An NFT Tokenomics Paper

Last night I said on Twitter that I would never write a whitepaper for the Orthoverse.

But it's Friday, and I feel like doing something that is a bit of fun, so I think I can get away with it under the Orthoverse project rules (of which there are none) if I call it a "tokenomics paper" instead.

Background

Back in January Richard Piacentini and I announced that we had conducted the world's largest NFT airdrop, with every single Ethereum address that exists or can ever exist receiving an Orthoverse token. In order to make the token fully ERC1155 compliant (and hence visible on OpenSea and other NFT marketplaces) you have to reveal it, which can be done either at the smart contract cliff-face, or using our handy web3 website at Orthoverse.io, usually for less than $15 depending on gas prices.

As I write this, 979 tokens have been revealed, and so the project was much more successful than I first expected it to be. But there is a problem with creating an NFT collection with over a quadricillion tokens, and that is: no scarcity or rarity. Why would any particular token become valuable, if you can go and obtain your own simply by creating a new Ethereum address in your blockchain wallet?

In economics, there is a principle called artificial scarcity - ensuring that despite the existence of the technology and resources for the production and sharing of a product, there is a limited supply. It is often used to drive up prices and to create hype and excitement around a new product.

NFT projects create artificial scarcity by only allowing a limited number of tokens to be minded. Except the Bored Apes Yacht Club, which allows for an unlimited number of apes to be minted, but still does not seem to be suffering from a lack of hype and rising prices. But I don't think the BAYC approach is going to work for the Orthoverse.

Artificially creating scarcity

Richard and I found a serious bug in the original Orthoverse smart contract code (or rather, HashArt did), and so we ran a migration by duplicating all the token transactions - the reveals, the leveling-ups, and the transfers, in the new contract. The old one now has tokens that point to error message images, and the new one looks exactly the same as the old one, with the bug fixed.

We sneakily used this migration as an opportunity to introduce a new kind of artificial scarcity to NFT contracts previously unseen (to the best of my knowledge), namely the creation of two classes of Orthoverse tokens. The first group consists of the first 10 000 tokens to be revealed, and the contract uses one URL to point to a particular set of metadata for those tokens. All tokens after the first 10 000 will have a second URL pointing to a different set of metadata.

Through this we are still holding true to the "biggest NFT airdrop ever" claim, while rewarding the early adopters and creating the opportunity for a bit of "fear of missing out", or FOMO.

Rare traits

For some reason, there are people out there who get excited when they discover that within a group of NFTs, there are some that have features that are uncommon compared to the rest. Think zombie or alien CryptoPunks, or Deadfellaz with purple fur coats. Because these tokens have no utility whatsoever, the existence of rare traits are only useful for bragging rights. But appreciation of rare traits is a psychological phenomenon, and so you can't fully analyse valuations based on them rationally.

For example, despite Van Gogh painting a still life of sunflowers a total of eleven times, making sunflowers in his paintings a "common trait", one of them recently sold for $82 million dollars. Makes $5-$15 for an Orthoverse token seem decidedly cheap, doesn't it?

Unreal estate

Another thing that people are getting more and more excited about is metaverses, despite the fact that everyone disagrees on exactly what a metaverse really is. I'm not particularly concerned about three dimensional immersive experiences, probably because I have bad eyesight and wear glasses, and have a tendency towards vertigo due to an inner ear condition. I bought an Oculus Quest six months ago, but haven't worn it in the last three. To me, VR is five minutes of "wow" followed by five minutes of nausea.

But I am interested in virtual digital communities providing individual ownership of virtual assets and their own economies, so I tend to equate metaverses with that concept, especially since something as simple as a bulletin board or text adventure can be just as immersive as a VR headset.

And I did buy a Sandbox land token, under the mistaken impression that it would grant me access to the Sandbox alpha game in December. What if found interesting was the amount of time I spent picking out a token that looked like it had a nice location given the budget I had for buying it, and the amount of time I spent gloating over it over the next few weeks, like Gollum hoarding the One Ring. Although, just as with the headset, that has worn off and I haven't looked at it for months. Nevertheless, it offered an interesting opportunity to make some notes on the emotions that NFTs, when framed correctly, can raise within an otherwise rational person.

The whitepaper

As you may have guessed from the image at the top of this article, the Orthoverse is going geographical. The first 10 000 tokens will have a place on a map. We will work out what the significance of the map will be later on, but ... virtual land! Everyone wants virtual land, and people are paying tens of thousands of dollars for NFTs representing not-so-real estate in places like Decentraland and the Sandbox! And whereas there are thousands, if not tens of thousands of cookie-cutter clones of CryptoPunks, Bored Apes, and other NFT profile pictures (PFPs), there are only hundreds of virtual land-representing tokens. Clearly a better space to foray into.

I said it's not a whitepaper, it's a tokenomics paper, which means I have to explain what the significance of the various traits and properties of the 10 000 Orthoverse NFTs will be. So here goes:

• The tokens will be placed on the map in order of importance in an outward growing spiral from the Origin, with new latitude and longitude coordinates that will be integers from -50 to +50. More about the Origin later.
• The order of importance is based on the block height of the block that the transaction revealing the token was included in, to reward early adopters
• But there is also a reward for leveling up your token, in that the token level (at some point in the future when the position of the tokens is finalized) will artificially subtract a number from your token block height using a highly complicated mathematical formula, thereby bumping it up the importance list
• The highly complicated mathematical formula for determining the order of importance is: importance = block height - ((2 ^ level) * k)
• I am still determining empirically what k will be, to ensure that token levelers get a decent reward reflecting their financial commitment balanced against the importance of rewarding early adoptors. Plus I don't want the center of the Orthoverse to be a cluster of castles just quite yet.
• To make things even more complicated the tokens will be fixed on the map in waves. The first fixing will take place after 1 250 tokens are revealed, the next wave after 5 000, and the final wave when the total of 10 000 special Orthoverse tokens are revealed.
• Early tokens stand a chance of being lake-front property. Apparently people like lake-front property, so I had to include that possibility. Plus I had to make the center of the Orthoverse look Finnish.

And that is the closest the Orthoverse will get to tokenomics. For now. Who know what the future will bring. It's interesting though that NFT tokenomics is more jazzy than ERC20 tokenomics. No pie charts, no percentages, no supply release charts. NFTs are just a lot more fun than dry trader statistics.

I said I'd explain the Origin: it's an extra special token owned by the Orthoverse contract deployer address (0xDecaF - that's a nod to HashArt's Ethereum address), that will be placed at [0,0], and it will be surrounded by eight slightly less special tokens, some of which will become prizes as part of puzzles that will be included in my upcoming book, "The Orthoverse Is Doomed"?

Did I mention that I am writing a book explaining NFTs, with the Orthoverse forming a story line flowing through the narrative? Keep your eyes out for that one in the summer. What's more, by participating in the Orthoverse NFT project you'll indirectly (or in the case of HashArt directly) be a part of the book.

Conclusion

Well that was a load of nonsense, wasn't it? But it's no more nonsensical than what is going on in other NFT projects that tens of thousands of people are excited by. Which means, by default, that it's not actually nonsense.

If, after reading this, you've decided you'd like a revealed Orthoverse token that is going on an actual map that will be living on an actual web3 website, click your way over to Orthoverse.io and follow the simple clear instructions. I assure you, it's one of the easiest Ethereum transactions you'll ever conduct, and makes a good starting point for getting into all these blockchain/smart contract/NFT things.

Anyway, I now have to go off and write programs to make the nonsense happen. If you're looking for me, I'll be in an office space I'm renting in the south side of Westairia, coding away. Third floor, first window on the left.