We’re in the fun era of this industry.
For example: Uniswap is issuing non-fungible tokens (NFTs) to cryptocurrency wallets that lend assets to its market making services, as part of its version 3.0, released this week.
It was probably necessary to switch to NFTs from fungible tokens, because Uniswap’s new system is so much more complicated than the old one. Here’s what probably wasn’t essential: Each of these NFTs comes with a special image that represents the deposit, something shiny and pretty with a hint of cyberpunk.
It’s cute. I don’t mean that condescendingly! It just is. The team didn’t have to do this, but they did, because they knew people would like it.
We’re in the time when people are going to keep finding extremely clever solutions for problems that crop up. It’s so impressive that it makes heads spin. Someday it will hit an inflection point when what works is largely known and successful projects will do more to guard market share than solve problems.
So enjoy this time of inventiveness and charming little touches. It’s happening now, and it’s not going to last forever.
A little more on Uniswap, and then we’ll pivot to NFTs.
In case the very top of this post was a little baffling, let me explain a bit more. Uniswap is an automated market maker, which is a kind of exchange that always has a buy price and a sell price for any token it lists. In fact, it has a price for every token denominated in every other token.
Want to swap ZRX for WBTC? It’s got a price for that.
The key point is this: It’s an exchange where buyers and sellers trade with the exchange itself. A bunch of token holders have lent it coins on the promise that they would share in fees earned by the coins it lent Uniswap.
This model had some drawbacks, though, which we have explained in detail elsewhere. In short, under certain circumstances depositors could lose dollar-denominated value even as their crypto bags got heavier.
It’s called impermanent loss. It’s a head scratcher. Bancor and THORChain are similar services and they took the problem on. What do people usually do when they fear a loss? They provide insurance. So those products offered insurance in exchange for patience.
Uniswap looked at the problem a whole other way, though. It’s new solution allows depositors to put guardrails on their trades. That fixed it.
It’s just one of those reminders that pernicious problems are just one clever person away from solved.
As also mentioned, Uniswap went further and added an imagistic NFT for its depositors, even though it didn’t have to.
So let’s talk about NFTs.
What’s the No. 1 critique that gets made about NFTs?
Some version of: “It’s just a jpeg.”
OK. It’s true-ish, with a caveat: for now.
NFTs are going to be more than jpegs. When? Before you know it. What will they be? Something else! It will make sense when it happens.
Well, it will make sense to the people for whom it makes sense. Then some of them will make it make sense to others. And then everyone else will feel as though they just have to figure it out. That’s what happened with social networks, cell phones and the web itself (I was there for all of them).
But there’s some twist to be made on digital ownership out there, some tweak to the NFT model as we know it that will speak very loudly to the notion that this thing has to be owned, this has to be digital and this could only work online.
That’s coming. Someone will figure out. Someone will look at this quandary differently and come up with something new.
And technology will once again teach its lesson: You never know what the new thing is really for until it shows you.
They won’t learn the lesson of course. They never do.
So that’s the good news. The bad news: It won’t always be this way. On the old web, people used to start companies to change the world. Now they start companies to be acquired as potential features tacked upon tech giants.
But here on the blockchain, there are tons of experiences that aren’t quite right, processes that don’t quite make sense and best practices that are just too hard to practice. When those are solved the right way, the solution will look like it should have been obvious all along. It will feel natural.
And this is the time of delights. It’s nice! Appreciate it while you still can.