Wrapped NFTs: The next phase in crypto-collectibles
Part 1 of a 3-part series on wrapped tokens
Since 2015, I’ve been involved in and advising on the space around digital collectibles and tokenization. It started with my working in the physical-to-digital space working with printed electronics to tokenize digital experiences, and then in 2017, I created the CryptoKitties Genome Project to eventually crack the DNA code for the newly launched NFT tokens.
Since then I’ve been advising on some great projects in the space, notably Avastars — but I’ve also been looking for a fun project of my own, so the NFT Hackathon is a great opportunity to explore an area I’m currently fascinated by: Wrapped NFTs.
What are NFTs and why ‘wrap’ them?
NFTs, short for non-fungible tokens, or as the friendlier name they’ve been given, ‘Nifties’ — are tokenized collectibles on the blockchain (such as Ethereum, or an exciting new entrant, Flow, designed specifically for NFTs).
The non-fungible part means that every token is unique. So CryptoKitty #8036 is completely unique compared to CryptoKitty #9484. In a sense, they are not interchangeable (fungible) compared to cryptocurrency where 1 BTC in my wallet is the same as 1 BTC in your wallet.
This is where wrapping comes into play.
Wrapping a token is exchanging one set of standards for token interaction with another set of standards.
In this case, most NFTs are defined using a standard called ERC-721, which maintains each token as a unique id and defines how to exchange them individually. Compared to the standard for cryptocurrency tokens, ERC-20, which allow tokens to be sent as multiples and fractionalized.
NFTs being unique is an advantage in some ways– you can have one CryptoKitty worth a few dollars, while another might have more rare qualities that make it worth a few thousand.
However, what if you wanted to take a collection of 1,000 CryptoKitties and exchange them for their ‘floor value’ — that is the minimum value that someone would buy them for on the open market. Normally you would have to list each individually and sell them one-by-one. Wouldn’t it be easier to have more liquidity around the market for a base value CryptoKitty so that you could trade them all in one transaction?
Enter Wrapped Kitties
WrappedKitties solved this problem by defining a token, WCK, for which you could 1:1 swap with a CryptoKitty. This in turn, has become a useful currency for the community, provides liquidity to the market and establishes a base floor value for all CryptoKitties.
List of Projects Wrapping NFTs for ERC-20 Tokens
- WrappedKitties (WCK)
- Wrapped Gen0 (WG0) — Also for CryptoKitties, but establishing a floor value for a premium tier of CryptoKitties, Generation 0.
- PUNKS — Wrapping CryptoPunks to ERC-20 (not to be confused with a different kind of Wrapped Punks which is for ERC-721 support)
- Wrapped MarbleCards
All of this is the background for my hackathon project PaRappa the Wrapper — a factory for creating wrapped tokens for any ERC-721 NFT.
Part 2 — Different Flavors of Wrapped Tokens
If you’d like to help out, find me on Discord — kai#1369