McDonald launched its first NFT with the McRib NFT a few days ago, Facebook rebranded Meta… The craziness of the Metaverse and the NFTs has just started and at Lugh we believe that it is just the beginning of a revolution in the way people will interact and transact in the future. We are witnessing the creation of a completely new market whose codes have yet to be written. The market is still immature and we have no doubt that great innovations and tools (such as regulated stablecoin) in this industry will give the full potential of NFTs.
A quick review of NFTs
Image, artwork, video game items, consumer goods, the NFT (“Non-Fungible Token”), is a cryptographic element issued on a blockchain that can take many forms. The NFT differs from the simple JPEG image on Google by several elements:
- It is unique due to its existence on the blockchain,
- It is indivisible, contrary to crypto tokens,
- It has a set of metadata (author, creation date, list of owners…) that is fully reliable and public on the blockchain.
- Thanks to blockchain technology, this data cannot be falsified.
NFTs have already been around for several years, but it was in 2021 that they really exploded. The examples of NFTs that started to buzz are numerous and well-known: we started with NBA Top Shots, these NBA highlights that are sold in packs and give holders their own animated cards of the most beautiful dunks or dribbles. For example, Lebron James’ famous “Dunk on Kings”, currently on sale for $1M. The Crypto Kitties craze then took over the market, some of these little cats that can be bred have sold for up to 600 ETH (€2.4M today).
CryptoPunks then took NFTs into another dimension. Auction houses like Sotheby’s started to take an interest in NFTs and hold dedicated auctions. In June, Sotheby’s sold CryptoPunk #7523 for $11.7M.
Finally, a new milestone has been reached with the recent fundraising of the French company Sorare which has just raised € 680M. Sorare allows you to collect NFT cards of soccer players with different levels of rarity to build a team and participate in tournaments. On Sorare, everything is extremely simplified for novice users and makes NFTs accessible to all.
The corporate aspect of NFT is also gaining importance. Some startups are offering their services to big companies for adding NFTs to their range of services. The French startup Arianee for example is partnering with Breitling, Ba&sh or Vacheron Constantin to give a virtual twin to their physical goods. French website C-Discount also uses a NFT service developed by the French startup Ownest to allow packages tracking with the help of a NFT. These uses of NFT are a drop in the bucket compared to the many possibilities offered by the technology.
How do customers buy NFTs today?
Today, NFTs are sold on websites specialized in the sale and distribution of NFTs. Initially based on the Ethereum blockchain, NFTs are developing more and more on new chains: Binance Chain, Solana or Tezos with many exciting initiatives developing. The most known platforms are Opensea or Rarible which sell the most known NFT on the Ethereum chain.
As far as Tezos is concerned, the most known initiatives are Kalamint or Hic et Nunc for example which allow to buy NFT with XTZ. Customers do not need to own Ether and pay the high transaction fees of the Ethereum network to acquire NFTs thanks to the initiatives on the different chains.
To buy NFTs, customers therefore need to own the network currency (ETH, XTZ, SOL…), they can buy NFTs on the different selling platforms via the connection of wallets to NFT sites. The NFTs are then sent directly to the customers’ wallets and can be resold on the marketplaces.
Why is a stablecoin useful in this case?
To buy NFTs it is necessary to own volatile crypto currencies. This can cause various problems for both buyers and artists.
By buying NFTs with their ETH or XTZ, buyers are therefore exposed to volatility with the risk of the value of the amount paid in crypto for the NFT exploding with the price of the crypto. The value of the NFT is much more related to the price of the crypto than to the intrinsic value of the work. The risk in this case is therefore great for the buyers. Indeed, no one wants to become the next NFT pizza guy by having overpaid for an NFT that may have lost its value!
For the artists, the risk is also great to be paid in volatile crypto. Indeed, if a strong rise is beneficial for them, a contrario a prolonged fall following the sale of their works can be harmful to them. Such an exposure to volatility for artists who would live only from the sale of their NFTs puts them in an uncomfortable situation on the long term and economically unviable.
Outside the crypto world, many people are afraid to buy volatile assets. Buying a stablecoin is therefore much easier for them because it allows to use cryptos without being exposed with a risk. As a result, they will be much more willing to buy goods as NFTs with non-volatile assets.
To overcome these three problems, a solution seems obvious: accept NFT payments in stablecoins for both artists and crypto holders. This way, buyers have a real visibility on the prices paid and the ROI over time, on the other hand, artists can manage their cash flow in an optimal way. A question arises however about the type of stablecoins. The regulations on stablecoins are going to get tougher, so it is necessary to choose the right one and to check the guarantees of these coins to ensure stability, collateral, and viability of the project on a long-term horizon. That’s why the EURL is suitable for NFT stablecoin payments because of the guarantees it offers thanks to our banking and audit partners (Société Générale, KPMG).
Hence, buying NFT with EURL, will assure the buyer and the seller an instant, cheap and secured transaction without having the fear of the volatility of the asset. Acquiring NFTs in stablecoins would allow artists, buyers, and platforms to facilitate exchanges and allow the emergence of a sustainable NFT market with all the weapons to revolutionize the art markets of the coming decades.