What You Need to Know About Cryptocurrency, NFTs, and the Blockchains That Power Them
On May 3, S&P Dow Jones launched its first three cryptocurrency indexes, giving traders hungry for investments in the exciting new cryptocurrency a decoded crypto price model recognized by a respected name in financial services. Now, the ability to buy stock in these companies, despite the lack of regulation and oversight, is moving forward through special-purpose acquisition companies (SPACs) and IPOs.
Without establishing values for different cryptocurrencies, many have their value established by scarcity or demand, which may or may not be accurate measures. The open market allows these currencies to set their own values according to demand instead of being regulated by an organization like the U.S. Treasury that determines the value of the dollar. Market-driven value is a great idea, but can it be measured accurately enough for institutional buy-in? Most businesses and institutional investors are waiting for a predictable, regulated market to emerge in order to justify investing in cryptocurrency blockchain technology. As with any new technology, pioneers and other early adopters have emerged that include businesses and investors that are outliers.
Included in the index are NFTs—non-fungible tokens. NFTs are unique digital widgets that are part of blockchains like Ethereum, Bitcoin, and Devvio, and can be used to identify the owner of a piece of digital art or record any other unique type of data on a blockchain. Cryptocurrency is used to pay for transaction fees and computational services. Users can send Ether, the cryptocurrency used on the Ethereum blockchain, to other users, and developers can write smart contracts that receive, hold, and send Ether. Ether comes into existence by the validation of transactions on the Ethereum platform, through a process called mining.
A blockchain is a digital ledger of transactions that are duplicated across the computers on the blockchain. This distributed database system is decentralized, making hacking, changing, or cheating the system difficult to impossible because the data is duplicated on multiple systems while allowing for a single source of truth that exists on all computers in the blockchain. All transactions are recorded with a cryptographic signature. Bitcoin, Ether, or any measure of exchange based on this system make up fungible assets that can be exchanged as legal tender.
The DevvESG platform is a public blockchain focused on environmental, social, and governance compliance. The Bitcoin and Ether cryptocurrencies use exponential amounts of electricity to power transactions through mega data centers, while the Devvio platform uses “sharding”—a significantly more efficient consensus mechanism to spread out the CPU workload on a blockchain network in a less computation-intensive verification process. Clients create their own DevvX blockchain assets and records in a public blockchain-as-a-service process.
NFTs are a way for anyone with an interest in non-fungible items or services to be part of this growing digital currency system. NFTs are a blockchain implementation that is unique and can apply to any unique item, like a car, house, or artwork. Acquiring an NFT is like buying a domain name. In fact, buying an NFT that is a domain name may replace services on sites such as GoDaddy and Google. Fungibility is the ability of a good or asset to be interchanged with other individual goods or assets of the same type. Fungible assets simplify the exchange and trade processes, as fungibility implies equal value between the assets. Goods that are similar but not interchangeable—think cars and houses—are non-fungible. Although cryptocurrencies are generally considered fungible assets, some blockchain assets are unique and not interchangeable (e.g., NFTs).
Buying Ethereum cryptocurrency, for instance, allows you to make a purchase of an NFT on the online exchanges OpenSea or Rarible. All cryptocurrencies are the equivalent of a dollar amount that can be exchanged back to dollars or bought with dollars at a predetermined exchange rate. It is yours to buy and sell and may someday be worth more than you paid for it.