The presentation outlines common use cases for NFTs, including digital art, collectibles, blockchain games, and IP management. Legal and regulatory considerations can be found on the last few slides.
5. INTRODUCING DIGITAL SCARCITY
today tomorrow (digital scarcity)
verifiable scarcity and ownership
token itself becomes scarce not the file to
which it points to
data can be copied easily, and ownership
cannot be verified
7. DIGITAL ART
Technical Implementation
media file
****
NFT
Benefits
digital scarcity
fair deal for artists for both primary and secondary markets
easy to verify authenticity of artwork and to track provenance
[6]
8. CRYPTO ART
Total CryptoArt Value: $647,658,598.98 (242,282.924 ETH)
Monthly CryptoArt Volume
https://cryptoart.io/data
11. COLLECTIBLES
NBA Topshots
1 million users
$700 million in sales in less than a year
» package price between $9 and $230
» 5% fee on all sales on secondary market
[9]
12. CROSSOVER - FASHION AND GAMING
Burberry skins in Honor of Kings
Burberry/Tencent
Louis Vuitton League of Legends collection
Louis Vuitton
Gucci Island in Animal Crossing
Final Fantasy XIII character wearing
Prada
[10]
[11]
[12]
[13]
13. GAMING BUSINESS MODELS
35%
38%
42%
46%
48%
50%
52%
54%
56%
59%
60%
62%
62%
69%
71%
80%
85%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Super Smash Bros.
Halo
StarCraft
SoulCalibur
Grand Theft Auto
Counter-Strike
Pokemon GO
Rocket League
The Elder Scrolls V: Skyrim
Heroes of the Storm
Call of Duty
League of Legends
Overwatch
Destiny
Hearthstone
Dota
Fortnite
Share of gamers who buy DLC (US/2019)
11
4
6
8
8
14
17
18
22
22
43
45
0 10 20 30 40 50
Other
Premium tier subscription
Paid subscription for individual game
Paid subscription as part of a monthly offering
Paid item crates
Ad supported
Free DLC/updates
Paid DLC/updates
Paid in-game currency
Paid in-game items
Free to download
Pay to download
Most common gaming business models in 2020
statista, Gaming monetization
statista, Gaming monetization
15. PROBLEM WITH EXISTING MODELS
“The Services, including all content, features, and functionality thereof, are owned by Epic, its licensors, or other providers of such
material and are protected by United States and international copyright, trademark, patent, and other intellectual property or proprietary
rights laws.”
“You must not reproduce, sell, or exploit for any commercial purposes any part of the Services, access to the Services or use of the
Services or any services or materials available through the Services.”
Fortnite, Terms of Service
17. IP IN BLOCKCHAIN GAMES
“During the operation of the Services, you may upload certain Assets and Games that you have created to The Sandbox in accordance
with these Terms. Except as otherwise set forth in these Terms, you remain the owner of your Assets and Games at all times, and TSB
does not claim any ownership rights in your Assets and Games.”
The Sandbox, Terms of Service
18. SECONDARY MARKETS IN BLOCKCHAIN
GAMES
buy in-game currency use currency to buy items
sell in-game currency
on exchanges
sell items
use items as collateral
...
%
20. REGULATORY CONSIDERATIONS
- digital art
- game items
- collectibles
unregulated
non-fungible
fungible
cryptocurrencies
- BTC
- LTC
- DOGE
type I crypto asset
[Section 2(5) PSA]
stable coins
- USDT
- USDT
- GYEN
type I/II crypto asset
[Section 2(5) PSA]
prepaid payment instrument
[Section 3(1) PSA]
money order
investment tokens
- tokenized shares
- tokenized bonds
electronically recorded
transfer right
[Section 2(3) FIEA]
utility tokens
- ETH
- BAT
- UNI
type II crypto asset
[Section 2(5) PSA]
crypto
other
21. LEGAL CONSIDERATIONS
What does the NFT represent?
Digital ownership?
Is this concept even recognized?
A license?
What is the scope of the license?
Are there any consumer protection laws that must be considered when selling the NFTs?
Which laws do apply?
What are the consequences?
Does the Premiums and Representation Act apply?
Are gambling laws applicable?
23. SOURCES
[1] Dapper Labs, CryptoKitties (Dragon), retrieved from https://www.cryptokitties.co/kitty/896775.
[2] Dapper Labs, CryptoKitties (Tally the Purrocious), retrieved from https://www.cryptokitties.co/kitty/1339126.
[3] Beeple, retrieved from https://onlineonly.christies.com/s/first-open-beeple/beeple-b-1981-1/112924 (screenshot).
[4] NBA Topshots, VINCE CARTER 3 Pointer Cosmic (Series 1), retrieved from https://nbatopshot.com/moment/Topsnot+1318ae65-f26d-49ab-b915-21dda3e38ccc (screenshot).
[5] The Sandbox.
[6] Hajime Kinoko Red Series: Samsara संसार 輪廻 Ultra Rare Shibari Japanese Rope Art Installation AR Rendition, retrieved from http://www.rpm.studio/kinoko/.
[7] Beeple (b. 1981), Everydays: The First 5000 Days, retrieved from https://ipfsgateway.makersplace.com/ipfs/QmZ15eQX8FPjfrtdX3QYbrhZxJpbLpvDpsgb2p3VEH8Bqq.
[8] LARVA LABS (EST. 2005), 9 Cryptopunks: 2, 532, 58, 30, 635, 602, 768, 603 and 757, retrieved from https://www.christies.com/lot/lot--6316969/ (screenshot).
[9] NBA Topshots, VINCE CARTER 3 Pointer Cosmic (Series 1), retrieved from https://nbatopshot.com/moment/Topsnot+1318ae65-f26d-49ab-b915-21dda3e38ccc (screenshot).
[10] Burberry/Tencent, retrieved from https://www.bbc.com/news/technology-56511343.
[11] Louis Vuitton, retrieved from https://www.washingtonpost.com/video-games/2019/12/09/you-can-get-league-legends-t-shirt-louis-vuitton/.
[12] Gucci/Animal Crossing: New Horizons, retrieved from https://www.marketing-interactive.com/gucci-puts-gaming-twist-to-foreverguilty-campaign-with-branded-island-on-animal-crossing.
[13] Prada/Final Fantasy, retrieved from https://www.theverge.com/2012/4/5/2928145/prada-final-fantasy-characters-arena-homme-magazine-spread.
[14] The Sandbox, retrieved from https://www.sandbox.game/en/map/ (screenshot).
[15] The Sandbox, retrieved from https://www.sandbox.game/en/ (screenshot).
[16] The Sandbox, retrieved from https://www.sandbox.game/en/ (screenshot).
[17] The Sandbox, retrieved from https://www.sandbox.game/en/ (screenshot).
Hinweis der Redaktion
CENTRALIZED SYSTEMS
today‘s infrastructure – google, facebook, amazon sitting in the middle
in a finance context the entity in the middle is usually a highly regulated and therefore trusted party
DISTRIBUTED SYSTEMS
anyone can participate – anyone can set up a node (public blockchains)
information in the system is shared between the nodes P2P
data is structured in the form of a blockchain (= chronologically ordered list of blocks)
each block in the blockchain references to the previous block >> information of all previous blocks become information of the latest block
consensus mechanism secures the network and ensures that all nodes share the same set of information (generally PoW or PoS)
example: bitcoin mining
because of the P2P blockchain infrastructure there is no need for centralized parties anymore
1ST GENERATION PLATFORMS
originally blockchains were only used to track transactions
no additional functionality
example: bitcoin
2ND GENERATION PLATFORMS
programmable blockchains with smart contract functionality
smart contracts = small computer programs that are run independently by all nodes in the network – also used for the issuance of tokens
3RD GENERATION PLATFORMS
due to decentralization and consensus mechanims blockchain infrastructure highly inefficient
compare Ethereum vs VISA
VISA 40,000 tps
Ethereum 10-15 tps
3rd generation platforms increase transaction throughput and make more scalable
THAT‘S IT WITH THE BACKGROUND INFORMATION ON DLT AND BLOCKCHAINS
Questions?
FUNGIBLE TOKENS
tokens are freely interchangeable as economic value is identical
1 BTC = 1 BTC
NON-FUNGIBLE TOKENS (NFTS)
NFTs are unique - economic value of each token is different, and the tokens are therefore not interchangeable
example: CryptoKitties – NFT representing Dragon sold for ~USD 172,000 / NFT representing Tally the Purrocious for sale on OpenSea (NFT marketplace) for ~USD 44.45
ATTENTION
NFT is unique but not necessarily the content represented by it
TODAY
there is abundance in the digital space
files can easily be copied
ownership cannot be verified
TOMORROW
NFTs introduce the concept of scarcity in the digital space
they are unique and cannot be copied
the file represented by the token can still be copied
proof: many of the pictures shown here are represented by NFTs – in some cases I even used the same files that are represented by the NFT
in any case digital ownership – to the extent it exists – can be easily tracked
COMMON USE CASES
cryptoart
collectibles
games
IP management
more use cases develop in the future
maybe you can see more use cases after the presentation
TECHNICAL IMPLEMENTATION
blockchain is a highly inefficient database
storing large pieces of data on the blockchain is extremely expensive
media file (jpg, mpeg, AR, VR file etc.) is typically stored off-chain
NFT points to the offchain file in its metadata
PROBLEM
even if metadata in the NFT becomes immutable it is still possible to change the data whcih is stored under a link
you can delete data
you can modify data
user is left with a valueless NFT which does not reference to anything anymore
example: artist changed pictures during auction and replaced them by rugs (similar to Banksy who shred the artwork during an auction)
SOLUTION
storing data on the InterPlanetary File System (IPFS)
data stored on the IPFS receives a unique identifier (exchanging data not possible without changing identifier)
BENEFITS
NFT introduces the concept of digital scarcity in the digital art space
artists get more exposure online – but there is a lot of noise (Sven can probably tell you more about this)
depending on technical implementation artist participates on all primary and secondary sales
for buyers easy to verify autheticity of the artwork and track provenance
PICTURE ON THE RIGHT
artwork of Hajime Kinoko
a Japanese Shibari rope artist
NFT representing VR file + ticket for exclusive Shibari private session
sold for ETH 6.25 (~ USD 18,000)
BEAR MARKET – CORRECTION STARTED SHORTLY BEFORE THE AUCTION
crypto art has been good business over the last few months
hype around February with sales surpassing USD 200M according to this data
now going down
usually a sign of hype being over and the industry maturing
Beeple (b. 1981)
EVERYDAYS: THE FIRST 5000 DAYS
Price Realized on Christies $ 69,346,250
Closed: 12 Mar 2021
Larva Labs (est. 1981)
9 Cryptopunks
Price Realized on Christies $ 16,962,500
Closed: 11 May 2021
NBA Topshots one example (other examples: CryptoKitties, SoRare)
comparable with Panini stickers
not sure whether you know them – many kids collect panini stickers during world cups or european championships
Panini stickers gone digital
NBA Topshot developed by Dapper Labs (Crypto Kitties) and licensed by NBA
according to the CEO of Dapper Labs trading card business USD 5-6 billion industry
with NBA top shots he wants to gross USD 1 billion
data suggests that he could be right
cite data
large parts of revenue generated by sales on secondary market
LeBron James highlight sold for $200,000 on secondary market
CROSSOVER FASHION AND GAMING
some of the projects pure marketing others generate revenue for the fashion brands
Burberry partnership with Honor of Kings
with more than 100 million daily players one of the most successful multiplayer online battle arena games worldwide
skin was removed from store after critical statement about cotton production in China
Louis Vuitton League of Legends collection
skins available in the game + „fan merchandise“ from Louis Vuitton
Gucci Island in Animal Crossing (nintendo switch)
partnership with popular gamers
Final Fantasy character wearing Prada – no official partnership but there are other partnerships in the game
other examples
Gucci the Virtual 25s sneakers in offical app – sold for USD 11.99 AR
Nike partnership with Fortnite
don‘t want to bore you with different gaming business models
IMPORTANT
free-to-play games very popular – usually combined with paid in-game items and in-game currency (data from statista)
right
share of gamers who buy downloadable content (incl. skins etc) 85 percent of all games in fortnite
Fortnite is a F2P battle royale game with an estimated revenue of USD 3.5 billion in 2019
Problem of existing gaming business models from a users point of view – we are having a look at an example on the next slide
(1) all assets in the game belong to the developer of the game – even if you ‘own’ it as a player (only a license)
(2) player uses real money to purchase in-game currency / items – but it is ONE WAY
funds of players forever locked and no way to sell items
games generally do not allow sale on secondary markets
if you stop playing, there is no way to get your money back
Blockchain games work a bit differently and give user more control over game assets and funds
example: The Sandbox (one of our clients)
company developing The Sandbox sells empty parcels of land
buyer of land can do whatever he wants with the land
develop land
implement gaming logic and monetization models
and sell it
creators can generate revenue by creating assets that can be deployed in the games
players can buy and sell in-game currencies on exchanges
game assets can be sold on NFT markets – creator participates in all sales on the secondary market
example: some art galleries in other games / exhibit and sell art directly to users
improve shopping experience in the metaverse
digital shopping malls / shops
Shibari artist streamed one session in decentraland live
we are still at the very beginning but if you want to experiment, this might be the right time
interest by fashion brands might be there as well – afterall crypto folks have a lot of money and they are digital natives
assets in the game are generally owned by the token holder
anyone can create assets and sell them on the marketplace
creators generally give The Sandbox a non-exclusive license to use items for marketing purposes etc.
players can buy and sell in-game currencies on exchanges
game assets can be sold on NFT markets – creator participates in all sales on the secondary market
NFTs can be used for IP management
IBM working on a service already
list benefits – IP becoming a liquid asset
easier securitization and automation of cash-flow
https://newsroom.ibm.com/2021-04-20-IPwe-and-IBM-Seek-to-Transform-Corporate-Patents-With-Next-Generation-NFTs-Using-IBM-Blockchain