Can NFTs be used as currency?
So following on from the NFT store of value commentary in "Is a Ruby a store of value?" we now return to the chronicles of Wikipedia, and the seemingly benign commentary or definition of a store of value. Here is the final paragraph from the examples of stores value Wikipedia commentary: "Cryptocurrency's role as a store of value is currently a matter of debate.  The Internal Revenue Service has issued guidance on "virtual currencies" that refers to them as "a medium of exchange, a unit of account, and/or a store of value." The cryptocurrency Bitcoin is often compared by advocates to gold. In their role as a store of value, cryptocurrencies often elicit concern, due to their extreme volatility,  or due to concerns about the emergence of regulation and contradictory handling by governments." Again, nothing controversial here, as it's very much up for debate. We argued and highlighted in our WP, that Bitcoin has proved one point and done so extremely well - it is a speculative asset, a very good one at that and there is nothing wrong with that reality. Now is it more than that? Its utility is certainly growing and again we return to Wikipedia which opens up that pandora's box when it discusses the following: "Money as a store of value Monetary economics is the branch of economics that analyses the functions of money. Storage of value is one of the three generally accepted functions of money. The other functions are the medium of exchange, which is used as an intermediary to avoid the inconveniences of the coincidence of wants, and the unit of account, which allows the value of various goods, services, assets, and liabilities to be rendered in multiples of the same unit. Money is well-suited to storing value because of its purchasing power. It is also useful because of its durability. Because of its function as a store of value, large quantities of money are hoarded. Money's usefulness as a store of value declines if there are significant changes in the general level of prices. So if inflation rises, purchasing power declines, and a cost is placed on those holding money. Workers who are paid in a currency that is experiencing high-inflation will prefer to spend their income quickly instead of saving it. When a currency loses its store of value, or more accurately when a currency is perceived to lose its future purchasing power, it fails to function as money. This causes people to use currencies from other countries as a substitute. According to the Cambridge cash-balance theory, which is represented by the Cambridge equation, money's ability to store value is more important than its function as a medium of exchange. Cambridge claims that the demand for money is derived from its ability to store value. This is contrary to Fisher economists' belief that demand arises because money is needed for exchange." Now wisely or not, we are happy not to get involved in that conversation with regard to money and Bitcoin. What we are far more comfortable doing is discussing our utility token. We have bored readers now (and we will do so again in future blogs) with references to our forthcoming NFTs, but for now, we will allow the web to define (we think incorrectly) an NFT as follows:
"Can NFTs be used as currency?
A non-fungible token (NFT) is a unique digital asset that represents ownership of real-world items like art, video clips, music, and more. NFTs use the same blockchain technology that powers cryptocurrencies, but they're not a currency.17 Feb 2022" So we then come to the nebulous world of utility tokens, and the regulatory purgatory they represent. The internet defines a utility token thus:
"a digital token of cryptocurrency that is issued in order to fund the development of the cryptocurrency and that can be later used to purchase a good or service offered by the issuer of the cryptocurrency sold utility tokens as a method of fundraising for the start-up." Our issuance fits that definition, and we have invested a tremendous amount of time and money with lawyers to ensure that our token is absolutely not a security token. We have independent legal testimony to that fact, and our website makes clear that our offering is a utility token and only a utility token (and why it is not a security token - there are no ownership or voting rights, etc). If it were a security token it would have to trade on a regulated market, of which there are very few, and very much on the periphery of the crypto-verse. Our utility token demonstrates how we will lock up a collectible, and ensure it is kept safe and can never be sold. Let's ignore the fact we are dealing with a collectible, a NON-regulated investment. An asset, and it's opaque (closed and ineffectual) markets that have never been regulated since time immemorial. Can you buy such an asset in the crpto-verse, using your own cryptocurrency, as you can in the real world? No, because it would be deemed a security token and regulated accordingly. Ironic if not ridiculous, BUT also a blessing too since it offers the NFT solution we propose and a way to improve and open imperfect markets, unlocking real and dormant value. But we digress, look at the above definition of money, as a store of value. Then look at our offering:
1) The finite issuance of tokens 2) The fact the token is tied (though absolutely not backed by) a real tangible asset (a rare and valuable collectible). We are absolutely not (and are legally prohibited from) saying our token could become a currency or have independent value - that's not the purpose of a utility token. And any assessment of value beyond its future utility is of course an eye of the beholder opinion.
What we can state is we believe so passionately in our project that we have committed one of our valuable assets forever on the basis that it not only showcases our asset quality but also demonstrates how we will protect and lock away that real-world asset in perpetuity so that it can be digitalised and reformatted in a fractionalised NFT format.