Destiner's Notes

The bull case for NFTs

14 February 2019

In November 28th of 2017, CryptoKitties was launched. Since then, the world of blockchain collectibles was never the same again.

While you are here, feel free to check out my friend’s NFT collection.


But let’s rewind first. CryptoKitties weren’t the first attempt to put non-fungible assets on the blockchain.

Once the Bitcoin network emerged, it was only a matter of time until someone started to repurpose it to secure arbitrary data. One of such experiments is Proof of Existence, a timestamping service. Another one is Counterparty.

Counterparty is a protocol built upon Bitcoin to provide rich scripting functionality compared to what the underlying network provides. It was launched back in 2014. Since then, it grew its ecosystem in terms of community, development activity, and projects. Wallets and DEXs were created, as well as third-party mobile apps and websites.

The most popular use cases of Counterparty are games and collectibles.

The first and the biggest collectible launched on Counterparty is Rare Pepes. Announced on September 14, 2016, it launched as a one-man project but quickly turned into an ecosystem of its own, where multiple third-party devs created tools and applications to view and manage blockchain pepes.

Finally, Cryptopunks was one of the first collectibles on Ethereum. Its contract was deployed on June 9, 2017 (this contract had a bug, and the new version was deployed later). Since then, Cryptopunks had a hell of a story from a side project with barely any traction to the soldout on an offline painting auction. The Breaker article worth a read.

Use cases

Back to the present time. What is the current game field? Who are the biggest players?


Speaking of players, blockchain games on Ethereum took off. Since the launch of Cryptokitties, many new games and even game dev studios emerged.

Contrary to the traditional video game industry, VC seems to be very interested in blockchain games, probably because of the enormous potential upside. However, I think there is one more reason. Good Ethereum games try to create an ecosystem rather than the game. Once the main product is taking off, the main goal is to onboard third-party developers to build upon it and enjoy the network effects.

Easier said than done, of course. You can’t simply pour money into it, you need to create an organic community.

Another interesting “killer feature” is interoperability. As everything happens on the same chain, games and in-game assets can be programmed to be aware of each other. Axies walking on the Decentraland tiles. Cryptokitties as Gods Unchained cards.

To be honest, I’m still a bit skeptical of blockchain games. Scalability is an issue, but that is not a big concern to me, as sidechains sound like a pretty good solution. But are tradable assets and interoperability enough to convince people to create the next Fortnite on Ethereum? Is tradeability even an advantage? And if yes, can’t we solve that without the blockchain? Will players want to trade one NFTs for others or just having an ability to buy and sell them with money is enough?


Blockchain art can be split into two categories: tokenized real paintings and digital native art. Both can be a billion dollar industry, but my preference goes to the latter. However, it’s more a personal preference than an investor’s decision, unless you see “tokenized stuff is boring” as a decent investment thesis.

People buy digital art because it’s fun, because it can appreciate, and because they want to support artists. It’s really hard to tell whether the digital art market will increase in value, and if so, which pieces will become expensive. The highest return will be generated by the earliest items and the ones that were sold in big auctions. The supply looks much bigger than the demand, thus the power law will rule, as with any digital art or digital content whatsoever.

One digital artist shared his opinion on digital art and how it should be consumed:

Principally, I share all of my work online. I really like the idea of people sharing online. My works have never been for printing. Really, I prefer to post them online and share the digital images in that way. I consume art through the internet, and I prefer that it stays there.


Other interesting concepts start to emerge that can’t be as neatly categorized. I’ll talk on a few of them.

Marble Cards, which was launched recently, is a mix of a game and a collectible. Each link from the Internet can be “marbled” into an NFT card. New marbled tokens are put on the auction.

Marble Cards are interesting because they attach value to Internet content. It is interesting to see which links will be more valuable than others and how the community will use (and abuse) the system.

Gift cards on Ethereum also spread last year. is one example, combining gifting NFTs with charity.

User-minting solutions is a hot topic. If we will give people an ability to create, trade, and send NFTs, what are they going to do with it? Mintable is one of the interfaces that allows deploying an NFT smart contract and mint new tokens using a familiar web interface.

Business model

Here comes my favorite part.

As an introduction, let’s look at how most of the decentralized applications and protocols are funded today. It’s either investors’ money or community grants.

At first glance, nothing seems off here. VC money is a common choice for tech startups, and grants fit perfectly for “common good” research. However, when we talk about individuals creating niche products as a way to create sustainable income, neither serves well. With the growth of indie makers movement, people realize that often they don’t want to shoot for the next unicorn. Instead, they want a small sustainable business that can generate a stable income.

That freedom wasn’t simply available to makers that wanted to build and create on Ethereum, until very recently.

Game developers can sell the first batch of NFTs to fundraise money on further development. At first glance, this model sounds similar to token presales. However, that’s far from the truth. Unlike ICO, it works only if you already have a working product. Unlike ICO, it needs players and fans, not retail investors and whales.

Another promising indie business model is digital artists selling their creations as NFTs on marketplaces for a living.


Many things were built around Ethereum collectibles. It’s impossible to cover them all, so I’ll give a quick overview with some examples.

A good way to look at the NFT industry from a bird’s-eye view is to look at stats and charts of trading volume and the number of transfers. NonFungible and CryptoDecks come handy when looking at the usage data.


It’s surprising how much asset types can be united under one standard.

ERC-721 did to NFTs what ERC-20 did to tokens, and it will do even more. I predict that in 10 years more value will be held under NFTs than under fungible tokens.


Most Ethereum wallets (especially mobile) support collectibles. What’s more interesting, wallets created specifically for NFTs and games are popping up: Vault, Dot, Lumi Collect.


NFTs essentially represent value. In crypto, traditionally much of the research and development went to designing platforms to exchange the value, and NFTs are no exception. Numerous marketplaces were created to facilitate trading in various forms.

Firstly, traditional, general-purpose marketplaces Open Sea and Rare Bits allow anyone to submit offers or execute them. It’s interesting to see how the marketplaces experiment with different market making and price discovery techniques, like auctions, private listings, and group listing.

Digital art marketplaces are very interesting. I see them less as marketplaces and more like a publishing platforms. For digital artists, minting an NFT on Super Rare, Known Origin, etc is like an authenticity mark that has a reputation of the issuing platform. It’ll be interesting to see how this will evolve over time.

Pixura, the creator of Super Rare, is offering a white-label collectible marketplace as a service. This should be helpful for blockchain game developers and artists that want to monetize their digital assets.

With the release of version 2, 0x introduced an extension to the exchange contract for trading ERC721 tokens, bringing the technical cost of creating an NFT marketplace down to zero. As technology is commoditized, it’s now a competition of product development and marketing to create the most successful exchange.

One of the 0x powered NFTs marketplaces is Emoon, which recently announced off-chain auctions: bidding is gas-free and instant unless you make the winning bid.


Using NFTs as a marketing tool is super early, but has a big potential IMO. One of the best ways to acquire users is to build a loyal community. People who love the product will tell all their friends about it.

NFTs are cheap to create: what you need are custom art and one Ethereum transaction. At the same time, NFTs are valuable to community members. Therefore, one marketing strategy is to reward the most active users with well-crafted NFTs to build an even more powerful relationship with them. By serving to the core audience, you’ll recruit early adopters and evangelists that will help you to build the product.


Non-fungible tokens, which started as a blockchain cat game, transformed into a whole new industry and formed an entirely new asset class.

The best thing about NFTs if that we don’t know all the possibilities yet. There are 2 existing use cases, 10 are being developed, and hundreds are still to be discovered.