The price of NFTs, especially profile-picture NFTs like CryptoPunks and Bored Ape, continuously skyrocket attracting great attention to the NFT market in the process. In addition to profile-picture NFTs, the market is made up of many other NFT types, including trading cards, generative art, and games. Each NFT type has its representative projects. The wealth resulting from the prosperity of select projects in the NFT market continues to inspire NFT collectors and newcomers to look for the next artistic breakthrough and blue-chip NFT. Also known as the "Mineable NFT," PoW NFT is a new NFT type that has the potential to ignite a new collection trend. To understand PoW NFT, we can first take a look at PoW coins. Two of the most well-known PoW coins are Bitcoin and Dogecoin. Besides, though always claiming the transfer from PoW to PoS, Ethereum - besides always claiming a transfer from PoW to PoS, is strictly a PoW coin. Despite the fact that the cryptocurrency market is full of scam tokens like ERC-20 and BEP-20, according to data from crypto state, the PoW coins account for over 60% of the entire market. In a nutshell, PoW coins are mineable coins that use the proof-of-work consensus algorithm to generate new blocks on the blockchain. It requires miners to perform hash rate calculations on machines - a process known as mining. CPUs and GPUs are no longer the machines used to mine PoW coins, today professional ASIC miners are used. These changes mainly resulted from miners' pursuit of efficiency and cost control after PoW coins have scaled up. Therefore, we can understand PoW NFT as a product of miners using machines to mine NFTs, rather than coins or using the proof-of-work consensus algorithm to generate new NFTs on the blockchain. PoW is important in cryptocurrency. Bitcoin uses PoW as its consensus protocol to realize distributed ledger and ensure the security of the ledger. At the same time, PoW provides added fairness to the distribution of Bitcoin. After more than ten years of development, Bitcoin has formed a stable production cost on a global scale because of the PoW mechanism. As a result, its relatively stable price and investment-profit matrix contribute to miners' faith in becoming long-term holders. Likewise, PoW's importance also applies to Ethereum and Dogecoin. PoW is extremely important for cryptocurrency in terms of market value, technology, security, fair distribution in the early stage, and the formation of long-term sustainability. It can be concluded that cryptocurrency cannot last without the PoW mechanism. One may wonder if PoW is just as important to NFTs as it is to cryptocurrency? What makes PoW NFT valuable? The rest of this article will center on these questions and explore answers to them. The article consists of 3 parts: A brief history of PoW and PoW NFT Representative PoW NFT projects: 2.1 PoW NFT on Ethereum: MoonCatResecure、Atom、MineablePunks 2.2 PoW NFT on Hacash: Hacash Diamond The value and future of PoW NFT 1. A brief history of PoW and PoW NFT To understand the emerging market of PoW NFT, we must first understand what PoW is. PoW is short for Proof-of-Work. It's an economic countermeasure against service and resource misuse or Denial of Service(DoS) attacks. Users are required to perform some complex operations that consume a moderate amount of time. The answers can be quickly verified by the service provider. The time, equipment, and energy consumed are used as guarantee costs to ensure that services and resources cater to real needs. This idea was first proposed by Cynthia Dwork and Moni Naor in an academic paper in 1993 and the term PoW was invented by Markus Jakobsson and Ari Juels in 1999. The earliest use case for the PoW mechanism was Hashcash created by the current BlockStream founder, Adam Back. Hashcash was later used by Satoshi Nakamoto in designing Bitcoin's mining scheme. At the bottom of Bitcoin’s white paper, it cites Hashcash as the sixth position. We can trace PoW NFT's origin to Crypto trading cards in 1993. It was proposed by Hal Finney, most likely by Bitcoin’s creator Satoshi Nakamoto. It is also widely recognized as the earliest NFT prototype. Although the Crypto trading card was not really implemented at the time, we can infer that each card's hash was not randomly generated with equal probability, otherwise, there would be an unlimited number of cards with identical value. As a result, these cards could have collection value only if their hash conforms to a certain established rule, such as the fixed PoW difficulty. If there are no established rules for generating effective hash, the potential number of crypto trading cards is infinite, and collectible crypto trading cards must have some kind of rare hash value result. For example: “000000000000007f8c5aba11cf3b5e67a2” “d01e14a7f8c5aba11cf3b025285e67a26687” The first one will be more collectible than the second because it is "good-looking." Such a well-organized hash is derived from PoW computation, greater hash power will result in a "better-looking" hash number. Then the Crypto trading cards mentioned by Finney, in every respect, must be PoW, otherwise, they will have no value for collection, transaction, and circulation. In 1998, Nick Szabo, the father of the smart contract, invented Bit Gold, which was an expensive encrypted gold that is computed using electricity. The first key property of Bit Gold is PoW: a proof of value derived from consuming hash power. For Bit Gold, a valid hash must follow some patterns, such as the number of leading zeros in the hash result. Due to the unpredictability involved in generating hash, the only way to find a valid hash is to compute it over and over again until we find a valid one. Such a valid hash serves as proof that its owner actually consumed computing power to find it and anyone who finds a valid hash will own it. Since each Bit Gold is represented by a unique hash, the cost of computing the hash and deriving the Bit Gold varies, resulting in different values. But Bit Gold's "unchanged difficulty" for deriving valid hash leads to inflation. As hash value increases and computers improve, it will become easier to generate a valid hash and its value will be diluted by an oversupply of valid hashes. Bit Gold is a typical PoW NFT. But it is not an NFT worthy of collection because it does not solve the core problem of inflation caused by "unchanged difficulty." 2. Representative PoW NFT projects We investigated exemplary PoW NFT projects available in the market. These NFTs can be divided into two categories: primitive PoW NFTs on non-smart-contract chains, and PoW NFTs on smart-contract-supported chains. Currently, PoW NFTs that support smart contracts are all only on the Ethereum chain, and PoW NFTs on non-smart-contract chains are only on the Hacash chain. 2.1 PoW NFT on Ethereum: MoonCat、Atom、Mpunks There are three main PoW NFTs on the Ethereum chain: MooncatRescue(MoonCat), PoW NFT (Atom), and Mineable NFT (Mpunks). PoW NFT and Mineable NFT are their real names. The group running these two projects might also have realized that PoW NFT was a potential market in its early stage, so they took these names in advance. But it can be verified by the blockchain that these two projects are not the earliest PoW NFTs. In this article, we will refer to them as Atom and mpunks respectively. MoonCatRescue(MoonCat) , also known as MoonCat, is a classic NFT after CryptoPunk. The first MoonCat was born on August 10, 2017. Moon Cat was developed by two creators, collectively known as Ponderware. MoonCatRescue Strictly speaking, MoonCat is not a PoW NFT. It uses the CPU mining mechanism for production. You can find a MoonCat in a few seconds or minutes by connecting your Ethereum wallet to the website and searching with a CPU. This process does not consume too much hash power, because it is just a simple "generating algorithm". This seemingly simple approach contributes to the birth of PoW NFT: fair distribution, open for everyone to mine, unpredictable style before an NFT is mined. Therefore, PoW NFT is generative art in the NFT market. PoW NFT(Atom) The first PoW NFT project on Ethereum centers on Atom and is named . In order to distinguish this project from the PoW NFT category, we refer to it as Atom in this article. PoW NFT The founders of Atom claimed that it is the first PoW NFT by definition, but the first Atom was generated on March 12, 2021. Similar to Mooncats, Atom can also be produced by connecting the Ethereum wallet to the website and searching Atoms with a CPU. But it takes no longer than just a matter of seconds to minutes to find an Atom because the "mining difficulty" is not fixed. Theoretically, the total amount of Atom is infinite. But after more than 40,000 Atoms are mined, it will be difficult to produce an Atom. That is, the difficulty of mining will go up with the number of Atoms mined. In each new cycle, the difficulty will increase by 3 times and the production time will also triple on average. Since there is no upper limit on the number of Atoms, the difficulty will surge in the 14th cycle (starting number #16384), and it would be infinitely difficult to mine an Atom. So the #16384 Atom is technically the last Atom that can be mined. Besides, the mining cost also doubles in each cycle, and the current cost of mining an Atom is 0.18ETH. Depending on the configuration of the computer, the average time of producing an Atom varies. Experiment shows that it takes 1 minute for a laptop to mine the #258 Atom, and 1 hour for the #2048 Atom on average. After in #8192, the average time needed jumps to about 6 hours. Unlike MoonCat, different Atoms vary in atomic elements and mining difficulty. However, Atom's mining difficulty does not change continuously, resulting in Atom production being monopolized by miners of large hash power. Due to the discontinuous mining difficulty, Atom production can become unpredictable and Atom price can fluctuate uncontrollably. At this time, the market is on the verge of collapse. Mineable NFT(Mpunks) has changed its name to Mineable NFT. Because the group running the project has created two different Mineable projects to increase Mpunks' liquidity, it uses two names to differentiate the two projects. Mpunks Mpunks mainly consist of CryptoPunk. Theoretically, there can be many CryptoPunks, but Larva Labs limits the number to 10,000. The remaining CryptoPunks in addition to the 10,000 ones, however, can be delivered through mining. The mining difficulty of Mpunks continues to increase. Like Atom, Mpunks can be monopolized by miners of great hash power. The fact that every 33 Mpunks mined would result in one Mpunk going to the founder further upsets some Mpunks collectors. Imagine how the Bitcoin miners feel if the community has to give a Bitcoin to Satoshi Nakamoto each time after 33 Bitcoins are mined. Another risk lies in Mpunks' copyright. But Mpunks collectors hope Larva Labs will sue Mpunks for copyright infringement because it's also a good sign for them. It can be expected that if the PoW NFT market becomes popular, various PoW NFT projects will emerge, such as mineable BAYC, mineable Noodles, and mineableBlockArt. Should this happen, interested collectors who have missed CryptoPunk or BYAC will have a more fair way to own their PoW version. 2.2 PoW NFT on Hacash: Hacash Diamond(HACD) Hacash Diamond is different from the three PoW NFTs on the Ethereum blockchain above. It is on a blockchain called Hacash. The Hacash White Paper was published by an anonymous author on the internet in 2018 and subsequently was used to develop the Hacash ecosystem by developers in the Hacash community. The first Hacash Diamond was mined on May 16, 2019. HACD is short for Hacash Diamond. Each HACD is represented by 6 special letters from the set of letters "WTYUIAHXVMEKBSZN" so that the total amount of HACD is limited to 16 ^ 6 = 16,777,216. And each HACD varies in shape and color. HACD's total amount is very large compared to the PoW NFT projects mentioned above, and its mining difficulty also constantly rises like Atom and Mpunks. But the mining difficulty increases smoothly and continuously, allowing miners to accurately estimate the time and hash power needed to mine a HACD. In terms of a sustainable ecosystem, the number of miners in the HACD community rises at a stable rate. Most interestingly, after each Hacash Diamond is produced, miners need to bid for the diamond. It should be the first example of miners participating in auctions in the cryptocurrency world. Compared to other PoW NFTs, this bidding mechanism has four significant benefits: The production of HACD per unit time is controllable and has an upper limit. While the continuous increase in mining difficulty contributes to stable demand and supply in the long term, the bid mechanism helps dynamically adjust demand-supply conditions in the short term. Note that a higher bid implies a greater demand. While the time spent on mining determines the validity of HACDs, bid mechanism determines which HACD is valid at the end of a cycle. Transparent bid cost helps collectors evaluate the value of a Hacash Diamond that they are collecting. The biggest problem is that HACD is not an NFT on the Ethereum blockchain and as such, a third party needs to be involved to guarantee the transaction for each listing on the Opensea or other NFT marketplaces. 3. PoW NFTs' Value and Future The core use case of PoW NFT must be the same as Bitcoin, i.e a store of value. If that is the case, then the three elements that measure good store of value pricing, stored value, and liquidity can also measure a PoW NFT collectible. The pricing level is referenced by the mining and bid cost, the stored value level is converted from energy, and the liquidity is provided by a certain number of NFTs with similar features. From MoonCat, Atom, Mpunks, and HACD, we can foresee the great value and potential of PoW NFT in the future. 1. Fair Production Traditional NFTs are produced by smart contracts on the Ethereum blockchain. With all things being equal, robots are more likely to find and mint an NFT ahead of you. Even after the white list came out, the majority of the collectors still have problems minting an NFT in the early stage. NFTs mined with the PoW mechanism can solve this problem and ensure fair production of NFTs, because the production mainly depends on the amount of hash power. Like the early Bitcoin, the general PoW NFT is mined with CPU and it requires greater hash power to mine as the blockchain's hash power increases. Such Bitcoin-like production is fairer. However, a continuous increase in mining difficulty and a bidding mechanism is necessary to prevent NFTs from being completely monopolized by miners of large hash power. 2. Quantity / Scarcity All NFT projects basically emulate Cypherpunks and limit their NFTs in circulation to specific numbers. Just like many people don’t understand why the number of Bitcoin in circulation is limited to 21M, the number of NFTs needed in circulation is also a mystery. The NFT issuers have intentionally intervened in the number of NFTs to create scarcity. The PoW mechanism allows the NFT to dynamically adjust its production to meet the market demand in the long run. When there is a shortage of the PoW NFTs, the miners can stop producing. In addition to this, the bidding mechanism can balance the demand and supply in the short run. Note that a rise in bid implies a greater demand for the NFT. 3. Art Form: Energy Generative Art Beeple's Everydays is one example of NFT artwork. The uniqueness of such artworks is fulfilled by being an NFT stored on blockchains. As the NFT technology develops, more advanced NFT art forms have emerged. For example, the small balls of Pak can interactively merge with other small balls into a larger ball. Therefore, the art form of PoW is by nature generative art, because it is nearly impossible to mine all PoW NFTs at the same time and know the look of all the NFTs in advance. Each PoW NFT is a blind box for miners. PoW NFT's art form is similar to the famous on-chain generative art, ArtBlock. But there is another name for such an art form--energy generative art. The four PoW NFT projects above all generate figurative works, namely cats, atoms, CryptoPunks, and diamonds. If ArtBlock is combined with PoW, ArtBlock's value can be numerically evaluated. 4. Long-term Sustainability The NFT market can attract great attention through celebrity endorsement and publicity. Though attention can help make a quick profit, it can not help build broad, long-term sustainability, which is necessary for the development of a high-quality collection. PoW NFT's production requires certain investments, including electricity and equipment. These absolute costs contribute to a stable NFT price and help buyers evaluate the value of the NFT. Most NFTs continuously slide down from birth and are short-lived. But PoW NFT does not have the problem of sliding down and perishing quickly. It is more suitable for long-term holding than most profile picture NFTs. Coupled with the increasing mining difficulty and bid mechanism, PoW NFT's marginal cost of production can constantly rise in the long run, and it can always dynamically adjust its production to reach supply-demand equilibrium. These features are conducive to long-term investment by miners and long-term holding by collectors, helping form long-term sustainability. Whether long-term sustainability can be established should be the most important factor to evaluate whether an NFT is worth collecting. Conclusion Compared with PoW coins’ over 60% market share, PoW NFTs are still in the early stage of NFT development. And HACD is undoubtedly a leading project in the PoW NFT market with its mature mechanism. But its problem is that it is not on the Ethereum blockchain, which will inevitably slow down its development. I believe that the rise of PoW NFT relies on the celebrity effect. HACD can expand its influence by cooperating with a well-known public blockchain or attracting famous artists to design new HACD-like PoW NFTs on a well-known public blockchain. We look forward to a breakthrough in PoW NFTs brought by these two approaches in the future. References [1]Wikipedia. (n.d.). Proof of work. Retrieved March 27, 2022, from https://en.wikipedia.org/wiki/Proof_of_work [2] Bit Gold (2005, December 29). Nick Szabo. https://nakamotoinstitute.org/bit-gold/ [3] PoW-Based NFTs in 2021: A Comparison (2021, October 15). Ken You. https://hackernoon.com/pow-based-nfts-in-2021-a-comparison

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