XRPL NFTs Before the XLS-20D
Artwork by Milad Fakurian
In the crypto space, there is arguably nothing more exciting, volatile, and expansive as NFTs. As many are aware, the XRPL, in its current form, does not support the seamless minting of NFTs on the most current NFT-compatible XLS-14D. However, this has not stopped NFT-based projects from thriving in the XRPL ecosystem. With many planning to launch marketplaces of their own, the widespread adoption of XRPL NFTs seems inevitable once the nodes vote to upgrade the ledger to XLS-20. Before we jump into the details, here is a quick lesson on NFTs and what most NFT-centric projects are to the XRPL.
NFTs on The XRPL (pre-XLS-20)
To break down the acronym, NFT stands for Non-Fungible Token. The emphasis of these digital tokens is on their fungibility or lack thereof. A great example of a fungible digital asset is XRP itself. XRP is fungible because any given amount of XRP is identical in every way to the same amount, acquired from different sources, and held in different custody, it is all the same cryptocurrency we know and love. In contrast, Non-Fungible tokens rely on scarcity and immutability. NFTs can be many things, from artwork and gaming to representing real-world assets such as clothing and property. What defines most NFTs is their level of uniqueness and scarcity. By finding a project with artwork you really enjoy, or a game that you love to play, always consider the supply and variability of the tokens these projects offer before investing in them. Yet, you may still be a little confused about what exactly these “NFTs” on the XRPL right now really are due to many of them being perfectly fungible.
Most XRPL NFT projects have issued what is known as an IOU, aka, a token that is redeemable for a Non-Fungible token of the project. By reading the whitepapers of some projects such as XBOTs or Pixel Ape Rowboat Club, you can find the “redemption clause” that explains how much of the fungible token can be exchanged for the minting of one non-fungible token of the project upon the adoption of XLS-20. Assuming total fairness in the minting process, imagine the tokens of these NFT IOUs as buying a playing card face down. You know what is in the deck, but you have no idea what card you will get. Currently, these face-down cards (NFTs) can be traded in a decentralized market of their own, assumed to be representative of the project as a whole. However, the prices of these NFT IOUs cannot be assumed to be the “floor price.” The floor price refers to the least expensive NFTs in a collection, but with the fungibility of XRPL NFT projects.
All Waiting For the Same Thing
With the relatively long wait for the validation of XLS-20D into the XLS-20, investors have realized that many of the XRPL NFT projects are a waiting game filled with times of excitement and unfortunately sometimes, dullness. Some of my personal favorite projects like Club589 and XBOT have seen times of great enthusiasm with runs over 500% in their miniature bull cycles, just to experience moments of stagnation. Much of this price movement is reliant on the supply and marketability of the teams behind the projects. As the market saturates, projects have to think creatively to keep their community engaged and therefore, interested.
With the NFT amendment added to the latest validator vote, it is very possible that we see some new excitement among investors, that it will bring more projects to the top. Much of the growth is stifled due to the difficult onramp to XRP for US investors, however, time will tell how willing crypto investors are to dip their feet in the XRPL. However, now dollar-cost averaging into NFT IOU projects is the advisable method of investing in them. Set limit order, and do not chase a project on the run when minting is not in sight yet.