The Economics of the Ethereum platform is very tightly coupled with NFTs, and that coupling has a lot of implications for participants in the NFT space, whether you are an artist, a collector, a speculator, or even just a casual looking to hop in.

Pricing NFTs in USD

Ethereum is a slowly inflating currency (soon to be mildly deflationary), whereas USD is an inflationary currency. As a NFT consumer, inflation motivates you to spend, while deflation motivates you to save. However, as a creator, inflation can work against you if you. For example, if you price a piece at $1000 instead of .5ETH, and the value of USD decreases by 10% due to inflation, then the same $1000 would only be able to purchase .45ETH. Inflation acts as if its a force raising the buyers up to your asking price, to use a metaphor. In theory, pricing in USD will make your pieces sell faster.

Pricing NFTs in ETH

So what happens if you do the opposite, and chose to price your piece in ETH? For this thought experiment, lets assume that ETH has moved into its mild deflationary phase (see this article for more info). When you set a price with ETH, you run the risk of the currency becoming more valuable and pricing people out of the market. Suppose you set a price of .5 ETH. On April 2nd, 2021, that translates into a USD amount of $2000. The piece sits on the market a bit, maybe because its a niche piece or maybe its just that you are still trying to find your client base. You check analytics on it on May 2nd, 2021, only a month later, and not only has it not sold, but the piece is showing up in fewer and fewer searches. .5 ETH now translates into a USD amount of $3000. Where you were hoping to attract an affluent but still moderate income buyer at approximately $2000 (think $1999), you are now asking for 50% more, multiple thousands of dollars. To continue the analogy above, the deflationary effect of pricing with ETH acts like a force pushing the piece up out of reach of the buyers, which is exactly what you don’t want to happen.

What are my options?

If you’ve made it this far, you can see that we clearly have reached a conundrum. We are currently in an inflationary environment, and most likely will remain there for the next several years. So, in a perfect world you would want to price in USD (to help buyers make the sale) but you want to receive ETH in payment. And you would want the sale to happen as quickly as possible, in order to avoid the depreciation of value of your artwork. So what can we do?

1. Price in USD, but pad your number a bit, as you should expect it to take some time to find a buyer and want to insure that you are properly compensated for the sale.    OR
2. Price in ETH, but get aggressive with the price. You don’t want to risk the increase in ETH/USD ratio to cause your piece to move out of reach of your buyers. Additionally, as you are compensated in ETH here, the future value increase of ETH should partially compensate for the upfront reduction in earnings.

Our Recommendation

While both approaches are valid, our recommendation is to use approach #2. Be sure to be very aggressive with your ETH pricing, while being cognizant of the expensive gas pricing. Remember that .5 ETH collected today at $3000 ETH:USD ratio could easily balloon to $5000 or $10000 USD in the space of a year. Ideally, you are in a position where you have some savings and can afford to hold off on converting the ETH. But in any case, be sure to follow one of the approaches above. Good Luck!

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1111 is a newly released artwork created by Kevin Abosch, and released on March 23, 2021 on OpenSea. It is a thought provoking piece, consisting of cryptographic styled pieces, with artistic alterations claiming to be a “lingual arcana and a repository of sacred knowledge”. The pieces were auctioned off with a reserve price of 1.111 ETH and will remain on sale through Friday, March 26, 2021.

Visiting the //TECH SPECS section of Kevin Abosch’s information page on 1111, presents the reader with an interesting tidbit of information regarding the work:

This information is interesting for 3 reasons:

1. The images themselves are stored on Arweave Permaweb
2. The metadata is stored on Arweave Permaweb
3. Curiously, the work itself is listed as ERC-1155 tokens on Ethereum blockchain NOT ERC-721 tokens, better known as NFTs.

Arweave Permaweb is a decentralized storage network, that seeks to permanently store data on its chain. This differs from SIA and Filecoin in that the data is meant to be permanently stores and not a disposable or transient storage system. The Permaweb deploys a “Proof-of-Access” algorithm and claims extremely cheap effective cost for the permanence, around $.005 / MB.

Assuming that Arweave can achieve its projected goal, then it represents a very important possible solution to a long held gripe about NFTs: “What happens if the exchange hosting the metadata or the actual piece of art (images or video) of the NFT goes offline?” This problem was famously presented by a series of twitter posts by Jonty Wearing.

If the tokens sold by Kevin Abosch as 1111 do indeed point to metadata and art pieces stored on Arweave, and Arweave is indeed a permanent storage mechanism, then Abosch has effectively minted a NFT that will not suffer the same fate 10 or 20 or 50 or 100 years from now when the various other NFT exchanges and marketplaces go offline for whatever reason. For that reason, we do find 1111 a very interesting work.

But, we circle back to point #3 above. Kevin lists the NFTs as ERC-1155 tokens. Browsing to the tokens on etherscan.io yields a source contract with only bytecode available. This is curious, as other projects such as Hashmasks deliberately upload the source code of the contract in order to enable people to confirm the tokens and the contract will work as claimed. It is unclear to NFT Culture staff if this is all part of the grand work, or if it is an oversight or perhaps an attempt to obscure the real connection between the tokens and Arweave.

Furthermore, Hashmasks itself has attempted to solve the Permanence problem: On The Permanence of the Hashmasks Artwork. Their solution is to store the metadata of the IPFS URLs “on-chain” via a contract on the Ethereum platform. What this means, is that the metadata itself, which contains the IPFS locations of the Hashmasks images is stored on-chain, and the Hashmasks website is no longer a single point of failure. An obvious question here is “What about the images themselves, why can’t they be on-chain too?” Apparently, art work for the whole project exceeds 40GB, which is just not economically feasible. Interestingly, Hashmasks too uses Arweave to store the images, and the IPFS pinning mechanism for incentivizing this storage. Perhaps we will do a deep dive on IPFS and pinning in a future article. Where Hashmasks gets things right is that the contracts used to programmatically guarantee all these aspects to their work are fully open sourced and available for viewing and validation on etherscan.io. Hopefully 1111 will take note of this and do it as well.

In any case, we will continue to keep an eye on 1111 and also on future projects that attempt to follow in its footsteps. We will always cheer on people attempting to push the ball forward and make the community better as a whole.

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GateHub was hacked in June 2019, resulting in the loss of 23 million XRP (Ripple) worth almost $10m. Later the same year, the crypto wallet service was hit by another attack, which saw the private data of 1.4 million users compromised.

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Beeple’s The First 5000 Days has sold for an astounding $69 Million. The auction price was paid by approximately 42K ETH. We will continue to update this post as we learn more.

The hypothetical crash that we speculated about is most likely NOT HERE! We will update that article: What is Next for NFTs?.

The work ranks #3 in all high sales for a living artist.

The buyer is the elusive crypto figure “MetaKovan”, who is apparently chief financial officer of a project called Metapurse: https://www.metapurse.fund/. MetaKovan allegedly is based in Singapore. MetaKovan is best known for tokenizing a December Beeple drop into the B20 token. Metapurse describes there efforts to that effect here. MetaKovan’s real identity is hypothesized to be Vignesh Sundaresan, according to Amy Castor.

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Bitcoin: The first system of global, decentralized, scarce, digital money as initially introduced in a white paper titled Bitcoin: A Peer-to-Peer Electronic Cash System by Satoshi Nakamoto.

Block: Synonymous with digital pages in a ledger. Blocks are added to an existing blockchain as transactions occur on the network. Miners are rewarded for “mining” a new block.

Blockchain: A cryptographically secure digital ledger that maintains a record of all transactions that occur on the network and follows a consensus protocol for confirming new blocks to be added to the blockchain.

Cold storage: The storage of private keys in any fashion that is disconnected from the internet. Common cold storage examples include offline computers, USB drives, or paper records.

Crypto: A broad term for any cryptography-based market, system, application, or decentralized network.

Crypto asset (or ‘token’): Any digital asset built using blockchain technology, including cryptocurrencies, stablecoins, and security tokens.
Crypto Asset Volatility: Represents our internal measure of crypto volatility in the market relative to prior periods. The volatility of crypto assets is measured on an hourly basis (using 10 minute price intervals within each hour) for each crypto asset supported for trading on Coinbase, averaged over the applicable time period (quarterly), then weighted by each crypto asset’s share of total trading volume during the same time period across a select set of trading platforms, in addition to the Coinbase platform, that operate in similar markets including itBit, Bitfinex, Bitstamp, bitFlyer, Binance.US, Binance, Kraken, Gemini, Bittrex, and Poloniex.
Cryptocurrency: Bitcoin and alternative coins, or ‘altcoins’, launched after the success of Bitcoin. This category of crypto asset is designed to work as a medium of exchange, store of value, or to power applications and excludes security tokens.
Cryptoeconomy: A new open financial system built upon crypto.
Customer: A retail user, institution, or ecosystem partner on our platform.
DeFi: Short for Decentralized Finance. Peer-to-peer software-based network of protocols that can be used to facilitate traditional financial services like borrowing, lending, trading derivatives, insurance, and more through smart contracts.
Ecosystem partners: Developers, creators, merchants, asset issuers, organizations and financial institutions, and other groups building decentralized protocols, applications, products, or other services for the cryptoeconomy.
Ethereum: A decentralized global computing platform that supports smart contract transactions and peer-to-peer applications, or “Ether,” the native crypto assets on the Ethereum network.
Fork: A fundamental change to the software underlying a blockchain which results in two different blockchains, the original, and the new version. In some instances, the fork results in the creation of a new token.
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Hodl: A term used in the crypto community for holding a crypto asset through ups and downs, rather than selling it.
Hot wallet: A wallet that is connected to the internet, enabling it to broadcast transactions.
Institutions: Businesses that include hedge funds, small to large financial institutions, and corporations.
Miner: Individuals or entities who operate a computer or group of computers that add new transactions to blocks, and verify blocks created by other miners. Miners collect transaction fees and are rewarded with new tokens for their services.
Mining: The process by which new blocks are created, and thus new transactions are added to the blockchain.
Network: The collection of all miners that use computing power to maintain the ledger and add new blocks to the blockchain. Most networks are decentralized, reducing the risk of a single point of failure.
Protocol: A type of algorithm or software that governs how a blockchain operates.
Public key or private key: Each public address has a corresponding public key and private key that are cryptographically generated. A private key allows the recipient to access any funds belonging to the address, similar to a bank account password. A public key helps validate transactions that are broadcasted to and from the address. Addresses are shortened versions of public keys, which are derived from private keys.
Retail users: Individual users with an account on our platform.
Security token: A crypto asset that is a security. This includes digital forms of traditional equity or fixed income securities, or may be assets deemed to be a security based on their characterization as an investment contract or note.
Smart contract: Software that digitally facilitates or enforces a rules-based agreement or terms between transacting parties.
Stablecoin: Crypto assets designed to minimize price volatility. A stablecoin is designed to track the price of an underlying asset such as fiat money or an exchange-traded commodity (such as precious metals or industrial metals). Stablecoins can be backed by fiat money or other crypto assets.
Staking: An energy efficient equivalent of mining. Stakers use pools of tokens as collateral to validate transactions and create blocks. In exchange for this service, stakers earn a reward.
Supported crypto assets: The crypto assets we support for trading and/or custody on our platform, which included over 90 crypto assets as of December 31, 2020.
USD Coin or USDC: A stablecoin issued through the Centre Consortium (co-founded by Coinbase and Circle Internet Financial Limited, or Circle), backed by fully reserved assets, held by the issuer, and able to be purchased and sold on a 1:1 basis for U.S. dollars.
Wallet: A place to store public and private keys for crypto assets. Wallets are typically software, hardware, or paper-based.
Wallet user: A retail user who has established an account with a username on our non-custodial software-based product. Coinbase Wallet is an application that allows the user to connect to DeFi applications and self-custody crypto assets. While they operate separately from our main

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The SEC filing for Coinbase has now been made public signifying that the commission has given Coinbase their approval.  Within the S-1 Coinbase had disclose many intimate details of the company to lure potential investors into the direct IPO.  Interesting details include Coinbase earning over a billion dollars in revenue in 2020 up over 100% from the previous year.

Founded in 2012 on the premise to help people send and receive cryptocurrency, their stated Mission is to create an open financial system for the world and provide economic freedom for every person and business. Over nearly a decade Coinbase has grown and for the first time has shared some impressive statistics about that growth and why the IPO is a good thing.

Key Coinbase S-1 Highlights

• $456 Billion in lifetime trading volume
• $90 Billion in assets currently on platform
• Over 40 million users
• 7000 institutions served
• Users in over 100 countries

Coinbase goes further to describe the major issues with current financial systems

Today’s financial system relies upon a patchwork of intermediaries that spans banks, brokers, clearinghouses, custodians, exchanges, payment processors, and their networks to facilitate money movement, safekeeping, lending, credit, and other capital markets activity. The trust and reliance on this complex web of intermediaries imposes the following limitations

• Limit 1: Access: geography and socioeconomics make it hard with limited access to bank accounts and funds
• Limit 2: Efficiency: Too many layers make it cumbersome to move money and currency in the current financial systems
• Limit 3: Cost: Current redundancy issues make it prohibitive for end users.

Coinbase Platform Value

We have developed a complementary suite of products and services that are designed to meet the distinct needs of our customers as they transact in the cryptoeconomy. Our customers – retail users, institutions, and ecosystem partners – come together on our platform to create a powerful flywheel for our business.

Our platform and flywheel are powered by a robust backend technology system that enables us to develop, launch, and market scalable new products and services. Our technology platform includes the following elements:

They are clearing the runway and giving Coinbase the greenlight toward IPO which will have a momentous impact on the perception of cryptocurrency in 2021.  Get ready. It’s going to be a wild ride.

We will provide updates as they come in and you can read the entire S-1 Here.

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