Nonfungible tokens (NFTs) are on the rise in the rapidly emerging blockchain industry as tokens that are constrained in their digital scarcity. NFTs are bridging capital closer to blockchain technology through various collectible sectors, such as gaming, sports, and fine arts. But what exactly are NFTs and how do their results ripple through the world of blockchain?
Non fungible tokens
Nonfungible tokens (NFTs), also referred to as crypto collectibles or nifty, are blockchain technology-managed digital assets. Each token has a unique individual specification which is represented on the blockchain by an unadulterated record. Although NFTs can be produced and issued on a variety of frameworks, ERC-721 tokens with a smart contract code embedded with unique information are a large number of them. In essence, the tokenized representation of real or digital assets is the NFTs.
Instead of being split into smaller denominations, NFTs may only be sold, traded and transferred in their full form. It is also possible to restrict the supply of NFTs to a certain amount, which makes NFTs uncommon and enticing for users to obtain. As well as having a source of authenticity and possession, NFTs are used to store crypto collectibles.
Reshaping the Collectible Industry
Although the idea of assets-turned-NFTs could sound novel, in our everyday lives, non-fungible assets exist everywhere. Nonfungibility implies that, even though they are of the same type, an asset or component is not transferable to another asset. A ticket on the front row of a live concert, an account handle for Instagram, a baseball with a star athlete's autograph are all exclusive collectibles. Avid gamers can also find in-game things that everyone wants to get their hands on that are unique and desirable. Art collectors are willing to spend millions of dollars on a masterpiece of authentic, one-of-a-kind art.
In both physical and digital types, the collectibles industry has been present throughout history. However, the industry is experiencing an unparalleled transformation with many benefits from NFTs when brought into existence.
Increasing Asset Movement and Tradability
NFTs allow coveted products to become easily tradable and transferable among users on gaming and other Internet platforms. Users can sell and trade stuff freely through ecosystems. Collectible tokens are far more available to whoever wants them in an open peer-to-peer marketplace without being tied to the walls of the original environment.
In addition, users can also opt to make the transaction in their preferred way, be it auctioning, bidding, bundling, and more, in a large pool of currencies. As a consequence, due to their instant tradability, tokenized assets will become increasingly liquid.
Secure the value of tokenized assets
A tokenized asset helps maintain the quality and value of the collectible, such as an original artwork, unlike a tangible asset that comes with the risk of theft, failure or unauthorized duplication. This helps secure the creator's ownership and rights. Moreover, because NFT properties are encoded on the chain and can not be changed when released, it is feasible to impose a limit on the supply of NFTs. Therefore, the value of collectibles resulting from their scarcity is secured and maintained.
Bring assets with possibilities for evolution to a unified shape
There are no existing digital assets of the same way, as the systemic nature of the domain of a website varies from that of a concert ticketing platform, which causes friction when users try to move or trade these assets. As the use of NFTs puts these services together in an amalgamation of uniform principles, this dilemma can be overcome. As a consequence, it is possible to own, pass, handle and view tokenized properties seamlessly.
It is also anticipated that, thanks to its programmability, developers will further extend the technological possibilities of NFTs. Via complex dynamics, NFTs continue to develop as they are forged, redeemed, randomly generated, etc. NFTs are definitely not limited to a specific blockchain technology and ecosystem, as changes to NFTs continue to be made.
NFT projects
On the blockchain, a number of NFT projects are floating, but which ones are truly groundbreaking? This depends on the scale of the project's participating population (how many users are there?) and the project's financial value (how much USD is involved in platform transactions?).
A renowned NFT project, CryptoKitties, is an Ethereum-based blockchain game developed in 2017 by Axiom Zen. As one of the first attempts to bring blockchain technology into recreation, it gives its name to itself. In order to gather, breed, purchase and sell virtual cats on the CryptoKitties market, players spend real money on ETH. There are unique features for each virtual pet, or token, called cattributes. Some felines are rarer than others in the game, giving them a higher market value for assets. In 2018, a virtual cat called Dragon was sold in the form of an NFT for a record-breaking price of 600 ETH, or $170,000, making it perhaps the most exorbitant in-app purchase to date.
NFTs future
NFTs can be a gateway to bring millions of new users to the world of crypto and blockchain technology as a spin-off from the well known collectibles in the real world. As collectible in-game objects are changed into NFTs, players in gaming economies may become potential new blockchain users. Real world assets such as real estate and artwork can also be tokenized and exchanged on the blockchain in addition to the virtual world of gaming. NFTs are likely to provide these markets with the much needed liquidity and bring in previously untapped revenue sources.
Although the market size of NFTs is still very limited as the secondary volume of trading is at USD 2-3 million, in the coming years, the technology used in NFTs is expected to bring new changes not only to the collectibles industry, but also to the world of blockchain. Before then, in order to further penetrate into mainstream markets for interested new blockchain users, NFTs will experience several dramatic changes in infrastructure and user interface.
