Non-fungible tokens, or NFTs, have dominated the cryptocurrency market this year. With sales exceeding $2.5 billion during the first half of 2021, it should come as no surprise that both the crypto community and major creators are launching NFT in hopes of increasing revenue and engagement. The rise of the Metaverse has also prompted the adoption of NFTs, demonstrating the value of nonfungibles to major brands and social media platforms alike.
While NFT sales are on the rise, the Ethereum blockchain continues to dominate the space. For example, a recent report from Cointelegraph Research found that Ethereum accounts for at least 97% of the entire NFT market segment, which includes the gaming, collectibles, and marketplaces. It is also interesting to note that blockchain analytics firm Moonstream has found that around 17% of addresses control over 80% of all NFTs on Ethereum, demonstrating the huge inequality that still exists in the NFT market.
Although this is the case, it is important to note that indestructible tokens are still a very early and new concept. Although Ethereum currently dominates the market, there are significant competitors.
For example, blockchain payments company Ripple recently announced an investment in the NFT Mintable marketplace, which will allow the platform to integrate with the XRP Ledger (XRPL) to enable creators to securely and efficiently sell NFTs. Additionally, in September of this year, Ripple launched a $250 million Creators Fund to promote coding innovation, with a special focus on non-perishable tokens.
Given Ripple’s recent involvement in the NFT space, Cointelegraph spoke to David Schwartz, Ripple’s chief technology officer and co-founder of XRP Ledger, during NFT NYC to learn more about the company’s growing interest in non-perishable tokens. Schwartz also discussed other topics including the rise of central bank digital currencies, or CBDCs, the objectives behind the XRP (wXRP) token and the upcoming roadmap for Ripple.
Cointelegraph: Thanks for joining me, David. First, what did you discuss during your talk at NFT NYC?
David SchwartzMy talk at NFT, NYC, was mostly about carbon-neutral NFTs with the XRP Ledger and solving the power consumption issue. Obviously, we won’t solve the problem of climate change in the blockchain space, but the least we can do is not make it much worse. It’s not a technical problem – we know how to not use a lot of energy, it’s just a matter of convincing people to adopt the technologies that are more climate-friendly.
Cointelegraph: Ripple rKindly suggest the standard that will allow People more smoothly Creating NFTs on the XRP Ledger. Can you discuss this in detail?
DS: We’re a little late to the party, but it’s not too late. If the NFTs succeed, we’re still early days. We initially started looking at how people wanted to use NFTs and realized that a lot of the challenges people faced was because the technology was so primitive.
“Every company that wants to get into the space needs a massive amount of specific expertise, and it’s not a good way to grow. So building these tools is what we’ve focused on. Also, sometimes money is the hurdle.”
When someone has a good idea with the right tools and the right team, sometimes they just need more money to scale. We can help them get around this to prove that the technology will work the way they want them to.
Cointelegraph: You also mentioned that the XRP Ledger is energy efficient. Can you explain why this is the case?
DSYes, the reason that Proof of Work, or Proof of Work, systems like Bitcoin (BTC) and Ethereum (ETH) are so energy-intensive is that they are specifically designed to create artificial scarcity. You may want an artificial rarity if you are trying to take advantage of something that is rare. You also need an artificial rarity for something to be valuable, and you need to convince customers that rarity is not artificial.
So Proof of Work produces artificial rarity using something rare, which is energy. When energy is used only to create an artificial scarcity, it raises the cost. The only reason you would want to do this is if you get paid a portion. Only the people who get this fee are the ones who promote that technology.
In XRP Ledger, nobody gets a transaction fee, so nobody wants high fees. The fee literally covers the cost of processing the transaction. The truth is that the XRP Ledger works just fine without artificial scarcity.
Cointelegraph: Are there any other benefits of using the XRP Ledger for NFTs vs. Ethereum?
Yes, one of them is scalability, or the number of transactions per second. There are things that you can do on Ethereum although you cannot do on the XRP Ledger. This is why a lot of DeFi business is happening today on Ethereum. You can do just about anything you can imagine, like things that involve loans, TradeFi, or mortgages and mortgages. We also have a decentralized exchange, and you can issue new tokens. Payments are cheap and fast, so it’s somewhat of a basic engineering trade-off. If you want to do it all, you can’t be good at anything. XRP Ledger has a list of things that it does well. If one of those things is what you need, that’s great. But if one isn’t what you need, you need to move on to something more general. Part of the low Ethereum transaction speed and cost is due to the fact that you can build more flexible technologies on the blockchain. Most people who build on the XRP Ledger do complicated things, but for technical reasons they don’t need these things to be right in the ledger.
We don’t have these capabilities on the XRP Ledger today, but you can issue NFTs. XRP Ledger also has a Decentralized Exchange (DEX), and you can issue new tokens. Payments are cheap and fast, so it’s somewhat of a basic engineering trade-off.
“If you want to do everything, you can’t be good at anything. The XRP Ledger has a list of things that they do really well. If one of those things is what you need, great. You need it, you need to move on to something more general.”
Part of the low Ethereum transaction speed and cost is due to the fact that you can build more flexible technologies on the blockchain. Most people who build on the XRP Ledger do complex things, but for technical reasons, they don’t need these things to be right in the ledger.
Cointelegraph: What are the best use cases for someone who wants to withdraw NFT on XRP Ledger?
DS: Today, use cases are basically collectibles. On the XRP Ledger, the cost is much lower, so if you are building an NFT on Ethereum, it should be worth at least $500, and even then the fee will be close to $100. The fees are much lower on the XRP Ledger and this allows for a wide range of use cases.
I think most use cases today are collectibles in the broad sense, like artwork, things that relate to digital art, things that relate to musicians. But I think that over time, we will see the NFT market expand.
Cointelegraph: I also wanted to discuss the XRP file. Can you go into detail about that?
DSXRP Envelope is an asset designed to track the price of XRP. For every wrapped XRP, there is XRP somewhere connected to an ecosystem that keeps XRP locked in until the encapsulated XRP is free. The idea here is that they should track the near price. XRP encapsulated will behave similarly to XRP. For example, if all you are using for XRP is transferring value, and you have something of similar value, they should act as alternatives in the marketplace.
“The disadvantage of Wrapped XRP is that you cannot transfer it cheaply and quickly on the XRP Ledger like XRP. But the advantage is that you can use it in a DEX on Ethereum.”
For example, if you have 500 XRP to use for a DEX and can’t do that today at any price, Wrapped XRP will allow you to get the XRP tokens and Ethereum semantics. This will help prevent XRP from blocking features. We can expect to see Wrapped XRP launch in December.
Cointelegraph: What’s next for Ripple?
DS: We have been pushing hard for CBDCs. What is exciting is that there are a lot of people in the space who don’t really know what CBDCs can do. Our vision is to imagine that every financial institution in the world is able to settle every fiat currency with every other financial institution in seconds. This is huge, but it requires interoperability and security.
“If you are going to build a payment system of this size, you need a security model that is not used by it fast, and there are largely no security issues with blockchains.”
Another advantage is interoperability. For example, the United States could not build such a system because Saudi Arabia would not use it. But if Saudi Arabia builds a system, and the US builds a system, there must be a standard for interoperability. Otherwise, banks in the US would not be able to settle the Euro with banks in Europe.
Another thing we are working on is standardized side chains that allow assets to move freely between the blockchains. The XRP file is an example of this because it allows XRP to move between the XRP Ledger and Etherem, but these are point solutions to specific problems. The advantage of solutions to a particular problem is that they enable a type of innovation that is not currently possible.
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Today, if you want Ethereum smart contracts, you have to build on the blockchain using Ethereum smart contracts. You also have to follow rules like how big a smart contact can be. Therefore, you cannot innovate at the level of changing those rules. What standardized side chains do is they allow you to innovate at the lowest level, so that users can build the blockchain with whatever fees and whatever assets they want. It can be public or private, and you can live in a short amount of time with real money.
This is great for developers who need to solve specific problems, or who want to make changes to other blockchains and need to convince people that these changes work and are safe. Unified sidechains offer today’s recipe for building a live blockchain that allows users to innovate on the blockchain itself.