Non-Fungible Tokens (NFTs), once the red-haired stepchild to more popular smart contract implementations, are finally having their day in the sun.
The average purchase prices of NFTs on peer-to-peer exchanges are skyrocketing. Six-digit sales are no longer uncommon. Dapper Labs, the minds behind the great-grandfather of the NFT collector projects CryptoKitties, have attracted significant investments for their native blockchain flow – including investments from NBA stars.
However, all of these advances make some wonder: where are the NFTs going next?
One person who may have some insight is Jesse Johnson, co-founder of Aavegotchi. Johnson worked with asset-backed products in the NFT space long before they became widespread. One of his early efforts, Bullionix, was among the first platforms to offer NFTs backed by real commodities – specifically gold.
With Aavegotchi, Johnson is going beyond meatspace assets and bringing asset-backed NFTs into a whole new area: decentralized financing (DeFi).
According to the Aavegotchi litepaper, Aavegotchi are digital collectibles supported by Aave-interest-bearing aTokens. Aavegotchi uses a mix of NFT token standards, including ERC-721 and ERC-998, and has a combination of characteristics that determine their value, including random characteristics determined when they were minted, the value of the aTokens and NFT-based “wearables”. ‘Child’ NFTs that can be programmatically bound to any Aavegotchi.
In an interview with Cointelegraph, Johnson revealed that the Aavegotchi team now has up to 9 full-time employees and that they also have a small army of volunteer artists and enthusiastic community members among their ranks. Going forward, Johnson wants to take Aavegotchi deeper into the DeFi fold, mixing NFTs and this explosive, emerging financial industry in exciting new ways.
After talking to him, one thing became clear: this is just the beginning for NFTs and Aavegotchi.
NFTs go beyond agriculture
Cointelegraph: How do NFTs fit into DeFi sensibly? An NFT can lead to digital scarcity and can be individualized. However, what unique properties of NFTs as smart contracts are particularly useful and important to DeFi?
Jesse Johnson: I think there are certain things that we are already seeing in high-yield farming. There’s this idea of farming NFTs out there, and that’s fine – I think everyone’s just trying it right now – but in terms of true DeFi, you should be able to get more interesting NFT products.
What if an NFT that you run is a key to a certain pool of liquidity, or a promissory note – it has such an action that it guarantees you something from another platform. I think you might see alliances, so to speak, because there really isn’t a word for it, but you’d have all this interoperability between all DeFi platforms. If there could be standard NFTs that are accepted as a certain value across platforms, or almost like badges that you earn on one platform and accepted on another, you will find that NFTs are very interesting for integrating all of these platforms into be used.
Badges – I used to think of badges only when gaming, but actually they could be a lot more.
For example, if you are in the process of wanting a DeFi loan, the vast majority of loans will be on your collateral – it’s not your creditworthiness, it’s your security.
“But I think one of the really exciting things NFTs can solve is the idea of a reputation system that spans Web3, no matter what platform you’re on, and even if you want to be virtually anonymous.”
As long as you own the NFT that shows you have earned that kind of reputation, and the NFT was X time in that wallet, you could begin to come up with solutions to some kind of credit score system that we are doing an audit on They have half a dozen badges – because of those badges, their origins, and how long they last in your wallet, you qualify for a better price – something like that.
I don’t think we can refer to a project that is doing this right now, but I see that as very possible, and it makes sense to need a reputation system that maintains a certain level of anonymity. I think that could be very exciting.
CT: It sounds like you’re bringing the Metaverse’s NFT gaming concept almost to DeFi with the interoperability and plug-and-play features. NFTs are used as a reputation and interoperability layer.
JJ: Yeah, yeah. Since all wallets accept 721, it just fulfills the requirements of something that is interoperable across everything, at least on Ethereum. So you could really go pretty far and wide and then. We will likely see many examples of this.
It’s not the primary use case of Aavegotchi, but we are aware of it.
“We think that the Aavegotchi exist in our world, but are also an avatar who can traverse the metaverse and, more than the metaverse, the entire Web3.”
When there’s an Aavegotchi in your wallet and you visit Uniswap, they actually affirm, “Oh, you have an Aavegotchi that’s two years old and has used many tokens X times and has five or six badges.” – because your Aavegotchi badge holds. So in a way we’re playing with where we want to see our Aavegotchi communicate with other DApps and actually earn badges from those DApps.
NFTs can do the job better than a specific set of smart contracts or DApps because the contracts rely on a specific user interface or dashboard. But the NFT can go through all of these different DApps and create a custody or history chain, so to speak, detailing how you earned it, when you earned it – did you deserve it? Or was it passed to you from another wallet?
It could be very exciting because they are equally important in the real world financial world, if not, creditworthiness is more important than security. But with DeFi at the moment it’s pretty much limited to the security side.
“In five years time we’ll be on a whole different level with real NFTs of consistency, which is one possibility I’m talking about – NFTs that really impact your bottom line and are more than just collectible.”
New money, new users
CT: Speaking of the bottom line, It seems like NFTs are about to be in the middle of a big moment. I think about Dapper’s monster raiseand key sales that seem to be increasing every week. What will NFTs look like when there is a lot more money around?
JJ: I think it will be good and bad. The bad is pretty obvious, and you’ll see the problems we’ve seen before, but on a larger scale.
“I love removing barriers to entry, but there are a lot of scammers and NFT scam is possibly the toughest of all types of crypto scam.”
When you look at a collectible in a marketplace, you think the graphics are there, the metadata on the front maybe fine, and then you realize that you’ve checked that smart contract and see if it’s in the same smart one Contract is how you really think you are buying. You see these problems very often.
Anyone can do anything, including fraud. And that’s difficult, because philosophy is about breaking down the barriers. So I totally agree with that. But you will see more scams, and likely some major scandals and some people hurt, you know. So this is the part to watch out for and to prevent.
On the good side, you will see more participants, but you will see people who only gamble to make money. I love the idea of changing the idea of playing where you actually get some rewards for your attention, right? Every advertisement, everything fights for people’s attention, and technically it’s games too. But the sincerity or loyalty to the project is where it gets a little mystified, where you might have big numbers, but will they just go once the coins drop in price, or there’s a bath, or whatever , they just leave the game for the next one that makes money.
I think the only way to address this is by having a very addicting game and a very strong ethos that everyone shares. And then you get through those rough spots and ultimately grow more and more.
Scandals are coming
CT: I’m trying to imagine what a major NFT scandal would look like. Do people put celebrity files on the blockchain or something? How does an NFT project go completely messed up, apart from one major fake?
JJ: That’s interesting. I mean, if you have art or information that is completely on the chain, you can see this type of scandal that is classified or something extremely indecent and you cannot remove it. That’s probably going to happen at some point, right, someone is going to do something along those lines.
In Aavegotchi’s case, we want to open things in which anyone can make wearables. It wouldn’t really be a scandal, but what if someone made a wearable or lewd wearable?
In fact, there is an answer to that at DAOs too. I think Rarible also does something where you can whitelist or blacklist things based on community members who take the time to flag certain content. This is not safe for work. And we will likely have something similar. I think most of the projects will have some kind of curation. Then the DAO can recognize that you are saying, “Yes, what you said is true” and then receive your reward.
CT: Is there anything you want to tease the Aavegotchi community to finish?
JJ: One important fact to be aware of is the upcoming network staker raffle. It’s event based and I like the way it comes to a close, it comes to a head at a specific time, place and everyone gets that kind of payout. They know they have won, they have lost, the winners will be announced, NFT wearables will be distributed, everything is automated.
So this will be November 10th, it will be the first, and I think that will generate a lot of interest throughout the crypto space. In the first 24 hours of $ GHST’s deployment, over 24% of our total token offering was deployed. It was one percent an hour so it’s pretty impressive. November 10th is the first raffle, and we’d like to run three of them before the mainnet launches around Christmas time.
I don’t think a lot of people are aware of it, they think it’s a one-off and then that’s the end of the game. But no, this is only the first of many.