The internet has been abuzz with NFT (non-fungible token) chatter. You can find stories of single tokens selling for millions. Additionally, many of these expensive tokens seem to show very simplistic artwork. So what makes NFTs so special? Why are these tokens continually making headlines? Here is some valuable insight into the NFT boom.
What are NFTs
To understand why an NFT can become so valuable, you first need to grasp the concept of fungibility. Fungibility is a term used to describe an asset’s ability to swap without losing value. In the case of monetary systems like the US dollar or Bitcoin, any single unit of currency must hold the same value as any other. Notably, most cryptocurrencies possess at least semi-fungibility by design.
NFTs are non-fungible. This designation means that each NFT token has its value and characteristics. NFTs provides users with the ability to verify this data the same way you would any other blockchain transaction. As such, they provide a reliable and efficient way to validate digital assets.
This capability makes NFTs ideal for a wide class of use cases. These tokens have found growing integration into the art, gaming, and business sectors. They have also berthed an entirely new sector within the crypto market. There are a growing number of NFT-related exchanges, services, and builders entering service. These platforms have helped to drive innovation and adoption to new heights in a short time.
How NFTs First Got Started
The concept of using cryptocurrencies to represent unique digital assets has been around way before NFTs became popular. In the early days of crypto, the idea existed but the technology wasn’t ready. It took the introduction of smart contract-capable blockchains like Ethereum to create a scenario where these assets could thrive.
Notably, the first NFT project to gain real notoriety in the market was Cryptokitties. Cryptokitties entered the market in 2017 and were an immediate hit among users. It took the concept of NFTs and gamified it in a way that allowed users to leverage the full capabilities of the tech at the time.
The game consists of a large selection of different types of kittens. Each cat operates as an NFT that lives on the Ethereum blockchain. It carries a unique number and 256-bit distinct genome with DNA that can be passed down to its offspring.
There are 12 “attributes” that a token can possess. These distinctions include the cat’s base color, pattern, mouth shape, fur, eye shape, accent color, highlight color, and eye color. There are also distinctions made regarding the cat’s environment, temperament, and whether it’s prestigious or secret.
Cryptokitties is still a top performer in the market with some of its NFTs selling for hundreds of thousands in crypto. For example, on May 12, 2018, a CryptoKitty sold for $140,000 through auction. In total, Cryptokitties has completed the sale of +2,854,490 digital cats with a combined value of +$39,457,576.53 USD.
Different Types of NFTs
There are a lot of different types of NFTs available to users today. Each style of NFT serves a different purpose in the market while still leveraging the technical superiority of blockchain technology to improve efficiency. Here are the top NFT Types and what makes them different.
Branded NFTs combine the concepts of memorabilia and brand recognition with the anti-manipulation systems found on NFT markets. These types of NFTs can include items like sports memorabilia or name-branded items like sports car art. A perfect example of branded NFTs in action is the platform NBA Top Shot.
NBA Top Shot has earned a reputation as an NFT powerhouse since its launch. The platform secured $147.8 million in sales in its first 7 days of operation. Additionally, the platform continues to break new milestones in terms of token values. In one instance, the platform sold a clip of LeBron James for $208,000.
Another type of NFT that you will encounter in the market is game-relevant tokens. There are endless reasons why NFTs and the gaming sector continue to merge. Game-relevant NFTs provides huge advantages to both users and developers.
For the first time in history, gamers can take real ownership of digital assets. Imagine that rare vehicle or weapon you discovered on your favorite title. In the past, you had to trust the developers as to the scarcity of the item. In many instances, it was impossible to find this information. As such, it became impossible to accurately value these assets.
Along with true ownership of digital in-game assets comes a need for more transparency. NFTs provide gamers with this and much more. Imagine being able to sell off your in-game weapons, vehicles, or land for real cryptocurrencies such as Bitcoin or Ethereum. Already the in-game NFT market is on the rise with titles like Cryptokitties growing in value.
Gameplay-driven NFTs expand on the NFT concept by enabling users to improve the value of these tokens based on their performance. Think of an avatar that gains experience points. In the past, users would spend countless hours developing these characters. When they would leave the game, all of their effort and time would be locked in the title.
Gameplay-driven NFTs enable you to unlock these efforts using blockchain technology. Imagine auctioning off your characters, class, weapon, vehicle, or piece of digital real estate. Gameplay-driven NFTs empowers users to improve the value of their tokens through actions. Additionally, they also gain value based on the game’s demand.
NFTs is the Art world
The art world has embraced NFT technology on an entirely different level. Today, there are billions in NFT art being sold globally. Networks like OpenSea conduct millions in NFT art trades daily. The site has seen some impressive stats with some NFTs selling for millions.
The average cost of an NFT is still under $1000 which means that most people can afford one if they desire to enter the market. Additionally, some other factors can drive the value of your NFT up including who previously owned the item. There are even a growing number of NFT art exposes around the world. Here users can expand or display their collections for the rest of the market to enjoy.
Making NFT Art
One of the main reasons why there continues to be a strong migration of artists to NFT protocols is the ease of the process. There are NFT builders available today that enable you to create nearly anything as an NFT with no programming whatsoever. In many instances, you simply upload the file and it is sent to the blockchain.
Advantages of NFT Art
The main advantage of making NFT art is that it is easily verifiable. The original of any NFT can be verified using a free blockchain explore. Additionally, potential buyers can trace the entire history of the token from creation to the current day in seconds using these systems.
There are even NFT platforms today that will scour the internet in search of unlicensed usages of your works. These networks will then notify you and the unauthorized user. They will even provide the user with the ability to purchase a licensing agreement to continue using your art if you desire. All of tthese options make NFT tech a smart fit for content creators.
NFTs in Real Estate
NFTs are also changing the real estate market. Since the first days of crypto, people have wanted to tokenize real estate. There are just so many reasons why you would want to do this. For one, it’s much easier to transfer ownership of a token versus a piece of property.
Traditionally, purchasing property is a major process that requires the buyer to jump through multiple hoops. Selling your property can be difficult due to these requirements. For example, the buyer needs to be located in your region or the process will be more difficult. Additionally, they must qualify for funding if they don’t have the full payment upfront.
These issues are only magnified when discussing larger properties such as commercial resorts or buildings. These properties are harder to sell because of their higher value. Most people are unable to qualify for multimillion-dollar loans on commercial properties. As such, the average person is excluded from the properties that offer the highest ROIs.
Tokenized properties provide a solution that is both cost-effective and securer. Tokenized properties can be broken down into fractional NFTs. These are tokens that have been split up into smaller denominations. There are real estate NFTs that have been broken down to $100 value per token.
This strategy lowers the entry bar and enables anyone to participate. It also allows traders to create more diversified portfolios with less risk. All in all, tokenized properties are only limited by regulatory concerns rather than technical restrictions. Hopefully, in the coming months, lawmakers will get up to speed on the amazing opportunities fractional NFTs bring to the market.
Using NFTs as Entry Pass
It’s becoming more common to see artists and other content creators issuing NFTs as a form of entry pass to a particular event. NFTs are ideal for this usage because they can be issued quickly and they can’t be faked like traditional concert tickets. This strategy also enables content creators to connect with their fans on a higher level as these NFTs can be collector items at a later date.
There has already been a number of high-level concerts that leveraged NFT technology for entry passes. The most notable of these events would have to be the ones held in the metaverse. The metaverse is a digital 3D world that operates 24/7. This digital landscape continues to secure new users with some concerts reaching over 10 million participants.
Along the same lines of thought, NFTs are ideal for use as lotto tickets. They can’t be faked and it’s easy to see statistics regarding issuance, winnings and participation. NFT lottos provide more transparency and are safer than paper-based models. Additionally, they’re far less expensive to operate and monitor.
NFT lottos can support international clientele which means the payouts can be much larger than local lotteries. This system can obtain liquidity from a global audience. Additionally, since these streams operate autonomously, there is far less overhead which equates to more funding for the winners. Best of all, you’ll always know if you’re a winner using a blockchain explorer.
Staking NFTs is a popular way in which people further their wealth in the market. It makes sense to stake your NFT because in many instance, you intend to hold the token for extended time. Staking can enable you to enjoy the tokens appreciation alongside staking returns.
Staking is an ideal choice for new users because it’s very low risk. Staking provides you a way to leverage your assets to produce passive income without risking our original asset like when trading. As such, staking is a smart choice for NFT holders across the board.
Social Media Leveraging NFTs in New Ways
The birth of social media coins is another major milestone for the NFT community. These tokens are designed to represent a certain content creator or influencer. They are usually held in pools that go up in value as the liquidity locked in the pool rises. Social media tokens provide a host of advantages to the market that were previously unavailable.
For example, you could purchase social media NFTs of your favorite artists. As their career grows and their liquidity pool deepens, these tokens increase in value. It’s also common for NFT issuers to offer NFT holders access to special events and offers. All of these factors add to the overall value of social media NFTs.
All Types of NFTs
There are many more styles of NFTs making waves in the market. As such, you can find NFTs in use across a growing number of industries. These tokens are also finding a home within the security sector as a better way to prove identities without revealing vital data. All of these reasons and many more continue to fuel demand for NFTs in the market.