The state of the NFT market
The recent NFT craze seems to at least temporary calm down with “floor prices” - the lowest price of an NFT in a collection - of some major projects slowly falling down from February’s highs. While the market is cooling off, developers are focusing on solving all sorts of issues from high gas fees to over-relying on a traditional centralized Internet infrastructure.
In the previous newsletter we’ve talked about the difference between on-chain and off-chain voting in the decentralized governance process of many DeFi projects. Now it’s the time to discuss a similar situation in the NFT space, which tries to marry on-chain tokens with off-chain data.
Since storing data on a blockchain is very expensive, most minted NFTs nowadays are essentially HTTP links (URLs) or IPFS hashes (CIDs) embedded into non-fungible tokens. Such an architecture has rightfully drawn a lot of criticism lately.
On one hand, the ownership of NFTs is secured by the highly decentralized censorship-resistant Ethereum network, but on the other hand, the content behind HTTP URLs can easily be altered and IPFS hashes don’t guarantee that the content will be permanently available.
For example, Beeple’s “Crossroad” NFT points to a file hosted on servers belonging to the Nifty startup, which means that the content behind the URL link can be changed or even deleted if the company ever go bust.
The “Everydays: The First 5000 Days” NFT — also by the same aforementioned artist — which was sold through acution house Christie’s for the record-breaking $69 million in March, has an embedded link to an IPFS gateway run by MakersPlace. Such approach is better because the IPFS hash can guarantee the authenticity of the content. However, if MakersPlace shuts down its business in the future, or is coerced to stop hosting the artwork, Beeple’s NFT will point to a dead link. It doesn’t mean that the NFT will suddenly become worthless, but it may have a serious negative impact on its value.
Unfortunately, that’s not just a hypothetical problem, but an actual reality of many NFTs, according to Check My NFT.
There are multiple approaches to solve this problem with no silver bullet. Enjin has recently announced its new NFT-focused blockchain Efinity on Polkadot, which might help solve issues with high gas fees, but storing all NFT media on-chain won’t be an option for most projects any time soon. For context, the artwork behind famous NFT project Hashmasks requires around 40GB of storage space.
Monero is under attack… again
Privacy-focused cryptocurrency Monero (XMR) became a victim of a social attack. A malicious actor spammed 25 subreddits with more than 13,000 low-quality comments, shilling Monero.
While spammer’s motivations are still unclear, most likely the attack had a goal of alienating the public and potentially provoking strict anti-spam measures.
So far the attack had mixed results. From one side, the attacker achieved certain success, because moderators of some subreddits indeed started auto-censoring comments that mention Monero. On the other side, redditors started actively discussing the attack with at least one post being pinned to the top of the r/CryptoCurrency subreddit for a few days, which has over 2 million registered members.
In other news
PayPal rolled out crypto payments for its U.S. customers. The company lets users pay with bitcoin (BTC), ether (ETH), litecoin (LTC), and bitcoin cash (BCH) to millions of merchants that the payment processor supports. Cryptos are converted into fiat currencies by PayPal on its customer’s behalf during a payment.
Visa becomes the first major payment processor to settle transactions in US dollar-backed centralized stablecoin USDC, over the Ethereum network. The company is piloting the USDC settlement process with Crypto.com and plans to offer similar settlement options to other partners later this year.
New DeFi project Force has been exploited for ~$367,000 shortly after its launch. According to the team, project’s interest-bearing token xFORCE will be re-launched after the bugs are fixed.