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NFTs Are Here. But Where Are They Headed?



Michael J. Casey is the chairman of CoinDesk’s advisory board and a senior advisor for blockchain research at MIT’s Digital Currency Initiative.

The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday exclusively to our subscribers.


There was something both fresh and familiar about the NFT.NYC conference that non-fungible token developer PeopleBrowsr put on at the PlayStation Theater in Times Square last week.

It felt like some of the early bitcoin conferences: A little scrappy and rough around the edges, some wild ideas that ranged from practical to pie-in-the-sky, but in all exuding a great deal of enthusiasm for a novel blockchain technology that could spawn a variety of new business and philanthropic models.

It remains to be seen whether NFTs can get beyond the gimmick status they occupied in popular imagination since Dapper Labs launched CryptoKitties, the popular game that creates unique, collectible, breedable digital cats. There are questions about scalability and interoperability associated with ERC-721, the dominant, Ethereum-based NFT standard, and on whether the world will embrace outside-the-box ideas for redefining value, property and commerce.

As with bitcoin’s development, success or failure will depend upon the emergence of an impassioned community and ecosystem around the technology, and the vibe at NFT.NYC suggested this is happening.

What’s both interesting and challenging, though, is that the very notion of community in the NFT world is quite different from the one observed in fungible tokens such as bitcoin. Unlike a bitcoin, which is intended to be fully substitutable for any other bitcoin, a non-fungible token is a unique piece of digital property.

Thus, the community that assigns value to that asset can often be quite narrow.

Speaking with me on stage, Arnold Waldstein, who raised $140,000 for ocean conservation via the Honu project – a collectible CryptoKitty that was part turtle, part cat – noted that Honu became a compelling storytelling device with which to galvanize action among a specific community of people passionate about ocean health.

But at the same time, the structure and community makeup made it difficult to achieve fundraising goals under the initial proposal. The team eventually had to abandon an auction model and went for a one-off sale.

It’s challenges like that which have people questioning what kind of business model could function for NFTs. Thankfully, some compelling ideas for new models that address them bubbled forth at the event.

Cashing on future upside

One key idea is that by attaching a smart contract that enshrines rights for the primary issuer of a token to future income from secondary market sales, creators of digital assets can be encouraged to relinquish control of them.

Venture capitalist David Pakman argued that the idea could lead NFT-embracing gaming companies to dramatically change their approach to how they make money. Such companies could deliberately create a limited supply of a particular digital artifact and ensure that they extract upside from future sales.

This way, rather than locking gamers into a walled garden of value capture, they can let their assets escape into the wider world, where they can generate greater value for the brand.

There was much talk of artists doing the same with otherwise unique, one-off works of art. As of now, an artist might sell a painting to a buyer for $10,000 but gain no benefit when a collector or a gallery subsequently buys it from that first buyer for, say, $1 million. If the work were indelibly associated with a unique NFT and a smart contract to manage future transaction rights, there could be a way for the original artist to participate in that future appreciation.

The approach could also enable payments for derivative works by creatives working with others’ original music or other artistic content. Or it could help charitable efforts like the Honu project, because the resale of the crypto-turtle-kitty to future buyers could continue to kick back funds to philanthropic cause it represents.

It’s these kinds of ideas that make the NFT conversation so engaging, enabling a break with pre-existing mental models so that innovators can conceive of creative new approaches to problems.

For now, much of it is highly intangible, though it was good to see NFT.NYC exhibitors such as, which demonstrated the potential for redeemable NFTs to transform gift tokens, branding and commercial exchange by showing visitors how to redeem a token in their wallet for a cup of coffee delivered by a Raspberry Pi-enabled coffee machine.

The tension between community and economy

Still, the question remains whether the narrow community of interests attached to specific NFTs can generate enough liquidity to make them viable.

This will depend in part on the success of different blockchain community’s scaling initiatives and on interoperability solutions such as the Cosmos and Polkadot networks, which could enable NFTs to move across blockchains. If the entire world is to be “tokenized” with these unique digital markers, as some suggest will be the case, we have to get far beyond the clunky on-chain transaction-processing capabilities of Ethereum and its competitors.

It’s a vision worth fighting for because communities are the breeding grounds for all notions of value. If you can tap into them, you can drive adoption. To achieve that, developers must consider that each community is unique: the things they value, the contracts their members enter into, and their preference for how to govern themselves aren’t necessarily served by anchoring themselves into monolithic blockchains with rigid programming logic.

It’s why, in addition to NFTs, other projects are working on community-based digital asset issuance models that don’t depend on an underlying chain or virtual machine such as Ethereum to process all transactions.

These include Intercoin, perhaps best known for now by a prominent hand-painted mural that greets motorists on the Gowanus Expressway heading into Manhattan from Brooklyn, and the colorfully named Economic Space Agency that was set up in Oakland, California by a group of radical economists, technologists and other social scientists.

The common idea in these concepts is that the smart contract-features, the terms attached the token, and the consensus model can be designed uniquely according to each community’s preferences. Whether they can be secure from attack and sufficiently liquid is the question.

In all of this, there is tension between the narrow, subjectivities of a distinct community’s expressions of value and the requirement to interface that otherwise closed subset of interests with a more universally accepted expression of value in the wider economy – in other words with fungible, negotiable instruments such as bitcoin or dollars.

It’s in confronting those tensions and figuring out the best business models to overcome them that NFTs and their ilk have the best chance of enabling practical, real implementations that can have a marked impact on the world. The more that those who are working on them come together and explore the prospects, the greater the chance of success.

NFT.NYC event image via CoinDesk archive

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Researchers Discover How To Automate Accountability On The Blockchain




“The (virtual) gold rush is on, and as in the Wild West of yore, the outlaws are ever present,” wrote blockchain developers and academics in a recent paper, Polygraph: Accountable Byzantine Agreement. Luckily, these researchers have have discovered a way to detect and punish dishonest blockchain users.

The authors — Vincent Gramoli and Pierre Civit of the University of Sydney, and Seth Gilbert of the National University of Singapore — developed the Polygraph protocol, which automates accountability in blockchains to hold participants accountable for double spending, a notoriously knotty issue in cryptography.

Though the double spend problem was supposedly solved by Satoshi’s white paper, published in 2008, the researchers discovered that disagreements caused by blockchain forks can lead to double spending if the resulting branches have conflicting transactions.

They cite a zombie case:

“Byzantine nodes can override the General Polygraph Protocol by proposing directly two conflicting views to two different clients to then perform a double-spending attack. The coalition does not participate to the consensus in order to violate the liveness property…. Note that safety is also violated: When a client invokes the read() primitive, the coalition can answer arbitrary values, despite the non-termination of the legitimate consensus. The client is supposed to trust the coalition, like all the other clients who can forever receive a different output for the read() primitive. Hence, for t ≥ n − t0, the eventual prefix property is violated. This makes the blockchain vulnerable to a double-spending attack.”

Yes, the paper is scholarly, but it also provides pragmatic solutions to real problems in current consensus mechanisms.

The group considers the growing threat of centralization on blockchains, caused by the collectivizing of hashing power. Under traditional Byzantine protocol agreements, if one party amasses more than one-third of total mining output they gain decision making authority. As an aside, the authors note that the largest Bitcoin mining pool today controls approximately 19 percent of total hashing power.

“We need a new sheriff in town to bring the guilty parties to justice. What if, instead of preventing bad behavior by a party that controls too much of the network power, we guarantee accountability,” write the authors.

Much in the way we prevent crime in the real world, we can prevent bad blockchain behavior via “defense-in-depth” — the basic Byzantine agreement protocol that prevents usurpation if the attacker has less than one-third of network control or if the network infrastructure is working to pass messages in time.

“Byzantine agreement protocols act as the locks on the bank doors, preventing the gangs from making off with the loot,” they wrote.

However, when these guarantees fail — and the authors suggest they can and do — the Polygraph protocol will intercept malicious behavior.

The Polygraph’s basic algorithm is based on the Byzantine agreement protocol, but goes further in that proceeds through asynchronous rounds, or a vote that receives democratic imput.

“First, a reliable broadcaster is used to distribute the proposal values. Then, a second phase of communication is used to determine whether enough processes have converged on a single value. Finally the processes decide, if they can; and if not, they update their estimate in an attempt to converge on a single value.”

This Town Isn’t Big Enough

If the process determines that someone is pursuing illegal actions, the consensus can vote them off the network.

“Accountability has been overlooked in blockchains but it is actually key to security,” said Gramoli, who also serves as Red Belly Blockchain CEO. “The industry cannot accept blockchain to be a simple distributed system where valuable assets vanish as soon as a third of the participants form a coalition.”

Red Belly Blockchain has been funded by the Australian Research Council and developed by researchers of the Concurrent Systems Research Group at the University of Sydney and Data61-CSIRO.

Photo by Xiang Gao on Unsplash

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A New Bitcoin Exchange Point On the Colombian-Venezuelan Border Will Help Refugees




A new cryptocurrency exchange service is available on the border between Colombia and Venezuela and its aim is to help refugees traveling across the Simon Bolivar International Bridge.

Visitors are now able to use the point-of-sale service with cryptocurrencies to buy goods. The POS is located in Santander, Colombia, just across the border from Venezuela. Panda Group created the payment alternative with refugees in mind. The group, a Columbian-Venezuela joint venture, announced the implementation of the new service through their Twitter account.

According to the data published by, the service lets users exchange using bitcoin (BTC), bitcoin cash (BCH) and dai (DAI), and converts them into to Colombian Pesos (COP).

At the physical location – a small phone service provider in a mall called La Parada – customers can buy bitcoin with prices based on the Localbitcoins rate in pesos. The service will charge 10 percent above the market price and those who sell their bitcoins will do so for 5 percent more than the established market value.

This is not the first cryptocurrency service in the country. The Panda Group has already installed another five cryptocurrency exchanges in Colombia, most of them in the Colombian capital, Bogotá.

According to Panda CEO, Arley Lozano Jaramillo, their solutions are focused on helping the Venezuelan users and they announced the addition of a new service called Xpay.Cash to encourage adoption.

“This service is for all our brothers to pay directly in Cucuta with their cryptoassets and mitigate the loss of exchanging from BTC to COP, which represents a loss of at least 20%,” Jaramillo said.

Colombia has the highest rate of cryptocurrency investors in South America, next to Brazil. There are reportedly over 20 businesses accepting bitcoin payments in the country. The establishments are mainly focused in tourism, food and digital services.

Bitcoin At The Border

The ATM installed in Villa del Rosario City is connected to the Venezuelan border by the state of Tachira. The states are only separated by the Simon Bolivar International Bridge, one of the most heavily traveled borders used by Venezuelan refugees.

The refugee situation has also sparked a focus on the cryptocurrency, mainly for humanitarian aid purposes.

On the other hand, the last point of sale with cryptocurrency was implemented in Cúcuta, another border location with an growing Venezuelan population. The state also has a Bitcoin ATM, one of forty-two in the country.

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Fidelity-Backed Crypto Analytics Firm to Integrate Twitter-Based Crypto Sentiment Feed




Crypto analytics firm Coin Metrics partnered with Social Market Analytics (SMA) to collaborate on a feed of real-time sentiment towards cryptocurrency based on social media data, according to a press release on June 17.

The new partnership intends to collect and analyze data posted by crypto community on social media in order to provide a new tool to help crypto traders to track social media sentiment data to build their portfolio strategies.

The new product will initially target sentiment data solely on social media giant Twitter, Coin Metrics CEO Tim Rice confirmed to Cointelegraph, adding that the firms are currently not considering integration of the service into Facebook.

Specifically,Coin Metrics will incorporate the product into market data platform, called the SMA cryptocurrency Sentiment Feed, providing calculated metrics of data on Twitter, according to a report by crypto media outlet The Block. In the report, Rice said that the calculation algorithms would include relevant tweets and calculate “19 different aggregate sentiment metrics down to snapshots of one minute.”

Social Market Analytics is providing social media-powered predictive data analytics to traditional capital markets participants in various markets, including stocks, forex, Exchange-Traded Funds (ETFs), futures, among others. Since its establishment in 2012, SMA has been a Twitter Finance partner, the firm’s CEO Joe Gits stated in an email to Cointelegraph.

Meanwhile, Coin Metrics is backed by major American investment management company Fidelity in February 2019, which participated in a $1.9 million funding round in February 2019.

Earlier today, social media giant Facebook released the white paper for its long-anticipated cryptocurrency and blockchain-powered financial project known as Libra stablecoin.

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