Updated: Oct 4
In recent months and years, cryptocurrency has become a global phenomenon as an alternative to centralized money. The year 2021 has seen the rapid growth of currencies such as Bitcoin and Ether, utilizing a decentralization system known as a blockchain. A blockchain is a database that stores different types of information in different groups that form the “chain”, creating a decentralized set of data that no one person, organization, or government has control over. For many cryptocurrencies, a blockchain’s base is made up of many computers or servers all over the world, and each of these computers are known as nodes.
This brings us to decentralized autonomous organizations, or DAOs. These are organizations that are not overseen by any one entity (such as a government), but are instead controlled through rules encoded in a program and controlled by many of its members. They also utilize smart contracts, which are special programs stored on the blockchain that execute commands when certain conditions are met. According to IBM, smart contracts are able to streamline and automate workflows to perform operations on the blockchain very quickly.
Another definition to be covered is that of the non-fungible token, or NFT. Connecting to a blockchain allows an NFT to be verified as non-interchangeable, allowing it to be owned by someone, or a group of people. Commonly used for specific art pieces or animations, NFTs are quickly revolutionizing the digital art and collection markets, letting ordinary investors own a stake and vote on the eventual outcome of them. This process can be applied to items as diverse as collector cards and digital game assets.
PleasrDAO is an example of one of these decentralized organizations. They are responsible for buying the Doge NFT, a viral internet phenomenon that has inspired millions of memes, web interaction and its own cryptocurrency. With ownership, PleasrDAO is allowing investors to “own” a part of the NFT, by breaking it into individual tokens which these investors can buy. With ownership of part of the NFT, investors can vote on functions such as whether to sell the NFT, for instance.
The advent of the decentralized autonomous organization and the NFT creates a variety of possibilities for the future of digital transactions, most notably cryptocurrencies such as Bitcoin and Ether. Join the podcast on Monday for a conversation with Juan Pablo at PleasrDAO about these new techniques and their uses.
Last we shared some statistics that pointed to liquidity being a consistent driver of steadily rising stock prices. While many fundamental factors were changing like waves of the pandemic, economic outlook, and changes in fiscal leadership and policy...one consistent factor was the sharp rise in household savings that came from a combination of forced savings during the lockdowns and government assistance aided by Fed policy. One common narrative today is that greater household liquidity combined with more virtual work has led to greater market speculation. We argued this point last year while referencing the 300% rise in call option premiums ... well above what could be justified by historical volatility ... and sharp increase in retail trading volumes.
Evidence of market speculation is fraught with subjectivity. Sir Isaac Newton probably did not consider his 1720 investment in the South Sea Company to be speculation...although the crash that followed is now widely accepted as being the result of a speculative bubble. But there are signs one can point that that at least some market participants are engaged in objective speculation at prices that seem to have no plausible justification. NFT trading since July is arguably one such space (chart). Measuring the size and growth of this market is challenging for the same reason as the housing market...every house is different and owners of NFTs argue the same is true by definition for an NFT. That said, based on http://NFT-stats.com, over 40,000 NFTs were sold at an average price of about $1,800. Based on http://Nonfungible.com that number is much higher at $3,277 from 13,000 primary sales. While NFTs are technically scarce in the sense that one is not exactly like another...it costs essentially nothing to create more of them. So in at least one important way, NFTs are similar to flowers ... like tulips.
The next episode of our podcast will take place on Monday, October 4th, 2021 at 5:30PM EST. We are excited to host Juan Pablo Dulanto (@JuanPaDulanto) with @PleasrDAO, who bought the original $DOGE NFT for $4 Million and sold it in fractional shares at $550 Million.