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Hello ladies and gents, Crypto Kitties got me thinking, and I was wondering if it would be possible to host a PoW (or even PoS) Plasma chain, in which the tokens rewarded to participants are non-fungible tokens. Dont have to be ERC721 (although would be great for Atom swaps I think). The idea being that if crypto-kitties wanted to move away from centralization they could create their own plasma chain, and offer a Gen 0 kitty every block to give incentives.

Is this complete non-sense or likely something that is coming for non-fungible collectibles on blockchain?

Thanks for your time.

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This is definitely an interesting concept, but it seems outside the realm of sound economic incentives. Using non-fungible tokens (NFT) as rewards for running a Plasma chain brings a few security threats:

  • There is a disincentive to run the node because of lack of determinism or Poisson distribution, i.e. some get more value for the same effort, while others receive worthless magic beans
  • The constant generation of kitties might devalue their selling proposition in the first place (imagining a future where we have dozens of kitten Plasma chains, ceteris paribus)

Excerpt from the white paper, chapter 2.5:

To incentivize avoidance of Byzantine states, especially around correctness and liveness, it may be ideal to create a token per contract. This token represents the network effects in operating the contract, and creates an incentive to maximize security of this contract.

It is implied that the authors were referring to fungible tokens. The main reason behind this assumption is that validators need to have some sort of assurance for their NPV.

If a validator has $a percent of the total voting weight, they are incentivised to propose a proportional $b = $n * $a / 100 number of blocks in any period $n (to encourage broadcasting). Using NFTs, it'd be hard to gauge the value of validator fees. If the rewards/ fees aren't distributed according to this $b, but rather to a fluctuating price of an NFT, we design a system with weak legs, not adhering to the elegance and security of the Nakamoto consensus.

Nevertheless, there are also the cases when:

  • There's only one party running a private blockchain, so security is not an issue. Tihs would refute the goal of decentralising CryptoKitties though.
  • One might be able to gamify the Plasma chain by including a Gen 0 kitty on top of the normal fees, but this would simply spawn tangent problems to the ones mentioned above.

It's important to note there's a difference between depositing NFTs onto a Plasma chain for storage or low fees in bouncing transactions and using NFTs as validator rewards. Having said that, perhaps some sort of price pegging would facilitate a small economy inside a secure, decentralised Plasma chain. Happy to hear any counterarguments!

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