For the best part of 2021, DeFi managed to capture the attention of inventors and enterprises, so much so that critics tagged it a bubble. While the DeFi landscape had since put this concern to bed and maintained a healthy hype, another crypto subsector has begun to prove its worth as another potential money maker.
Called non-fungible tokens or NFTs, tokens built using this crypto framework rely on scarcity and frequently sell for hundreds of thousands of dollars. For those who are not yet familiar with this unfolding renaissance, here is a detailed take on the structure of the NFT framework, what they are used for, and examples of some of the applications that already capitalize on the technology.
A prime example of applications drawing from this digital asset framework is CryptoKitties, a gamified platform, which allows users to create, breed, and sell NFT-based digital cats for real money. Since it launched in 2017, over $35 million worth of digital cats has been sold. The same level of success is attributed to Sorare, a marketplace for licensed digital cards of players and a growing hub for fantasy football leagues. In 2020 alone, Sorare registered a 1000% increase in sales and partnered with around 80 football clubs.
Remarkably, the NFT model has also spurred the rise of a new form of art marketplace. With a record of over $8 million worth of tokenized artworks sold in December 2020, it has become clear that we are on the verge of a critical shift in blockchain trends. And considering the exploits of DeFi in 2020, there is little doubt that NFT also has the potential of making an even bigger splash in 2021.
Victor Larionov, CEO of one of the leading blockchain marketing agency, Priority Token, explains that “the NFT standard implements unique, irreplaceable, and non-interchangeable digital assets on the blockchain. This design provides exciting ways to represent digital and real-world items on the blockchain for seamless transfer of ownership and verification of authenticity.” He added that “you can acquire a token that embodies the worth and ownership of a real estate property in California and be rest assured that it is impossible to replicate it. For what it is worth, there is zero chance that another token can challenge your ownership of such property.”
Most popular applications of NFTs are gaming, art, collectibles, fashion, virtual assets, identity, NFT Structure. Below we will dig deeper in these niches.
1. Gaming
Judging by the historical performance of NFts-based games, it is safe to say that this emerging economy has the potential of becoming a mainstay in the gaming industry. According to Nonfungible.com, Decentraland has facilitated the trade of over $35 million worth of NFTs. Cryptokitties, in particular, changed the NFT narrative in 2018 when one digital cat, called Dragon, sold for $170,000.
2. Art
3. Collectibles
4. FashionNike NKE
5. Virtual Assets
6. Identity
7. NFT StructureEthereum
Victor Lariononov noted that “although NFTs are indivisible, it is possible to bundle two or more tokens and sell them as a whole. This is thanks to the introduction of another token standard, named ERC 998, which permits the combining of ERC 721 tokens. In other words, instead of selling tokenized plots of land separately, you can sell all of them at a go.”
Note that NFTs are not restricted to the Ethereum ecosystem. This token model is also compatible with other smart contract-based blockchain networks, including TRON, NEO, and EOS.
Final Thought
Victor Lariononov expects “the utility of this token model to spur the influx of enterprise-based blockchain adoptions and establish new paradigms in the ongoing quest for global digitization.”
Platforms that are smart enough to incorporate this framework have a higher chance at success because there is a strong demand for digitized means of owning or vetting assets, and NFT is the only viable way to achieve this. As it is with other promising but nascent crypto sectors, early movers are often the biggest winners.