Commodity NFTs will make it possible to seamlessly redeem and onboard physical assets onto the blockchain. This will especially bring enormous benefits to highly unique MetaMetals precious metal products.
It's especially worth to notice that we're working with Rocklogic on the development of commodity NFTs. Rocklogic is well-known in the blockchain industry for its Ethereum node management software „Stereum“ and they bring along profound experience in smart contract development. Together with their excellent team, we're working on high-end technology to establish a trading platform for unique assets.
Making a real asset financially perform requires more than offering a great physical product.. With digitalization and blockchain integration a highly digital, and secure open trade platform for Metametals can be generated. This leads to many advantages for precious metal investors. A direct connection to a highly digital market system brings liquidity and tradeability to onchain assets. On top of that integration into multiple blockchain applications helps to bring utility and demand. All these aspects combined actually make price action possible.
As one of a few players we're focusing on actual seamless redemption and onboarding of physical assets onto the blockchain. A look on our crystals and highly unique assets raises some real questions which show how this approach was born:
- How can crystallized precious metal crystals be traded?
- What's their worth?
- Where can I sell them?
- What's the utility?
As supporters of a free market, it quickly became clear that facing these problems requires a trading system. We solve these questions with a brave and highly technological approach.
If you have the opportunity of creating a new asset class why should you waste time with Web2 technology? Furthermore digital integration of Web3 assets creates a whole new world of application which can give unknown and unique assets an even higher boost. The question for physical utility can be converted to a question about digital utility.
To understand the approach MetaMetals takes, it's necessary to understand the concept of non-fungible tokens. There are numerous good explanations on the websites of crypto exchanges on this matter. A good start is here.
It's important to see that real physical precious metals in form of precious metal crystals are unique. This perfectly matches the approach of an NFT standard. The word non-fungible means that two tokens can't simply be replaced with one another, which makes it a perfect digital technology for unique assets.
If we take a closer look on ounces and bars, Blockchain industry has already got some suppliers like PAX or others who offer ERC-20 tokens (fungible tokens) with a backing of gold. It can be seen that this standard doesn't make it possible to correctly represent a customized ounce or a special ounce in a vault. It wouldn't also be possible to represent different precious metals with the same ERC20-token and it also certainly doesn't make it possible to clearly make a person the owner of a special bar of his choice. These are the clear limits of fungibility. Our approach is that each precious metal product is in its core none-fungible.
NFTs as a technology also make it possible to be integrated in many more blockchain protocols and application. This brings more demand and utility to assets, especially to those with physical backing. Imagine an E-Sports team winning a MetaMetal commodity NFT as a price for a victory, or Gamers finding rare precious metals in an online game which they can use for,building,trading etc.
It's also possible to use NFTs as collateral for loans. There are not many assets which would be more suitable for this mechanism between counterparties than precious metals.
Limits of NFTs
It's necessary to notice that NFTs are mostly purely digital. In other cases they can be used to trigger an action (e.g. an NFT represents a t-shirt which can be obtained by swapping it at a store). However the main problem with these approaches is that you can't seamlessly on/offboard your physical assets onto the blockchain without further steps. MetaMetals NFTs need to be physically backed with a proper mechanism to ensure on/offboarding and to make sure that storage fees are paid. It's also necessary to establish audited vaults which proves owners the backing of their assets. That's what is changed via commodity NFTs.
This mechanism differs MetaMetals extremely from other NFTs. Where others launch purely digital collections out of an automatic generator to mint a bunch of ~20k NFTs, MetaMetals can't do that. Our NFTs will be bound to their physical counterpart and only one can exist in a customers hand at a time. There will be an audited vault to securely store physical MetaMetals which serve as the backing for the digital NFT counterparts. On/Offboarding actually refers to the physical good in the vault. If a customer chooses the purest form of ownership (holding it physically in ones hand and storing it by themselves), MetaMetals PMs can be bought in the online shop or be redeemed via the digital NFT. Redeeming will destroy the NFT and trigger the redemption process. This will send the user the physical precious metal. If users prefer the digital counterpart for different reasons (better tradeability and market liquidity, digital applications, etc.), the crystal can be onboarded again or an NFT can be simply bought via different NFT plattforms.
Introducing structures which make it possible to charge fair storage fees for physical assets is essential for providers.
Not doing that would have sincere side-effects:
- Infinite onchain lifecycle of physical assets which would lead to enormous storage fees
- Providers going bust due to enormous storage fees they can't pass on to owners
In a first step it's necessary to bring information about storage costs onchain. This can done via oracles. In a next step its necessary to combine the storage information with the NFTs and establish a mechanism which makes sure that fees are paid in any case, also if a user forgets or doesn't pay his storage fees. In that case an auction is triggered, which sells off the concerned NFT. The mechanism was already successfully established by Maker collateral auctions for digital assets.
Disclaimer: These materials are for general information purposes only and are not investment advice or a recommendation or solicitation to buy, sell or hold any cryptoasset or to engage in any specific trading strategy. Some crypto products and markets are unregulated, and you may not be protected by government compensation and/or regulatory protection schemes. The unpredictable nature of the cryptoasset markets can lead to loss of funds.