NFTs or non-fungible tokens are one-of-a-kind or digitally unique assets. The most common example currently involves limited edition digital art and collectibles.
Imagine an extremely rare baseball card that is immortalized on a blockchain such as Ethereum, or a popular artist releasing limited edition prints of classic pieces. NFTs are authenticated and validated on the blockchain verifying their originality. Please read our articles on “What is blockchain” and “What are smart contracts” to learn more.
NFTs are not only limited to art. The most important aspect of NFTs is that since they are written into a blockchain they are non-replicable, and to some extent unique. A good example of this is Bored Ape Yacht Club. There are only 10,000 digital Apes, making them scarce and limiting buyers[1]. Bored Apes have since exploded in popularity and price action. Even Stephen Curry, a very famous NBA allstar recently bought an ape for $180,000.
Only the imagination of the creator limits the functionality and creativity of NFTs. In the future, NFTs will provide a limited edition of a digital asset, but upon burning the NFT a physical copy is created. Burning of an NFT permanently removes the NFT from the blockchain but leaves a history of its removal. A great example of this is Uniqly.io. Uniqly.io allows users to purchase one of kind graphical T shirts. These digital T-shirts can then have the NFT burned with a signature from the owner, and in return provide a physical copy of the T-shirt instead[2].
NFTs really become powerful when use cases or perks are tied to the asset. Imagine a European football fan that can purchase a game ticket as an NFT. As part of purchasing the ticket, the buyer gets a random lottery at a new football card. The cards could vary from common to rare. The rarest cards could carry rewards such as free season passes, or meet the team rewards. Another example is limited edition albums from popular artists. The albums could provide limited edition vinyl copies to purchasers, or VIP access to virtual concerts.
Another use case in the future will be cars or houses. Each individual car using its VIN number could be solidified on a blockchain, and ownership could easily be transferred using smart contracts for exchange and sales. Fungible assets like bitcoin can be exchanged for each other on a 1:1 ratio currently, since 1 BTC will always equal 1 BTC. Non-fungible assets could be traded in the future. Sick of your car? Trade your car for your friends car through a smart contract. This will also apply to houses and any number of things that have value.
Video games will be a large avenue for NFTs. Currently, if someone owns an in-game item for a particular video game, they could get banned by the game moderators and lose access to their items. Games can fall out of popularity. What happens to all the in game cosmetics and other items that were purchased? With NFTs, one could own a particular weapon skin and carry it through multiple different games while also owning the rights to the item itself for trade or resale. This opens up many opportunities for fans and developers alike. Early adopters and collectors of popular games NFTs could find themselves in a rather lucrative scenario. This explosive growth was seen with Axie-infinity and with the collectable monster
In March 2021, Berkley auctioned NFTs for the patent disclosures to two Nobel prize winning inventions, including gene editing, and cancer immunotherapy [3]. This was made possible through the use of smart contracts on Ethereum.
NFTs are rapidly gaining popularity across various entertainment industries. Many popular artists are getting in very early and creating limited edition NFTs this year. Newcomers can get involved in a variety of ways. Perhaps one of the easiest ways would be to purchase tokens for projects that focus on NFTs. The downside risk would be lower than buying single NFTs and the upside would grant direct exposure to the NFT markets. The three most valuable NFT tokens currently include [Theta Network] which aims to bring streaming to the blockchain, [Chiliz] which focuses on sports and collectibles, and [Enjin] which focuses on gaming. All three of these projects are up over 1,000% in the past year.
Please remember this information is for educational purposes only. Nothing stated in the article is financial advice. Always do your own research and take accountability for investments.
[1] https://boredapeyachtclub.com/#/
[2] https://www.uniqly.io/
[3] https://www.insidehighered.com/quicktakes/2021/05/28/uc-berkeley-will-auction-nfts-2-nobel-prize-patents
