Non-Fungible Digital Assets on NOIZ Chain and BEAM Wallet
Goal of this Document
The goal of this document is to describe a system architecture that allows the implementation of a system similar to ERC-721 (NFT) artwork in BEAM Wallet on the NOIZ blockchain.
There is a lot of confusion on the market as to what exactly NFTs are, and a lot of confusion on the technical side of things as to why the market would choose to implement artwork ownership this way. As a result, we will start with a short primer on the current state of the market.
What is fungibility?
To say that two things are fungible is to say they are exactly equivalent. The easiest way to explain this is with examples. All US dollars are fungible because as a general rule it does not matter which US dollar you have. If someone takes all your current US dollars and gives you the same amount of
different US dollars back, it is no big issue. This is because US dollars are fungible.
Consider babies on the other hand. After giving birth at the hospital, the nurse takes your baby away for postnatal care, hands you a different baby, and tells you that you can go home. Most parents would be rather upset — this is because babies are all inherently different, and their respective properties (e.g. who their parents are) make them more valuable to some people than others (e.g. their parents). Babies are therefore non-fungible.
What are NFTs? What is their role in ‘NFT Art’ Today?
ERC-721 NFTs (non-fungible tokens) are defined in a smart contract on a blockchain that supports the Ethereum Virtual Machine. ERC-721 is just the name of a technical standard. They associate an arbitrary set of information with a particular account on the blockchain. This is sort of like an excel
a spreadsheet that looks like this:
Artist: John Smith
Name Artwork Title: Photo of my desk
Artwork link: www.ebsite.com/myart.jpg
Notably, the blockchain itself doesn’t understand any of that information except the address. So as far as the blockchain is concerned, “ownership” of an NFT is the ability to change the Account field and that is all.
Everything else exists off the blockchain and can disappear or be changed at any time. A limited number of copies of the NFT (but not of the artwork!) can be enforced on the blockchain as well.
Notably, the Artwork Link is visible to everyone and can generally be seen by everyone. You may have recently read in the news that the other fields can be updated by the token holder, but this is an unintentional bug.
In other words, this functions like a collectable only. Much like a baseball card or limited-run comic book, everyone already knows what it looks like, but there is subjective value in being the owner.
This presents a choice for the artist — do they realize more value by selling access to content, or by selling collectables where the content can be freely accessed? In the former case, allowing public access to their artwork would represent a major loss. In the latter case, their artwork can be enjoyed by many while the artist captures value from the few ‘owners’.
We believe that the current implementation of NFT artwork on the blockchain fails to offer artists this choice (it does collectables only), and thereby fails to capture a lot of value. Additionally, the existing implementation (NFTs on the Ethereum blockchain) is restrictive, inefficient, and expensive.
Interestingly, using ERC-721 NFTs is not necessary to achieve the typical functionality we see in the market today. In fact, even non-fungibility is unnecessary — after all, all copies of a digital art piece are fungible (unless you specifically implement serial numbers or another such mechanism).
This is the whole point of digital graphics — a copy of a digital graphic is exactly equivalent to the original, with perfect fidelity!
This means that there is a lot of money and time wasted on creating tokens for artwork and then moving them around. The exact price fluctuates, but as of March 2021 it is well over 100$ per token, plus the cost of the smart contract. By introducing a more efficient method of doing this, we hope to capture some of that value.
In the next section, we will propose an architecture that both provides artists with a choice in how their content is distributed and removes much of the inefficiency of the current implementation. We will always leave an option for backwards-compatibility for the user, although they will have to pay the
fees to convert to and transfer from our representation of digital art to ERC-721 NFTs.
II. A New System for Digital Goods
A New System for Collectibles
We propose a paradigm shift from NFTs to a broader concept of ‘Digital Goods’. Presently, NFTs look something like this:
This is a lot of overhead! It’s built like a Russian doll — tokens, within owners, within a smart contract, within a blockchain. Moreover, the data from a piece of artwork will be replicated many times if there is more than one copy and multiple people own them.
We propose that it can be simplified to this:
This way, a particular digital asset is described and listed natively on a blockchain without a smart contract. People can own one or more of them. This cannot be done on Ethereum, but the current NOIZ TestNet does support this feature! The fees and transaction time are a fraction of what you
would experience on Ethereum.
On the TestNet web portal, creating a new digital asset looks like this:
In this case, the name of the piece of artwork is the Asset Name, and the description would include a link to a low-resolution sample. The Quantity is the number of copies available, and this can never be changed. The decimals will always be zero since you cannot buy fractions of a piece of artwork in this model — you either own a copy or you do not. The fee is set by us and is the same for everyone.
Ownership of one or more units of this Digital Good will allow access to the full version of the artwork using NOIZ Wallet.
Moreover, these digital goods can be bought and sold on a decentralized exchange (DEX) that is already supported by our blockchain! The fees and speed of our DEX are far superior to Ethereum.
On TestNet, it looks like this:
The solution above is equivalent to the ‘Collectibles’ implementation on Ethereum that uses ERC 721 tokens but offers superior speed and functionality with lower costs.
However, the description of the artwork is public, along with any link to the artwork. Furthermore, the price fluctuates with market demand. The quantity, once issued, cannot be changed as well! This makes it unsuitable for artists who realize value through content distribution (e.g. musicians). The next section describes a different way to use Digital Goods on a blockchain to enable this distribution model as well.
A New System for Content Distribution
If you’re a content distributor, you generally don’t want there to be a secondary market in your content. For example, computer game distributors shifted to online distribution (e.g. Steam Store) in part because it eliminates the market in used games. The concept is that you own a non-transferable license to access music, movies, or games for personal use.
We can give small, independent artists access to this distribution model by defining a digital good that works more like a license than a collectable — you own a non-transferable access code (tied to your blockchain account) to a digital good, not the digital good itself. This means you can access it in BEAM wallet with your NOIZ blockchain account, but there is nothing for you to resell.
This feature exists on the NOIZ TestNet but is experimental. It works, but is presently disabled and is not accessible without special developer tools.
With this tool, all accounts on the NOIZ blockchain possess their own digital store! This empowers all users to start selling content using a distribution model previously accessible only to large content distributors.
Presently, creating a digital asset looks like this:
Once created, it will be added to the digital store of your blockchain account, where you can update the quantity available and price:
Presently, you need to know someone’s blockchain address to see their digital goods store:
In BEAM wallet (or its website) stores should be able to list their products so they can be searched using BEAM wallet’s internal web browser. This would be a much better experience.
III. Architecture and Implementation
Building on the two classes of digital good described in the previous section, we can design the services provided to artists and users.
For artists, they need to be able to make their artwork accessible on-chain without being exposed to the complexity of blockchain technology. A website where they can upload their artwork (along with a sample) is sufficient. They will also need to configure how that artwork will be represented on-chain, e.g. what content distribution model they want to use:
From the end user’s perspective, they are either bidding on a collectable or purchasing a license to some media (digital art, music, etc.). This media is accessed through BEAM Wallet as long as they have access — presumably forever if they buy on the digital goods store, and for as long as they hold the token if it’s a collectable.
The above requires the creation of a well thought out fontend. A web portal might be appropriate for artists, but the end-user should be able to buy and sell directly from BEAM Wallet.
Since our blockchain is significantly less expensive than issuing an ERC-721 token, we can charge a meaningful fee for artists to issue either asset.
Backwards Compatibility with ERC-721 and Popular Digital Art Platforms
While the system described in this document offers significant improvements over the current NFT Art offerings on the market, it’s important to provide backward compatibility.
What we suggest is that we add a feature to BEAM Wallet or a web interface to act as a bridge to Ethereum. When a user can prove that they destroyed a piece of NFT artwork on our blockchain (by sending to a specific account where no one has access), and they pay the gas fees on Ethereum, we will issue them an ERC-721 token that corresponds to their artwork and is compatible with popular platforms like OpenSea:
In other words, our collectables platform can export artwork to Ethereum, but the user has to pay the fees required by Ethereum to do this. To prevent duplication of artwork, this is a one-way process.
Because we are tracking artwork across two blockchains (our own as well as Ethereum), we should ask users to provide their Ethereum account details as part of our KYC process. This is easy with the Metamask browser — we just ask for their digital signature. This is a technique used presently and it’s a good user experience.
Once we do that, we can (generally) display art from both Ethereum and our own blockchain in BEAM wallet. This is also important to know during the export process.
NOIZ has recently hit new technology key milestones and is extremely excited to bring everyone this update. In the first half of 2021, BEAM wallet has been pushed to its Beta test stage and now integrates with recently trending NFT technology. NOIZ will continue to explore new developing technology in blockchain and digital asset landscape.