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Humanity’s intense desire to create value and then retain it over generations has often led us to seek out one-of-a-kind objects that fascinate the mind and stimulate our senses. For example, each of the seven wonders of the world is unique and has held significance in many civilizations for hundreds of years, if not longer. However, man-made creations can also reach immense levels of cultural and financial significance, and that fact is most commonly illustrated by fine art. The Mona Lisa, likely the most valuable painting in the world, is estimated to currently have a value of nearly $1 billion U.S. dollars and other paintings from famous painters like Pablo Picasso, Vincent Van Gogh, and Qi Baishi commonly sell for tens or even hundreds of millions of dollars each.
The immense value of those works of art is certainly driven by their quality and by their history. However, perhaps an even greater driver of their price is their uniqueness. There can only ever be one true Mona Lisa, one real Starry Night, and so on. The painters behind the masterpieces are long gone and any recreation of the originals, no matter how masterful, would simply be a nearly worthless facsimile. Just think about how little you paid the last time you bought a print of a famous piece of art from the gift shop in a museum. Or think about how easy it is to Google an image of the artwork and copy it whenever you want.
Our world has become digital at a rapid pace and that transition is only speeding up as time passes. The vast majority of knowledge and content ever created now resides on the internet. And people spend more time working, playing, and living lives in the digital world than ever before. This same digital world calls for a method of creating and maintaining the same quality and uniqueness of content that for thousands of years has only existed in physical form. A new technology has exploded over the past several years to fill this newly experienced digital need: non-fungible tokens (NFTs).
Non-Fungible Tokens: Digitally Scarce
At its core, an NFT is simply a unit of data on a blockchain that attests to the uniqueness of an underlying digital asset. Unlike cryptocurrencies, which are unique but have millions (like Bitcoin) or billions (like Dogecoin) of tokens that can be interchanged one with another, NFTs are cryptographically unique. This means that all NFTs represent different underlying assets and have fundamentally different values from one another. To give you a better sense of what NFTs are, let’s use two examples: CryptoKitties and Beeple’s Everydays: The First 5000 Days.
CryptoKitties
CryptoKitties is a game running on top of the Ethereum blockchain that allows players to acquire, train, and breed virtual cats that are completely unique from one another. Perhaps your first thought is that images and videos of cats are extremely common on the internet. While that’s certainly true, it misses the point of NFTs. The unique part of CryptoKitties is that each cat is represented as an NFT on Ethereum's blockchain. Once a user purchases a CryptoKitty NFT, no one can take or transfer it without the user’s permission, not even the game developer. Ownership of the CryptoKitty is recorded to and verified on the blockchain and no one can access it unless they have access to the private key that secures it (which, of course, only the owner should have).
Everydays: The First 5000 Days
Everydays is much more similar in form to the works of art that we discussed previously. This NFT is made up of 5,000 digital images created by the artist Mike Winkelmann, also known as Beeple, over the course of more than a decade. While the images were originally created digitally by Beeple, ownership of the rights to display the artwork now belongs to Vignesh Sundaresan, the man who purchased the NFT from Beeple for over $69 million U.S. dollars worth of the Ether cryptocurrency earlier this year.
Axie Infinity: A New Blockchain Game
The developer behind Axie Infinity describes the game as follows:
Axie Infinity is a Pokémon-inspired universe where anyone can earn tokens through skilled gameplay and contributions to the ecosystem.
Players of the blockchain game are able to collect, train, and battle with their “pets”, each of which also represent an NFT tied to the Ronin sidechain of the Ethereum blockchain.
Owning the product of our time spent online is certainly very different from what we usually experience. So much of our digital identity is owned and controlled by entities other than ourselves. The information tied to your digital identity definitely pertains to you and your life, but once it’s collected by a company, it can be used to a large degree at the company's discretion. Facebook owns the social media software on which your profile resides. Google owns the software on which your email resides. Microsoft owns the software on which your Xbox Live profile resides. And when you want to leave, those companies will keep some of your information. In other words, it won't all leave with you.
This new “play-to-own”, as I like to call it, format is rather revolutionary. For the first several decades of gaming, the time you spent on a game (i.e., your “progress”) was lost when the disk or cartridge broke or was displaced. Gaming next moved into an initial online phase, in which you could, at least to some degree, still access your game file when you switched systems or locations, but everything in the game you produced was still owned by the game developer. This third iteration, gaming on a blockchain, is different in that it allows users to maintain and exchange ownership of the value they create online.
Play-to-Earn: A New Jobs Platform?
The developers over at Axie Infinity have their own term, “Play-to-Earn”, for this gaming model and it is indeed becoming quite revolutionary. The game has exploded in popularity in countries like the Philippines, Venezuela, Cuba, and others, in part, because some players in those countries are able to earn more from playing the game for several hours a day than they could from having traditional full-time jobs. Players’ earnings can be driven by training their pets as we mentioned above. However, players are also able to earn “Small Love Potion”, one of the Axie Infinity ecosystem’s two tokens, as a reward for playing the game.
The real-world earnings from the game can add up quite substantially. The Small Love Potion token currently sells for around $.26 U.S. dollars apiece and some users are able to earn around two hundred of the tokens per day. Additionally, some of the rarer Axie pets are currently selling for around the equivalent of about $65,000 U.S. dollars or more.
While not everyone in the world, or even everyone using cryptocurrency today, will be interested in playing video games for money, the possibility of owning a piece of your online identity could perhaps become quite lucrative. Additionally, it goes without saying that we as a society will continue to spend more of our time in and migrate more of our identities into the digital world. The ability to retain some of the value we create online rather than losing it entirely to the companies we interact with will be revolutionary by helping people around the globe improve their financial futures and retain their self-sovereignty.
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