Here a few observations about NFTs on Layer 2, which hint at the possibility true network effects.
These effects *only apply to nonfungibles*.
🌠🌆🎆👇
ERC721 NFTs are notoriously hard to move, you have to pay gas per asset and there is no bulk transfer.
That means once you start a collection in a particular wallet, it will be very expensive to move to a new one.
This implies that users entering the NFT world through a rollup have little incentive to move their assets to the base layer.
Moreover, moving the assets to another L2 is going to cost at least as much as bulk wallet transfers.
With Optimistic Rollups (ORs) in particular, there is an offboarding period for moving back on-chain which could take weeks.
For fungibles, an “offboarding intermediary” can give you liquidity straight away for a fee. But this scheme doesn’t work for NFTs, which are illiquid.
In other words, ORs are suboptimal for NFTs. And L2s are likely to develop network effects based on concentrations of NFTs.
This is a much different state of affairs than fungible assets, for whom moving between base layers and L2s is generally quick and low cost.
/end
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First key take away is that inflation is really a relative measure, and poorly expressed through the CPI.
Real inflation rates are much worse than they appear & the cost of your capital is not being compensated adequately by traditional investments like bonds and real estate.
MicroStrategy found an interesting way to obtain a loan and buy Bitcoin with it in a way that takes advantage of the inflation hedge, control downside risk, and bet on the future.
“There is no 5 year timeframe in which Bitcoin underperformed.”
2/Some say that NFTs “shouldn’t be” liquid, yet the innovation process continues.
Just like photography has become much easier to create in the last 100 years, liquid NFTs will surely bring down price points of tokenized digital content but will also open expansive new markets.
3/The key observation is this: #NFTLiquidity is merely a technical problem for #DeFi, and the entire set of economic mechanisms is its solution space.
👉🏻 In particular, because of tokenization, *the NFT liquidity problem reduces to the NFT price discovery problem.*