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There has been a lot of hype surrounding non-fungible tokens (NFTs) as of late. These unique digital assets build on the security of traditional cryptocurrencies and introduce some new functionalities and opportunities to the market. Non-fungible tokens differ from regular cryptocurrencies in some key ways. The main difference is that these tokens represent something unique. As such, NFTs are not mutually interchangeable with other tokens or digital assets.
Fungibility vs. Non-Fungibility
To understand NFTs, you first need to grasp the differences between fungible vs. non-fungible assets. Notably, fungibility is a core characteristic of all successful monetary systems. Put simply, fungible assets share the same value. For example, an ounce of gold possesses the same value as any other ounce of gold that holds the same purity. The same goes for fiat currencies. You can spend a dollar and receive another dollar with no loss of value.
Notably, most cryptocurrencies are semi-fungible by nature. This distinction results from the fact that blockchain assets are easily trackable. So, while in theory, any two Bitcoins hold the same value regardless of their past use or how they were procured, this isn’t always the case. Recently, crypto’s fungibility has been put at risk with the introduction of more powerful blockchain forensic tools. These tools have led to organizations being able to refuse or blacklist certain coins.
Non-Fungible Digital Assets
NFTs are the opposite. They are completely unique. Their individuality can be easily verified via the blockchain. These tokens provide the market with a variety of new opportunities. Notably, no two NFTs are the exact same. In this way, developers can utilize NFTs as an effective way to individualize assets on the blockchain.
Today there are all types of NFTs in use. The introduction of this technology has allowed developers to represent nearly any asset on the blockchain. From real estate to personal identities, NFTs provide the market with some new and exciting opportunities.
How NFTs First Got Started
Notably, NFTs first gained popularity in the gaming sector. It was here that developers realized they could provide more value to users via these unique protocols. Gaming developers have worked tirelessly to integrate NFTs with in-game features such as property, characters, and other unique aspects. Notably, the first platform to leverage this technology successfully in the market was Cryptokitties.
Cryptokitties is an Ethereum-based collectors game. Users purchase unique characters with the hope of obtaining very rare characteristics. In Cryptokitties, each digital cat carries a unique number and 256-bit distinct genome with DNA. Each of these features is referred to as cattributes. Each cattribute has a different scarcity to it. Get the right combination of cattributes and you could see some impressive profits for your kitties.
Cryptokitties introduces twelve different cattributes in different combinations to add to the fun and overall scarcity of each kitten. Specifically, the pattern, mouth shape, fur, eye shape, base color, accent color, highlight color, and eye color are of interest. There are also cattributes regarding the domesticated nature of the kitten. This feature tells you the kitties’ environment and its overall prestige. There is even a secret cattribute that is very rare.
Cryptokitties users can gather a combination of kittens and mate their tokens. These NFTs will pass down their characteristics to their offspring and create new and more valuable kittens to enter the market. Speaking on the value of these NFTs, there are Cryptokitties worth well over $100,000. On May 12, 2018, one very rare Cryptokitty sold for $140,000 via an auction. As it stands today, Cryptokitties now has completed the sale of 2,854,490 digital cats with a total trading volume of $39,457,576.53 USD since launch.
Top NFT Types
Understanding the differences between each NFT type is a smart first step in gaining a better understanding of the usefulness of these tokens. There are all types of NFTs in use in the market currently. Each has its benefits and exclusive uses. Here are the top NFT types encountered by traders today.
One of the most popular forms of NFTs to emerge is branded NFTs. You can think of branded NFTs kind of like your traditional collectibles. These tokens include some popular name brands. In many instances, these brands are sports companies. The main aspect of branded NFTs is that the brand’s recognition and overall love determines the value of the token.
Branded NFTs have found a home within the sports collectibles arena. There are NFT sports memorabilia selling for hundreds of thousands of dollars at this time. NBA Top Shot, a basketball NFT collectors site has led this charge. The platform first made headlines after it secured $147.8 million in sales soaring its first week in operation. The platform has continued to see its memorabilia’s value increase. Recently, a single NBA Top Shot video highlight featuring LeBron James sold for a record $208,000.
Supporting this growth, Dallas Mavericks owner, Mark Cuban, has played a vital role in helping the public to understand why NFTs are valuable. He has auctioned off a variety of digital goods online and has even boasted about his growing collection of rare NFTs on numerous occasions. Not surprisingly, Cuban isn’t alone. There are now more artists, performers, athletes, and well-known persons getting in on the NFT craze.
Along the same line of thought is memorabilia NFTs. These NFTs build upon the branded NFT concept by utilizing the token’s ownership history to increase value. Owning one of these tokens is like owning a piece of history in that their previous owners are usually of note. For example, imagine owning a golf club that was once Tiger Woods.
Now apply that same demand to digital assets. Imagine owning a Cryptokitty that was once owned by Vitalik Buterin, Ethereum’s creator. Keenly, Memorabilia NFTs derive value from their history, rather than their actual usability. This approach has unlimited ROI. These tokens have such an impressive upside due to the fact that the history of these digital assets is encoded forever and easily verifiable via the blockchain.
Game Relevant NFTs
Game-relevant NFTs is another fast-growing option available to traders. These NFTs build on the Cryptokitties concept by integrating the rarity of these tokens into already existing platforms. Notably, game-relevant NFTs derive value based on the overall demand of the platform they exist in.
They can consist of certain tools, characters, or virtual real estate. For example, imagine owning a crucial piece of land in your favorite game or digital ecosystem. This virtual real estate holds real value to players who wish to obtain the property. In the past, when you purchased this virtual land, you were simply buying the right to use it. NFTs take the concept a step further and provides users with actual ownership of the property.
One of the key aspects of game-relevant NFTs is that the user has no way to add to the value of these tokens. Their value is solely dependent on the gaming atmosphere and the role that the NFT plays in that ecosystem. Games like Fortnite, where users own virtual real estate, have much to gain when they integrate this technology because it makes it easier to sell in-game add-ons.
Gameplay-driven NFTs are another variation of these tokens that have unlimited upside potential. Unlike game-relevant NFTs, these coins combine the popularity of the platform with the user’s actions to determine value. These NFTs can include specially developed characters, classes, weapons, vehicles, or pieces of developed digital real estate.
Gameplay Driven NFTs’ value comes directly from the actions of the user. Games that allow you to develop your features have much to gain from integrating these NFTs. Think of games that allow you to specially design and create built-up avatars, weapons, outfits, or vehicles.
In a traditional gaming atmosphere, all the labor put into building these unique gameplay items is lost once a player decides to leave the platform. Now, NFT tech allows these users to capitalize on all of their efforts. This strategy benefits players because they can receive real rewards for their hard work when they are prepared to sell their items. It also helps developers because it provides users with a chance to earn ROIs on their in-game purchases. In turn, this makes it easier to sell these features to users.
Real Estate NFTs and FNFTs
One of the earliest forms of non-fungible tokens was in the real estate sector. Real estate has always been difficult to invest in for many people. Aside from the financial barriers to this kind of investment, there are also legal and regulatory hurdles that can make real estate investing difficult for many people. Tokenized real estate eliminates these concerns.
Users from around the globe can purchase tokenized real estate in the same manner as any other token. Additionally, tokenized real estate is often sold using fractional non-fungible tokens. This strategy eliminates the financial barriers associated with real estate investing. Users can purchase small tokenized shares of the property using this method. These shares can sell for as low as $100. When you combine both of these features, it’s easy to see how NFTs help to democratize the entire market.
NFT art is a hot ticket item in the market today. The use of NFTs to verify the authenticity and scarcity of these digital artworks has created an entire subsection in the market. There are entire NFT art platforms that allow artists to create, share, trade, and sell their works and earn real profits. Impressively, some of these platforms even provide the artist with residuals every time their non-fungible token is resold.
NFT art continues to make headlines across the globe. Recently, one NFT art piece sold for over $6 million. The artwork in question was created by a popular artist in the sector known as Beeple. The digital animation featured a picture of ex-president Donald Trump lying on the ground naked with a rainbow in the background. Notably, many people see these developments as the start of a new digital renaissance where artists will be able to maximize their profits.
The next-gen platform, Art Blocks takes the non-fungible token art concept further. The platform introduces an automated digital art creator. Users simply input their preferences and the protocol automatically creates a one-of-a-kind piece of art. When the work is complete, the user can decide if they wish to complete the purchase or create another work of art.
Non-Fungible Token Markets
Recently, a variety of NFT marketplaces have entered the sector. These marketplaces provide users with a secure way to sell, buy, and trade their tokens. One such platform is Opensea. Opensea is the largest NFT marketplace in operation at this time. The protocol currently has over 4 million NFTs on auction. Users can easily see the rarity and current value of these NFTs using the interface. There are also auction options available. NFT auctions are beneficial to artists because they provide an easy way for them to maximize their profits.
SuperRare is another NFT market that has raised eyebrows across the sector. SuperRare is different from the competition in that it strictly supports only high-end NFT projects. Consequently, you need to be prepared to spend a little more when you utilize this market for your NFT purchases. SuperRare continues to see more growth as there are now more valuable NFTs than ever. Advanced traders and collectors are sure to find what they are looking for on this auction platform.
NFTs – Creating New Opportunities for Blockchain Integration
NFTs are one of the fastest-growing sectors in the blockchain industry and for good reason. These unique blockchain assets are extremely flexible and secure. They enable more usability for all parties and they are far more cost-efficient than previous alternatives. For these reasons, you can expect the NFT market to continue to expand for the foreseeable future.
David Hamilton is a full-time journalist and a long-time bitcoinist. He specializes in writing articles on the blockchain. His articles have been published in multiple bitcoin publications including Bitcoinlightning.com
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