Nonfungible tokens, or NFTs, have been dominating the crypto market this year. With sales topping over $2.5 billion during the first half of 2021,
Nonfungible tokens, or NFTs, have been dominating the crypto market this year. With sales topping over $2.5 billion during the first half of 2021, it shouldn’t come as a surprise that both the crypto community and mainstream creators are launching NFTs in hopes of driving revenue and engagement. The rise of the Metaverse has also pushed the adoption of NFTs, demonstrating the value of nonfungibles for major brands and social media platforms alike.
While NFT sales soar, the Ethereum blockchain continues to rule the space. For instance, a recent report from Cointelegraph Research found that Ethereum represented at least 97% of every NFT market sector, which includes games, collectibles and marketplaces. It’s also interesting to point out that blockchain analytics firm Moonstream found that around 17% of addresses control more than 80% of all NFTs on Ethereum, demonstrating the vast inequality that still exists in the NFT market.
Although this is the case, it’s important to note that nonfungible tokens are still a very new and early concept. Even though Ethereum is currently dominating the market, there are significant competitors.
For example, blockchain payments firm Ripple recently announced an investment in the NFT marketplace Mintable, which would allow the platform to integrate with the XRP Ledger (XRPL) to enable creators to securely and efficiently sell their NFTs. In addition, in September this year, Ripple launched a $250 million creators fund to foster innovation in tokenization, specifically focused on nonfungible tokens.
Given Ripple’s recent involvement in the NFT space, Cointelegraph spoke to David Schwartz, Ripple’s chief technology officer, during NFT NYC to learn more about the company’s growing interest in nonfungible tokens. Schwarz also discussed other topics including the rise of central bank digital currencies, or CBDCs, the goals behind a Wrapped XRP (wXRP) token and Ripple’s upcoming roadmap.
Cointelegraph: Thanks for joining me, David. First off, what did you discuss during your talk at NFT NYC?
David Schwartz: My talk at NFT NYC was mostly about carbon-neutral NFTs and solving the energy consumption problem. Obviously, we aren’t going to solve climate change in the blockchain space, but the least we can do is not make it a lot worse. It’s not a technical problem — we know how to not consume that much energy, it’s just a matter of convincing people to adopt the technologies that are more climate-friendly.
Cointelegraph: Ripple is now letting people create NFTs on the XRP Ledger. Can you discuss this in detail?
DS: We were a little late to the party, but not too late. If NFTs are successful, then we are all still early. We initially started to look at how people wanted to use NFTs and realized that a lot of the challenges people were facing were due to the technology being very primitive.
“Every company wanting to get into the space needed a tremendous amount of specific expertise, which isn’t a good way to grow. So, building that tooling is what we’ve been focused on. Also, sometimes money is the obstacle.”
When someone has a good idea with the right tooling and the right team, sometimes they just need more money to scale. We can help them overcome this to prove the technology will work the way they want it to.
Cointelegraph: You also mentioned that the XRP Ledger is energy efficient. Could you explain why this is the case?
DS: Yes, the reason why proof-of-work, or PoW, systems like Bitcoin (BTC) and Ethereum (ETH) consume energy is that they are specifically designed to create artificial scarcity. You’d want artificial scarcity if you are trying to profit from something that has to be scarce. You also need artificial scarcity for something to be valuable, and you need to convince customers that the scarcity is not artificial.
So, PoW creates artificial scarcity by using something scarce, which is energy. When energy is purely used to create artificial scarcity though, it drives up cost. The only reason you’d want to do this is if you are getting a cut of the money. Only the people getting those fees are promoting that technology.
In the XRP Ledger, no one gets transaction fees, so no one wants high fees. The fee literally covers the cost of processing the transaction. The fact is that the XRP Ledger works just as well without artificial scarcity.
Cointelegraph: Are there any other benefits of using the XRP Ledger for NFTs versus Ethereum?
DS: Yes, one of them is the scalability, or the number of transactions per second. There are things you can do on Ethereum though that you can’t do on the XRP Ledger. That’s why a lot of decentralized finance (DeFi) work today is happening on Ethereum. You can do almost anything you can envision, like things with loans, or TradeFi, or mortgages and staking. We don’t have those capabilities on the XRP Ledger today, but you can mint NFTs.
We don’t have those capabilities on the XRP Ledger today, but you can mint NFTs. We also have…
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