Dynamically Priced Merchandise
Dynamically priced merchandise is a method for the free market to find an item’s fair price based on supply and demand. Businesses have used dynamic pricing in order to optimize sales and entice customers to indulge in an expense (for example, Happy Hour at your local bar).
How a business controls pricing is typically left up to the whim of the business. If the business fails to price the item correctly and the market believes it is too expensive, they may not get many sales. If the business makes an item too cheap, they may not be very profitable.
Recently, in the world of decentralized finance, a new method of pricing has been experimented with called “Bonding Curves”. This is a method that allows pricing to be calculated algorithmically. For a detailed explanation of Bonding Curves, please read this excellent Medium post from Linum Labs: https://medium.com/linum-labs/intro-to-bonding-curves-and-shapes-bf326bc4e11a
Championed by the decentralized cryptocurrency exchange Uniswap, dynamic pricing and bonding curves have been implemented in a new system called “Automated Market Making”. AMMs create a brand new way of providing dynamically priced liquidity in a commodities exchange, in this case with digital commodities (cryptocurrency). A detailed explanation on Automated Market Making (AMM) can be found here: https://academy.binance.com/en/articles/what-is-an-automated-market-maker-amm.
Bonding Curves and Physical Goods
Up until recently, bonding curves and AMMs have been utilized only for digital goods. But, what if we could apply this same idea to physical goods? Championed by the Uniswap Unisocks project https://unisocks.exchange/, this was the first experiment to successfully demonstrate this concept of dynamically priced physical merchandise combined with Automated Market Making.
Unisocks produced 500 pairs of unique Unicorn Uniswap branded socks. They then created an ERC-20 token called SOCKS and, by decree, stated that 1 SOCK token may be redeemed for 1 pair of real socks. When redeeming the token for the merchandise on the Unisocks website, the SOCK token is provably burned as payment once the customer provides their shipping information. Since there is now 1 less pair of physical socks for sale, the token burning mirrors the physical world by reducing the token supply by 1. If the customer decides they don’t actually want the pair of socks, they are also able to sell the SOCK token back into the market. Buying tokens increases the price, selling tokens reduces the price, and burning tokens cements the base price by forever reducing the supply.
But wait a minute, why cant I just make some counterfeit Unisocks and sell those on the market as real ones? How do we know the pair of physical Unisocks are real?
Proof of Authenticity
This is where the NFT “Nifty” Nixie comes in. The “Nifty” Nixie is a Nixie tube clock. The WIFI enabled clock comes with six real rare Soviet era Nixie vacuum tubes. NIXIE is the nickname given to the NIX 1, short for “Numeric Indicator eXperimental №1”. Invented in the 1950’s, these vacuum tubes were used as simple numerical displays. LEDs have now replaced Nixie Tubes due to their low cost and high efficiency and as such, Nixie Tubes are now a piece of history.
Through the magic of elliptical curve cryptography, NFT Nixie’s authenticity can be validated by providing a unique random signature whenever it is requested. The only way to generate this signature is by having access to the private key locked inside the physical hardware. The onboard secure cryptographic authentication chip allows the NFT Nixie to generate its own unique signature from that private key, which can never be revealed, even to the creator of the NFT Nixie. Even though the private key is encrypted and locked inside the chip forever, the clock itself can still use the information to generate its own random signatures.
Alongside the 20 physical clocks, there will also be 20 non-fungible tokens (NFT). One NFT will represent One NFT Nixie. By matching the physical NFT Nixie’s unique random signature to a public key found in the associated NFT’s metadata, you can validate the hardware’s authenticity. The only way to generate a matching signature is to physically have access to 1 of the 20 physical clocks.
This mechanism can be used to prove that the physical object, which the NFT is linked to, is authentic and real. Beeple sent a “certificate of authenticity”, and a hair sample (“not pubes”) with his “physical token”. But, since this is cryptocurrency I think we can step it up a notch by using digital signatures and cryptography.
If the NFT Nixie project is successful, future explorations of how digital signatures and private/public key cryptography can be applied to physical items are completely open, including a more generic implementation for other artists to utilize.
I am currently working full time as an electrical engineer (for over a decade) and this is just a passion project of mine. Hardware is difficult and expensive! The hardware, firmware, cryptography, and conceptual implementation, artwork, etc… are all my own. As firmware is written, more features such as cryptocurrency price and statistics tracking will be available.
Expect the launch of the NIXIE fungible token within the next few weeks. The search continues for a great platform to launch on!
Finally, bonding curves and AMMs are not the only mechanisms that are being considered for launching the fungible NIXIE token. Other options, such as a Dutch Auction style release mechanism might be considered. This will depend on the platform selected for launch. The most recent example of this release mechanism can be found with SAKE, a Dutch Auction style release for fancy Sake on the upcoming MISO platform by SushiSwap. https://sake.sushi.com. More information about Dutch Auctions can be found in the MISO documentation: https://instantmiso.gitbook.io/miso/markets/markets. Future articles on the NFT Nixie Substack newsletter may explore these mechanisms more deeply.
For more information, please see the NFT Nixie website at https://nftnixie.com or reach out to me at firstname.lastname@example.org. There is also a Discord server that I have recently created if you feel comfortable reaching out to me there: https://discord.gg/tAea6SQw. Finally, twitter: https://twitter.com/NftNixie/