploded. Due to this, the best example of Lore Layer traction exists within the Yuga Labs ecosystem. Harry Liu of Forj Research did an excellent job outlining IP usage across the Yuga Labs ecosystem, as seen in a recent Tweet: Harry Liu @ Forj on Twitter.

While NFT IP licensing set the stage for the Lore Layer, the Lore Layer has since become a large branch on the evolution tree of standard 10k PFP projects that extends far beyond leveraging underlying IP.

After the initial launch of a new PFP or NFT, projects recognized the value of providing ongoing utility for their token holders. This utility came about through storytelling, community, and gaming.

Specifically, within the Yugaverse, these projects are further driven by efforts from The Otherside to eventually integrate their projects directly into the game via the ODK (learn more about The Otherside in our previous post).

Check out lorelayer.xyz to view a complete list of current Otherside-based Lore Layer projects or to submit a new project.

Example Projects

10KTF

10KTF, one of the most prominent Lore Layer projects recently acquired by Yuga Labs, set the stage for BAYC/MAYC IP leveraging with the launch of their NFT “gear.” 10KTF gear can be minted with your NFTs image embedded in the asset. Outside of their gear, 10KTF is developing an enormously complex story and an NFT-gated mission/questing system, among many other elements.

Non-Yugaverse

Beyond the Yugaverse, there are several other ecosystems with a burgeoning Lore Layer, including but not limited to:

• Forgotten Runes

• Nouns

• TreasureDAO (Specifically, Smolverse)

• Azuki

The Role of Gaming

Recent advances in gaming technology have streamlined both game development and gameplay. Nvidia and Epic games' cloud gaming efforts, such as GeForce NOW and Pixel Stream, bring high-end gaming graphics and gameplay to browsers and mobile devices. Simultaneously, frameworks such as Unreal Engine 5 and Unity make AAA game development significantly more accessible. This technology has the potential to dramatically impact the gaming industry, allowing the web's capabilities to merge with high-end graphics gaming and enabling smaller companies to build incredible gaming experiences on a budget. With gaming more accessible, it is now easier than ever to merge Blockchain, gaming, storytelling, lifestyle brands, and community into a single cohesive experience.

Redefining the “Platform”

Web3 companies that take advantage of The Lore Layer framework are redefining what it means to be a “platform.” Historically, digital platforms, such as Facebook or Steam, enable third-party companies to tap into the platform's network effects at the expense of being tightly coupled to and beholden to the platform itself. Unfortunately, this often leads to the loss of control over user data and privacy, as well as having limited ability to customize the user experience.

Unlike previous platforms, Lore Layer projects can leverage existing communities and network effects without being beholden to a specific platform. Ultimately, this setup is a win-win scenario, enabling parent brands to expand their reach (and revenue in the form of NFT royalties) while simultaneously providing external projects the freedom to operate and expand as they see fit.

Unique to Web3 companies is the ability to garner dedicated fans and engagement through the use of tokenomics and ownership over their assets with NFTs. A mental model to describe this new paradigm is the Fandom Flywheel.

The Lore Layer framework exponentially affects the Web3 Fandom Flywheel, as each additional project builds on top of the original IP. This can also occur at any number of depths. For a real-world example take can look at:
Mutant Ape Yacht Club —> The Mutant Cartel Hounds —> Lil Hounds.

Ultimately, the Lore Layer has the potential to change the way we think about digital platforms and provides a small glimpse into the future of how a decentralized Metaverse could one day operate.

Lore Layer Analytics

The following analytics cover projects listed at lorelayer.xyz.

Analytics as of Mar 28, 2023

• Total trade volume: 23,013 ETH

• Average Twitter Followers: 47,479

• Average Active Discord Members: 1,846

• Average Floor Price: 0.204ETH

View the full analytics dashboard

Getting Involved

• Join one of the projects communities listed at lorelayer.xyz.

• Know a project we didn’t mention? Submit it.

• Create a new Lore Layer project.

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The Need for Avatar-Centered Design

Human-Centered Design (HCD) focuses on understanding human behaviors and emotions to inform the design process. As the metaverse/web3 populates, we need to extend a similar level of understanding to the avatars–“PFPs”–we create in the virtual world. Let’s call this Avatar Centered Design (ACD), and it’s a response to the expanding life and context of avatars, aka Avatar Agency.

Trends Creating This Need

Avatar-Centered Design is important for the metaverse and web3 for several reasons:

• Historically an “avatar” was associated only with in-game characters–at least in the “mainstream”–but we’re now seeing them applied across work platforms, social networks, online games, video chat, and even built into our devices

• Trends are showing people find increased significance in identifying through their digital avatar. A Roblox report on digital fashion states, “2 in 5 Gen-Z-ers find self-expression in the digital world is MORE important than in the physical world.” [roblox link]

• NFTs multiply the already strong pull of self-identification with financial incentives. “PFPs” are regularly selling for $10k,$20k,$30k, or more, creating extreme loyalty to the community and significant potential financial rewards from participating.

• Interoperability means avatars purchased through open marketplaces replace the access point to games–or ecosystems, communities, experiences, etc. Rather than purchasing a game/experience and obtaining an avatar inside of it, you purchase the avatar to gain access.

• The lore of an avatar will live in both physical and digital spaces across time and platforms. Your avatar enables access to IRL events, online games, social networks, and more. This will become increasingly fractured and difficult to visualize unless through the common thread of the avatar. Again, placing it at the center of multiple things.

  

• Avatars are becoming their own sovereign beings. In addition to increasing importance for ourselves, we’re seeing licensing deals for Bored Apes and Virtual influencers gaining large followings, regardless of who “owns” them. [https://www.instagram.com/imma.gram]

• DeSoc will increase the importance of tying an identity to an avatar as it will carry its own social network across platforms. Ie. Think of brands buying an avatar because of its built-in network of millions of followers. This gets infinitely more complex when postulating on reputation systems in the future.

A framework for Avatar-Centered Design

If we’re going to formulate a framework for Avatar-Centered Design, let’s first look at a typical Human-Centered Design process:

• Specify the context of use: understand human behavior, environment, problems

• Specify requirements: what is needed, how does it function

• Create design solutions: what is it, what does it look and feel like

• Evaluate designs: test, iterate

This process is similar to avatars. In fact, we can think of using HCD for avatars as an extension or “Layer 2 process” because we need to first apply the process for the human(s) using the avatar and then apply what we learned to the avatar. In other words;
L1 (HCD) define the needs of the audience for this avatar
L2 (ACD) define the needs of the avatar built for the audience 

While many ACD concepts are similar to HCD (the avatar has environments, emotes, behaviors, problems, etc., just as a human does), perhaps the core of Avatar-Centered Design is the important dynamic of uncovering where the human (operator, audience, owner) ends and the avatar begins. We need to consider what agency the avatar has with and without its human.

Core ACD Questions

There are a few key questions that get at the core of the ACD process:

• How Interoperable is the avatar?
  Ex. Where will this avatar live, and how does it function in that space? What metaverse(s), platforms, and networks will it work with?

• What utility is baked into its contract, and what is independent?
  Ex. Do sales of the avatar trigger royalties on the marketplace or its own smart contract?

• Where does the value come from?
  Ex. Is the avatar valuable because of the human’s personality or contribution to a community? We would consider this value non-transferable, hard to price, or inseparable from the owner. Or is the value simply because it’s acquired a lot of cool gear? In this case, it’s tied to the owner’s actions, but it is transferable and easier to quantify a price.

• What happens at the Point of Transfer?
  This question encapsulates all the other questions.
  Ex. What goes with the avatar, and what stays with the owner when the Avatar is sold or transferred? If you complete a quest, does the achievement (badge, NFT, rank) stay with the avatar or transfer to the new owner?

Closing Thoughts

Your Avatar is the focal point of all activity occurring in the metaverse/web3. As you engage in activities such as gaming, collecting items, and participating in contests and events, the lore associated with your Avatar builds up its standing and worth. However, this Avatar may not stay in your possession forever. When it’s sold or transferred, certain elements associated with it should transfer as well. This way, your Avatar has an independent existence (avatar agency) that is not linked to a single person or metaverse. Building a process for Avatar Centered Design will ensure we create smart decisions that encourage a robust, interoperable ecosystem.

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The NFT ecosystem has debated the best approach to NFT royalties since the inception of NFT marketplaces. Recently, this debate has become heated and is at the center of big marketplace competition, primarily the battle between OpenSea and Blur. However, this debate is a crucial topic for the future success of NFTs, with royalties being one of their most important and revolutionary pieces of functionality. But before we dive into the specifics of the royalty stand-off between marketplaces, let's cover the basics.

What are NFT royalties?

NFT royalties are a percentage of the sale price paid to the creator every time the NFT is sold to a new owner. This means that the creator of an NFT can continue to earn money even after the initial sale. NFT royalties are designed to protect the intellectual property rights of creators and ensure that they are fairly compensated for their work.

Why are NFT royalties important?

NFT royalties are important because they allow creators to earn a steady income from their work. In the traditional art world, artists often only receive payment for their work once, and then the artwork can be resold for much higher prices without the artist receiving any additional compensation. NFT royalties help to ensure that creators are compensated fairly and can continue to earn money from their work even after it has been sold. Because an NFT has the potential to represent ownership over many types of assets, far beyond basic artwork (music, game items, deeds, etc.), NFT royalties are a novel way to provide compensation in perpetuity for creators of all types.

How do NFT royalties work?

When an NFT is created, the creator can set a royalty percentage they will receive every time the NFT is sold. This percentage is usually around 1-5%, but it can be as high as 50%, depending on the creator's preferences. Once the NFT is sold, the royalty percentage is automatically paid out to the creator's wallet.

There are three types of mechanisms for royalties:

Marketplace Enforced

Royalties are enforced at the marketplace level. This is typically accomplished by encoding logic into the marketplace smart contract that enables the transfer of assets and value from one party to another. In an effort to standardize royalties across marketplaces manifold.xyz created an on-chain registry in collaboration with many of the major marketplaces that can be relied on to determine the royalties configuration of any given NFT. You can learn more about this registry at royaltyregistry.xyz.

In an attempt to incentivize the enforcement of royalties for all marketplaces, both OpenSea and Blur also recently launched an open-source blacklist registry that can be implemented by NFT smart contract creators. The registry provides creators with a mechanism to prevent the support of marketplaces that do not support creator royalties.

OpenSea’s Registry

https://github.com/ProjectOpenSea/operator-filter-registry

Blur’s Registry

https://github.com/blur-io/operator-filter-registry

Contract Optional

Royalties are not enforced, but instead, standards are implemented at the NFT contract level to suggest to marketplaces how to handle royalties for a specific NFT. The primary interface used to implement this functionality is EIP 2981. Implementing EIP 2981 has gained support since its inception. According to our data, approximately 17.44% of all collections have implemented the Royalties standard.

Contract Enforced

Royalties are enforced at the contract level. In order for this to be possible, each NFT contract must implement marketplace functionality. EIP 6105 describes a standard to enable “intermediary-free NFT trading,” which would enable trading without reliance on a marketplace contract. However, this standard is still unable to prevent trading NFTs on marketplaces that bypass the built-in trading mechanics and would need to implement a blacklist similar to the above Operator Filter Registry.

Blur vs. OpenSea

On Nov 5th 2022, OpenSea announced a change to their royalties mechanics. The goal of the change was to provide a mechanism to enforce on-chain royalties through a blacklist registry contract (the aforementioned Operator Filter Registry). One downside to this approach was that contracts that do not implement the new standard would no longer receive royalties at all. This change was both celebrated and criticized.

On one hand, moving closer toward an NFT ecosystem with enforced royalties is good for creators by ensuring their royalties are respected. On the other hand, by blacklisting marketplaces, OpenSea has introduced an anti-competitive mechanism that restricts the free market nature of NFT trading.

Read their original Twitter thread: OpenSea on Twitter

On Nov 14, 2022 Marketplace Blur announced its strategy for royalties. In an effort to both win market share and incentivize royalties to be paid, Blur created its own version of the Operator Filter Registry that allows creators to enforce and earn royalties on both Opensea and Blur, bypassing OpenSea’s version of the registry. In addition to the new Registry, Blur attempts to incentivize paying collection royalties through the use of the $BLUR rewards token. Somewhat ironically, Blur provides larger rewards to traders who exclusively trade on Blur (e.g. do not have any orders open on any other marketplace).

Read their original Twitter thread: Blur on Twitter

For the time being, Blur's strategy has increased creator royalties due to the benefits of farming the $BLUR token. However, it's unclear what the longevity of this mechanism looks like and whether or not Blur will maintain this competitive advantage.

The following Dune Analytics dashboard offers an in-depth view of Royalties analytics:

https://dune.com/hildobby/nft-fees

Creators vs. Marketplaces

While the intentions behind OpenSea and Blurs strategies might be good, the reality is that it is also opportunistic. Marketplaces have the incentive to increase their market share and bottom line. So, what's really happening? OpenSea and Blur are duking it out. The primary objective for both is to maintain (in Blur's case, win more) market share. Unfortunately, there is no perfect option. Enforcing royalties causes traders to flee to cheaper marketplaces, not enforcing royalties will still inevitably lead to a race to the bottom, as most NFT buyers are traders looking to make a profit.

Ultimately, the CR3 Labs team is aligned with creators, but we understand the complexities of royalty enforcement both from a technical and a business model perspective. Royalties are a fundamental mechanism that makes NFTs revolutionary and useful. Creators have the right to decide if they will enforce royalties, and marketplaces/buyers should not. The levers that should be pulled for marketplace competition should be marketplace fees, incentive/reward mechanisms, and novel innovation, not creator royalties. Unfortunately, this is only in a perfect world - aligning all creators and platforms on the use of NFT smart contracts with enforced royalties is unlikely to happen soon.

Marketplace Royalties & Fees

• OpenSea:

  • Royalty: Enforced for most new collections

  • Fee: 0% (temporarily waved for collections with high volume )

• Blur:

  • Royalties: Enforced for new collections, Royalty incentives via $BLUR

  • Fee: 0%

• LooksRare:

  • Royalties: Optional

  • Fee: 2% (1.5% to LOOKS stakers, 0.5% to Creators as an enforced royalty)

• X2Y2:

  • Royalties: Enforced

  • Fee: 0.5%

Notable mentions

• Magic Eden: Optional royalties (opt-in like a tip)

• PsudoSwap: No creator royalties

• Magically: zero royalty fees

• GonnaMakeIt: User protection, Royalty protection

About CR3 Labs

CR3 Labs builds tooling for Web3 gaming to help creators, collectors, and gamers unlock value in the new digital frontier.

Learn more at https://www.cr3labs.com.

Seeking more information about a particular topic, project, or technology?
Submit a research request!

Otherside is an upcoming metaverse project created by Yuga Labs that combines elements of MMORPGs and Web3-enabled worlds. The project is being developed as a gamified, interoperable metaverse where players can own and control various aspects of the game world, including their characters, lands, resources, and structures. This makes it a "metaRPG" where the players themselves have a direct impact on the game's development and evolution.

Inspired by the popular tabletop role-playing game Dungeons and Dragons, Otherside aims to provide an always-evolving experience that is co-created with its players. Yuga Labs intends to involve the community in the game's development by offering prototype builds, demos, and tests, allowing players to help shape the final game design and experience.

Game Characters

Upon the launch of Otherside, NFT holders of BAYC, MAYC, BAKC, Meebits, and CryptoPunks will receive 3D models of their NFTs which they can play as characters in the game. Players who don't own these specific NFTs will have the option to import and create their own characters through the ODK (more on this below).

Game Engine

The Otherside is being built on top of Improbable’s game engine, MSquared (M²).

The M² game engine is a revolutionary game engine developed by Improbable that enables unprecedented levels of player interaction and immersion. The engine is capable of supporting over 10,000 players interacting simultaneously in a game world, with natural voice chat supported even in crowded areas.

One of the key features of the M² engine is the use of AI to generate a variety of unique appearances for characters and crowds based on the player's perspective. This means that even in very large crowds, each player will have a different experience and view of the game world.

Another notable feature of the M² engine is its incredible scalability. The engine is capable of scaling to 500 billion operations per second, which is a massive improvement over the typical 10,000 operations per second seen in other game engines.

Game Currency and Economy

ApeCoin will be the primary in-game currency in the Otherside Metaverse, and it will be used to power the game's economy. Players will use ApeCoin to purchase various items and resources that are available in the game world. These items may include artifacts, resources, weapons, armor, and other in-game assets that can enhance the player's experience.

Learn more about ApeCoin in our previous post.

Otherdeeds

Otherdeeds are the lands that make up the game world of Otherside. Each Otherdeed is a dynamic NFT that represents a piece of land in the game, including all its elements, such as resources and artifacts. Unlike a traditional static representation of a land, Otherdeeds are designed to evolve along with the actions of the players in the game.

Landowners in Otherside will be creators and have the ability to shape the game world. They will be able to participate in demos, prototypes, test builds, in-person events, and contests that help bring the Otherside to life. The game will co-evolve with its players, and the decisions made by the land owners will have a significant impact on the game's development.

There will be a total of 200,000 Otherdeeds in Otherside, with the first 100,000 released in an initial land sale last year. The remaining 100,000 Otherdeeds will be exclusively rewarded to players who hold Otherdeeds and contribute to the development of Otherside.

Check out the community wiki For a comprehensive overview of Otherdeeds: www.otherside-wiki.xyz

Initial Land Sale

The initial land sale of Otherdeeds occurred on April 30, 2022. The total supply of Otherdeeds available on the open market was 55,000, with a mint price of 305 APE (equivalent to $5,800 at the time).

During the sale, a total of 32,860 holders acquired Otherdeeds, with the distribution of ownership being divided into three categories. Claims from Bored Ape Yacht Club (BAYC) and Mutant Ape Yacht Club (MAYC) members accounted for 30% of the supply, while 15% was allocated to internal contributors. The remaining 55% of the Otherdeeds were available for purchase by the general public.

The sale caused significant network congestion on the Ethereum blockchain, with a total of 60,234 ETH spent on gas fees. A record 1,666 ETH was also lost due to failed transactions during the sale.

View an in-depth overview of the Otherdeed market and initial land sale stats on Dune: https://dune.com/hildobby/Otherside

Otherdeed Market

Total Trade Volume: 454,063 ETH ($1,089,172,867)
Current Floor Price: 2 ETH
Max Floor Price: 7.6 ETH (May, 2022)
Average Daily Volume: 7,500 ETH

Those looking to purchase Otherdeeds can use our dashboard for a comprehensive view of traits and prices:

Roadmap / Timeline

Yuga and Improbable have designed a creative way to enable the community to participate in the iterative development of The Otherside through a concept called The Obelisk. The Obelisk lays out a series of events in which Otherdeed and NFT holders can participate.

First Trip [07-16-2022]

The first trip occurred on July 16th, 2022. This event served as the first tech demo to showcase the capabilities of the MSquared game engine and its ability to support large-scale gameplay.

Over 10,000 players, represented as Apes, participated in a mini-game where they explored a small area of the Otherside world and worked together to defeat a boss. This event was a significant milestone in the development of Otherside, as it demonstrated the potential of the game engine to support large-scale gameplay with natural voice chat and AI-powered crowd mechanics.

The first trip was one of several planned incremental releases called “trips” that will showcase different aspects of the full game as it continues to be developed.

Codex [TBA] - A living document of lore co-written by landholders. It also describes a concept called land linking.

Koda Origins // The Decoupling [TBA] - Kodas are available on 10k of the Otherside deeds. This event will be related to the “unlinking” of these Kodas from their lands, turning them into a standalone NFT.

The Growth [TBA] - Lands will start producing resources, and an invasive species emerges.

The Agora [TBA] - Item marketplace is opened, and item crafting begins.

The Dream [TBA] - An Arcade machine at the center of the biogenic swamp?

The Choice [TBA] - Release of a faction system and new lands.

The Settling [TBA] - Start building structures on lands.

The Toolkit [TBA] - Release of the Otherside Development Kit (ODK)

The Aeronauts [TBA] - The most ambiguous event on the obelisk related to the discovery of something new based on a “different perspective.”

The Rift [TBA] - Full game launches, choose stats for your character, and dive into the Otherside.

ODK

The Otherside Development Kit (ODK) is one of the most well-known components of Otherside. ODK is an acronym for Otherside Development Kit, and it is based on the Software Development Kit (SDK) concept that software developers use to build on top of existing products. Yuga has applied the SDK concept to Otherside, allowing creators to develop and integrate their own art, 3D models, 2D images, character rigs, emotes, and other creations, as long as they adhere to the ODK standards.

These standards are similar to ERC standards used to build NFTs. The ERC-721 standard ensures that one project's NFT works with everyone else's NFTs on the same marketplaces, lending platforms, and other platforms. Similarly, the ODK defines standards for game items to ensure interoperability across ecosystems and games. For example, using the ODK, players could bring their Ape character into the Otherside along with their Mutant Hound mount and favorite sword.

ODK Items

The ODK breaks items into 3 categories:

• People - Your account, friends list, and identity across Otherside.

• Places - Worlds with common game systems.

• Things - Interoperable objects, avatars, wearables, items you can take between places - within the Otherside, and beyond.

Building Assets

The ODK will offer an "application" alongside its guidelines, allowing users to download the ODK app and easily convert their 3D model into an ODK-compliant NFT. More technically advanced builders will also likely be able to use code to have greater control over the creation of assets.

Assets created through the ODK will be called "Templates" and can only be "Manufactured" by players with the necessary resources. For instance, crafting a chair may require basic Root Resources, while creating a rare item like "The Sword of Truth" could require a combination of hard-to-find Resources.

Imbuing

The ODK will also include functionality for a process called Imbuing. Imbuing gives a chance for an object to get a random special property as it is Manufactured. The better the resources used for imbuing, the better the potential special properties.

How to Participate

• Purchase an Otherdeed / Trade the market. Use our dashboard for better resource analysis.

• With your deed, participate in iterative game prototypes/demos. The second trip is approaching swiftly.

• Join layer-2 communities like OtherGuild to start creating your own lore and participating in mini games.

• Apply to use the ODK to become a dev for the Otherside.

The Otherside's ambitious vision is a massive undertaking, and the success of the project remains to be seen. Their approach to iterative releases via the Obelisk and involving the community in the development process is a positive sign that they are willing to listen and adapt to their players and partners’ feedback. Time will tell whether the Otherside will be revolutionary to the gaming and web3 industry, or whether it will fall short of expectations. Nonetheless, the Otherside is an exciting project that is pushing the boundaries of what is possible in the metaverse and is one to keep an eye on in the future.

Read the lite paper for more information: https://otherside.xyz/litepaper

About CR3 Labs

CR3 Labs builds tooling for Web3 gaming to help creators, collectors, and gamers unlock value in the new digital frontier.

Learn more at https://www.cr3labs.com.

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Submit a research request!

Treasure is a decentralized NFT ecosystem explicitly designed for metaverse and GameFi projects built on the Arbitrum blockchain. The platform aims to bring a new level of innovation and excitement to the world of metaverse and gaming. Treasure refers to itself as a decentralized Nintendo, where each game is a "cartridge" that plugs into the ecosystem.

Treasure is comprised of three key components: The $MAGIC token, the NFT marketplace, and a game launchpad. The Magic token is the native currency of the platform and is used for all transactions within the Treasure ecosystem. The NFT marketplace is the hub for buying and selling NFT game items. And the game launchpad is a platform to support game developers in quickly launching and bootstrapping new games.

The Treasure ecosystem has experienced steady growth since its inception, attracting a growing number of users and contributing to the overall success of the platform. In the past year, the number of cumulative users has increased from 2,000 to nearly 400,000.

Currently, the number of monthly active users hovers around 3,000. This is a decent indication of a strong and active user base, particularly in the GameFi space.

Ecosystem Dune Dashboard: ✨ TreasureDAO Ecosystem

TreasureDAO Links: https://link3.to/treasuredao

Why Arbitrum?

Arbitrum is a layer-two blockchain that offers fast, secure, and scalable transactions with low fees. This is crucial for a platform like Treasure, where high transaction volumes and low fees are necessary for seamless and enjoyable gaming experiences.

Arbitrum was built by Offchain Labs, a company co-founded in 2018 by Ed Felton, a computer science and public affairs professor at Princeton University.

Arbitrum uses optimistic rollups and a challenge system to ensure the security and integrity of the platform. In this challenge system, any validator can dispute a block on the chain, which is then subject to a series of checks to determine the validity of the dispute. This ensures that the platform remains secure and that any potential issues are addressed quickly and efficiently.

An optimistic rollup works by maintaining a list of transactions off of the Ethereum blockchain, then “rolling them up” into a single transaction which is then settled back on Ethereum.

If you are interested in learning more about Optimistic rollups, you can read the excellent write-up by the Alchemy team: https://www.alchemy.com/overviews/optimistic-rollups.

Arbitrum is considered to be one of the main competitors to another layer two blockchain solution, Optimism. Both platforms use optimistic rollups to offer fast and scalable transactions, but the key difference between the two lies in their approach to the challenge system. Optimism re-executes the disputed transaction on the layer one blockchain and checks which party is correct in their assertion. On the other hand, Arbitrum realized that this process could significantly contribute to network congestion. To deal with this, they designed a system that continuously subdivides the challenge until the disputed information is smaller and can be quickly sent to and resolved on layer one (Ethereum).

Arbitrum Docs: https://developer.arbitrum.io

The Evolution of Treasure

Treasure began as a small project initiated by John Patten and Yuta with the goal of providing value to the community. They started with a 10,000 free-to-mint LOOT derivative NFT project, following the same bottom-up approach that LOOT encouraged when it came to development. The idea was to start with simple primitives and allow the community to imagine and build these out for the ecosystem.

Over time, Treasure evolved beyond its initial NFT loot project and transformed into the Treasure ecosystem through the creation of its gaming hub, Bridgeworld. Bridgeworld is a game that revolves around exploring, creating, and extracting MAGIC through an interrelated resource economy involving the MAGIC token, Treasures, and Legions.

To bootstrap liquidity and community participation, Treasure introduced the primary mechanism called Atlas Mine. This mechanism was used to drive the core mechanics of the game and encourage community engagement.

Today, Treasure is in its final transition stage to become the Nintendo of the metaverse. They are moving away from the original Atlas Mine staking mechanism to a more sustainable mechanism called “Harvesters.” This transition is meant to ensure the long-term sustainability and growth of the Treasure ecosystem. You can read more about this transition in the Treasure DAO proposal on Commonwealth: https://commonwealth.im/treasure-dao/discussion/8902-tip23-atlas-mine-cataclysm-sunset

Magic Token

The Treasure DAO ecosystem utilizes $MAGIC as its primary token. The use of $MAGIC is central to the ecosystem, connecting all Treasure projects both narratively and economically. This means that each project within the Treasure ecosystem is linked through the use of $MAGIC.

The Treasure DAO uses emissions of $MAGIC to support and grow new projects within the ecosystem. These emissions help to finance new projects and ensure the continued support of more mature projects within the ecosystem. By utilizing $MAGIC emissions in this way, the Treasure DAO is able to sustain the growth and development of its projects and maintain the strength of the overall ecosystem.

Token Distribution

Total Supply: 350,000,000

Treasure Farm: 33%

Mining: 25%

Staking / Liquidity: 17%

Ecosystem Fund: 15%

Team: 10%

Market Cap: $353,772,949

Fully Diluted Market Cap: $587,579,022

Price: $MAGIC peaked at $6 in February of 2022 and is currently sitting at $1.69.

Volume has picked up significantly in 2023, with a previous 24hr volume of $199,728,267.

Trove Marketplace

The Trove marketplace is designed to help build and grow the TreasureDAO ecosystem by connecting users and projects through the buying, selling, and trading of NFTs related to the Treasure metaverse and GameFi projects.

The marketplace has seen over $183 million (99,500,000 $MAGIC) in trade volume over the last 90 days. Current top game NFTs include: Smol brains, Legion Genesis, The Beacon - Founding Characters, Wastelands, and Treasures.

The marketplace smart contract can be found at 0x09986B4e255B3c548041a30A2Ee312Fe176731c2 and has been audited by Quantstamp and Macro. View the smart contract audits here: https://docs.treasure.lol/references/contracts/audits.

Governance

The Treasure DAO is governed by $MAGIC token holders and votes on improvement proposals as well as future participants of the GBP (Game Builders Program). The DAO is managed through Commonwealth for proposals and Snapshot for voting.

• The TreasureDAO treasury currently holds approximately $1,658,021.18, primarily in USDC.

• To date, the DAO has voted on 27 different proposals with a near 100% approval rate.

Games

TreasureDAO games (cartridges) are the heart of the TreasureDAO ecosystem. There are currently 26 games total, 15 of which make up 99% of the Trove marketplace volume.

Top 15 games:

Game | Volume ($MAGIC) | Categories
The Beacon | 3,300,000 | PVE, RPG, Roguelike
Smolverse | 39,000,000 | RPG
Bridgeworld | 37,000,000 | Strategy
LifeVerse | 10,900,000 |
BattleFly | 3,400,000 |
Realm | 2,100,000 | MOBA Tales of
Elleria | 1,500,000 | Strategy
Toadstoolz | 1,200,000 |
The Lost Donkeys | 644,000 |
SmithyDAO | 237,700 | Platformer
Knights of the Ether | 191,000 | Deckbuilding, roguelike
Smuverse | 49,100 | RPG
Lost Samurise | 32,400 | MOBA
Smol Age | 4,000 | Strategy
Smol Sharks | 2,000 |

How to Get Involved

There are several ways to get involved in TreasureDAO.

$MAGIC

• Trade / Stake the $MAGIC token on the Magic Pools

  • ELM-MAGIC - 2.1% APR

  • MAGIC-GFLY - 1.64% APR

• Provide $MAGIC liquidity on Sushi

  • WETH-MAGIC - 70.9%

• Trade NFTs on Trove

Build a Game

If you have an idea for a project that could interface with $MAGIC you can apply to their launch program.

https://docs.treasure.lol/games/game-builders-program

Play Games

The best way to interact with TreasureDAO is to start playing games! Our personal favorite is the Beacon, a dungeon crawler that is opening up access to weekly dungeons in the coming weeks.

The Beacon

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Deciding which decentralized storage solution to use for your NFT metadata can be difficult. There are many to choose from that all have various pros and cons. To make the decision easier, we took a deep dive into each service to compare their response times and other important features. The storage providers examined include Filebase, Pinata, NFT.Storage, Web3.storage, IPFS.io, Arweave, Amazon S3, and Self-Hosted.

Provider Response Times

All storage options come with tradeoffs. One of the most important tradeoffs is the balance of response times and decentralization. Typically, providers which are more decentralized also have slower response times.

Response times were calculated for each provider by using an average time-to-first-byte comparison across thousands of NFT image and metadata requests.

Amazon’s centralized S3 service was included in the comparison to provide a baseline for the response times.

Results
50th Percentile Comparison (Ranked Fastest to Slowest)

1. Filebase: 2.12s

2. AWS S3: 2.2s

3. IPFS.io: 2.67s

4. Web3.Storage: 2.89s

5. Arweave: 3.4s

6. Pinata.Cloud: 3.49s

7. NFT.Storage: 4.1s

View the Full Analytics Dashboard

Want to explore the data further? Check out Skry’s API documentation to use NFT latency data streams and more.

Pros/Cons

In addition to analyzing the average response times of each storage provider, it's important to understand their pros and cons. Each provider was compared across seven different key data points.

Cost

The pricing models and costs associated with using the storage provider. For the purposes of the comparison table below, we focus on the cheapest paid option

Ease of use

The difficulty of using the provider. This ranges from code-only implementations to intuitive interfaces.

Redundancy

The level of redundancy the storage provider implements. This can range from a single IPFS node to many nodes with caching and geographic diversity.

S3 API compatibility

The ability to interact with files on the provider by using the S3 API syntax.

IPFS CID in URL

The availability of the files CID in the provider's file URLs. If the CID is in the URL, it is easier to recover files from the IPFS network. This is also critical when linking IPFS files to on-chain assets (NFTs).

Browser compatibility

The browser compatibility of a file uploads location. E.G., whether or not it makes use of the HTTP URL syntax.

Decentralization

The level of reliance on the provider itself to maintain the uploaded data.

Comparison Table

Conclusion

If you’re looking for a high-performing decentralized storage solution, Filebase is an excellent option. Filebase strikes a balance between maintaining decentralization, being simple to use, and being highly performant.

Each storage provider has areas they shine, and it depends on your requirements to determine which option is best for you.

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Overview

ApeCoin is an ERC-20 token developed by Yuga Labs, the creators of the Bored Ape Yacht Club. The token aims to become the asset of choice for a new metaverse ecosystem. Currently, ApeCoin can be traded, staked to earn APR, used to participate in the governance of the ApeCoin DAO, or used to purchase additional NFTs and merchandise within the Bored Ape ecosystem.

Market

The market for ApeCoin has had fairly violent swings similar to many assets in the industry over 2022/2023. According to Coinmarketcap, ApeCoin traded over $8 billion in volume on its release day, March 17, 2022. The token hit an all-time high of $26.75 on April 28th, 2022. Today it's trading around $5.00.

If you are looking to pick up ApeCoin, you can get it on most major exchanges

• Purchase on Coinbase

• Purchase on Binance

• Purchase on Kraken

Tokenomics

The current circulating supply is at 361,250,000, with a max supply of 1,000,000,000.

62% of the tokens go to the ApeCoin DAO community. Of that, 15% goes to holders of BAYC and MAYC, with holders of BAYC eligible to claim 10,094 $APE for each NFT they own, and MAYC holders able to claim 2,042. The rest has been released as part of the DAO’s “ecosystem fund.”

16% of the tokens have gone directly to Yuga Labs. Yuga Labs has also designated a portion of this allocation toward the primatologist Jane Goodall’s charity foundation to help support real-life apes.

14% of the tokens went to “launch contributors,” which are defined as “the companies and people who helped make this project a reality,” but details are scant on exactly who these contributors are.

8% of the tokens went directly to the four founders of Yuga Labs and BAYC.

Staking

The Ape staking process will be implemented over a 3-year period and will result in the distribution of 17.5% of the total ApeCoin supply. One of the most unique and interesting aspects of ApeCoin is its staking mechanism which deviates from many traditional staking protocols with the ability to stake “through” an NFT as a means of securing staked tokens. This approach enables continued utilization of the NFT for various purposes, such as merchandise drops and event participation, while simultaneously accruing staked ApeCoin.The custom staking mechanism is a novel concept, but it is important to note that the potential loss or transfer of the NFT would result in the transfer of any accrued or staked ApeCoin. If you plan to participate in staking, it's important to keep this in mind to avoid accidentally transferring your accrued/staked ApeCoin along with your NFTs.

Pools

In addition to serving as keys to your staked ApeCoin, staking with an NFT also provides access to different staking pools. There will be four pools available to access, based on the NFT used to stake: a BAYC pool, a MAYC pool, a BAKC pool, and an $ape-only pool.

To access the BAKC pool, you must hold a BAYC or MAYC, and each B/MAYC can only be paired with one BAKC.

Each pool will contain a portion of the total 100,000,000 ApeCoin that will be released in the first year. The ApeCoin pool can be accessed by anyone with ApeCoin and does not require holding any NFTs.

The pool breakdown is as follows:

ApeCoin Pool: 30,000,000 (30%)

BAYC Pool: 47,105,000 (47.1%)

MAYC Pool: 19,060,000 (19.06%)

BAKC Pool: 3,835,000 (3.83%)

These allocations will be readjusted based on floor prices before each staking period (one year). An average price during Q4 of the previous staking period will determine the amount allocated to each of the pools in the next period. The ApeCoin-only pool will remain constant at 30%.

If you are interested in an overview of all of the wallets currently staking and in which pools, take a look at our dashboard:

Caps

The NFT-specific pools have caps on the total ApeCoin that can be staked, equalling the amount that NFT received from the initial ApeCoin claim. The ApeCoin-only pool has no caps.

BAYC Cap: 10,094 ApeCoin

MAYC Cap: 2,042 ApeCoin

BAKC Cap: 856 ApeCoin

These caps were added to encourage equal distribution within the NFT pools. Everyone is on equal footing, only able to stake a specific amount. Without this, the allocation of the rewards would dwindle as large holders staked more ApeCoin into the pools.

Staking also contains an “Incentive Distribution Curve”. This curve means that the earlier a stake is placed each period, the better. The highest staking earnings are earned within the first 91 days of each staking period.

Staking Returns

At the time of this writing, the APY of ApeCoin staking remains relatively high, with the BAKC pool consistently providing the highest APR.

Ape-only Pool: 105% APR

BAYC-only Pool: 184% APR

MAYC-only Pool: 199% APR

BAKC Pool: 197% APR

The following is an up-to-date dashboard of the current staking APY:

https://dune.com/ponzidope/apecoin-staking-apy

All of this info and more can be found in the official staking AIPs 21 and 22. forum.apecoin.com/t/aip-21-staki…
forum.apecoin.com/t/aip-22-staki…

ApeCoin DAO

The ApeCoin DAO manages a treasury that is used to fund projects that support the growth and development of the ApeCoin ecosystem. The DAO follows a proposal process (AIPs) where community members can propose and vote on how the Ecosystem Fund should be distributed. The goal of this process is to promote a diverse and self-sustaining ecosystem for ApeCoin.

Proposals are voted on by staking ApeCoin in favor or against a particular proposal. The DAO has had a total of 58 proposals submitted, out of which 22 have passed. The average amount of ApeCoin staked per proposal is roughly 5,065,497 (only 1.4% of the total available ApeCoin supply).

For a deeper look into the ApeCoin statistics, take a look at our ApeCoin dashboard:

ApeCoin for the Metaverse

One of the most exciting utilities of ApeCoin is the upcoming use within the Otherside metaverse. Stay tuned for a follow-up that will dive deep specifically into the Otherside.

How to Participate

There are many ways to participate in ApeCoin .

• Purchase a BAYC/MAYC/MAKC to get involved in the community.

• Purchase ApeCoin and stake (non-US only).

• Participate in ApeCoin DAO by submitting proposals or voting.

• Participate in “Trips”

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Messari

• General: Messari believes this NFT bubble is analogous to Bitcoins 2013 bubble. Stating, "...the 10-year trajectory of the overall [nft] market will be the same: 100x+.”

  “NFTs will become a ubiquitous standard for wrapping financial assets in the same way they currently wrap monkey JPEGs.”

• Blue Chips (PFPs): The Yuga Labs ecosystem is a very novel and interesting experiment rooted in the desire to “feel like you belong somewhere.”  ApeCoin token holders grew 31% QoQ.

• Generative Art: Art Blocks is proving to be a Veblen good, and many of the early generative art projects could maintain that status.

• Institutions: Major brands that many didn’t expect entered the NFT market, including Gucci, Dulce & Gabbana, Starbucks, Salesforce, Nike, Addidas, the New York Knicks, Reddit, Tiffany & Co., and more.

• Metaverse/Cryptoverse: The Crypto Metaverse has a future, but it is still far away, attributing this to the current lack of good VR headsets/hardware and the difficulties of building good games.

• DeSo (Decentralized Social): Messari is bullish on this category for two reasons:

  1. Its easier to do than gaming.

  2. The value is disproportionately in the back end (easier to decentralize via open-source software), unlike gaming which is on the front end (best built by centralized visionaries).

• ENS / Identity: ENS and similar services are extremely valuable, but its problematic that everything is public and globally searchable by default. In order for there to be greater adoption, we need privacy-focused solutions. 

• Royalties: The right default in the long term is to side with the creators. If creators want to *opt out of royalties, given the current market conditions, as a way to help their fans get through the bear market, that makes sense. 

• Opensea: Opensea will maintain its reign as long as they don’t fumble operationally, stop innovating, or experience extensive brand damage. OpenSea is the next Coinbase.

• Generative AI: Prompt writers/designers will inherit the earth. AI + NFTs have huge future potential.

Read the Full Report

Coinbase

• Market: We shouldn’t ignore the fact that JPEGs are still trading frequently and at significant prices. The recent downtrend could be perceived as a healthy correction in the context of a broader trajectory of cyclical adoption.

• Gaming: Coinbase is closing watching gaming with the big question being: will blockchain games be developed by crypto-native firms or by incumbent video game developers?

• ENS/Identity: Maintained a growth trajectory despite the market downturn. NFT adoption could be driven by utility more directly tied to digital property rights. “Themes such as digital identity, digital footprint mapping, soulbound tokens, and the tokenization of real-world assets have the ability to strip away the speculative nature of art/collectibles and emphasize the fundamental advantages of non-fungible tokenization.”

• Royalties: They understand why current “profit-driven” participants are doing away with royalties but also believe that, “If royalties are increasingly ignored by market participants, we think it could threaten the adoption of the technology more broadly. 

• Big Brands / Next Wave: Believes corporations and brands will likely continue to view NFTs as a differentiated form of marketing spend and create projects that act as powerful onboarding mechanisms for non-crypto-native consumers.

Read the Full Report

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An NFT, or non-fungible token, is a type of digital asset that is unique and cannot be replicated. NFTs are typically stored on a blockchain, which allows for the asset to be verified as authentic and for the ownership and transfer of the asset to be recorded and tracked. The actual content or data of the NFT can be stored off-chain, but the ownership and authenticity of the NFT is verified on-chain through the use of a unique token or identifier.

Side Note

Tokens become non-fungible simply because their contract gives each new token a unique ID. Fungible tokens, on the other hand, share the same ID.

Creating an NFT

Minting an NFT typically involves deploying a smart contract to the blockchain, which acts as a template for creating unique tokens. The smart contract defines the rules and conditions for minting the tokens, such as the total supply, the token's metadata, and any other information.

A smart contract is a computer program that is stored on the blockchain and can automatically execute the terms of a contract when certain conditions are met. In the case of NFTs, a smart contract is used to mint, transfer, and burn tokens.

Using someone else's smart contract to mint an NFT, such as a marketplace, can be more cost-effective as it eliminates the need to deploy a new contract. However, using someone else's contract also means that you will have less control over your assets and may not be able to customize them to your needs fully.

ERC-721 is one example of a smart contract standard for NFTs on the Ethereum blockchain. It defines a set of rules for creating and managing non-fungible tokens, making it easy for developers to create and manage their own NFTs.

NFT Interoperability

Tokens that are created using a specific smart contract are bound by the rules and conditions defined in that contract. Each smart contract defines its own set of instructions for minting, transferring, and burning tokens, and these instructions can vary from contract to contract.

This means that tokens minted using different smart contracts may not be compatible with one another and may have different properties and behaviors. For example, one contract may have a feature that allows tokens to earn royalties, while another contract may not. As a result, tokens minted using the first contract would have that feature, while tokens minted using the second contract would not.

NFT Asset Storage

Token assets, such as images, metadata, videos, etc. Can be stored with different levels of permanence. If your image and/or metadata are only hosted in one place, they could become inaccessible if that place goes down. Because of this, distributed file storage is a good way to keep things around. If you are uploading and minting your NFT through a platform, they will typically make this choice for you.

Side Note

If you aren't the one who owns the hosting account where your assets are stored, you may have limited control of them. This is great for convenience and potentially cost, but if you insist on complete ownership, it's best to look into other options.

Off-Chain Assets

When creating NFTs, the actual content or data of the NFT, such as images, videos, and audio files, are often stored off-chain. This is done to prevent the blockchain from becoming bogged down with large files, as every node on the blockchain would need to store a copy of those files.

Instead, the NFT token on the blockchain contains a link or reference to the off-chain asset, such as a URL or IPFS hash. This link points to the location of the off-chain asset, where it can be accessed and viewed. Along with the link, metadata is also stored on-chain, which contains information about the NFT, such as the title, description, artist, and other relevant details.

The way the off-chain assets and metadata are stored can vary between different NFT platforms and protocols. But in general, the goal is to keep the blockchain lightweight by storing large files and media off-chain while still providing a way to verify the authenticity and ownership of the NFT on-chain.

Types of Off-Chain Storage

The storage method used for off-chain assets also affects how reliably and easily they can be found and accessed by others. The location protocols used to store the assets, such as IPFS or centralized servers, will impact the accessibility of your assets in the long term.

Decentralized storage solutions, like IPFS, provide a more permanent and decentralized way to store and access off-chain assets, making it more reliable and less dependent on a single point of failure. Additionally, decentralized storage solutions can be accessed by many different browsers and clients, making it easier for others to find and access your assets.

On the other hand, centralized servers can be more vulnerable to failures or outages, and the accessibility of the assets will depend on the uptime of the hosting providers.

As a creator, it is important to consider the long-term accessibility of your assets when choosing a storage method and location protocol. If you are using a platform, you should check their documentation or support team about the location protocol used for your assets and how it affects their accessibility in the future.

Centralized Storage

Decentralized Storage

Types of NFTs

There are many different categories of NFTs, but some common ones include:

1. Digital art: This category includes digital paintings, illustrations, animations, and other forms of digital art. These NFTs can be used to represent ownership of a digital piece of art and can be used for online galleries and art marketplaces.

2. Collectibles: This category includes virtual trading cards, in-game items, and other digital collectibles. These NFTs can be used to represent ownership of a unique virtual item and can be used for online marketplaces and gaming platforms.

3. Virtual Real Estate: This category includes virtual land, buildings, and other virtual assets that can be used in online virtual worlds and gaming platforms. These NFTs can be used to represent ownership of a virtual property.

4. Music: This category includes digital music files and digital concert tickets that can be used for online music platforms. These NFTs can be used to represent ownership of a digital music file and can be used for online music marketplaces.

5. Identity and Social Media: This category includes digital identities and social media profiles. These NFTs can be used to represent ownership of a digital identity and can be used for online social media platforms and marketplaces.

6. PFPs: A blend of several categories of NFTs, including digital art, collectibles, and identity. PFPs currently represent the most well-known type of NFTs. They are often high-dollar avatars that can be used for access to exclusive communities and are heading toward becoming the defacto avatar for upcoming metaverses such as The Otherside by Yuga Labs.

7. Video and Film: This category includes digital videos, movies, and film. These NFTs can be used to represent ownership of a digital video and can be used for online video marketplaces.

These are just some examples. There are many other categories and subcategories of NFTs that are emerging and being created constantly as the technology evolves and more use cases are discovered.

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