In recent times there happens to be a lot of buzz going around in the crypto industry and beyond regarding non-fungible tokens or assets. This particular variety of digital assets is predicted to initiate a lot of positive changes across sectors as cryptocurrency gears up for an extended bull run. NFTs have been bringing valued assets into the blockchain periphery via a wide range of industries such as real estate, gaming, art, media, and more.
Most people have become familiar with the concept of blockchain, the foundation to crypto, NFTs, CBDCs, and likewise. It was the launch of Bitcoin the put the spotlight on the blockchain, which promotes the removal of a centralized architecture, be it the government or organization, controlling an entire network through a single main server. Blockchain is the exact opposite of that structure, where it operates on a decentralized architecture across several computers or servers.
These computers verify and authenticate the transactions by cracking complex mathematical equations. Blockchain operates across a network or consortium model where the stakeholders have to come to a consensus to validate a transaction. Only then can it be recorded in a block, which is virtually immutable. The computers use the data from the past transaction to verify the ongoing one, which means that every transaction has identical hashes making it almost impossible to alter, modify, hack, or delete.
Every tokenized asset on a blockchain has distinguishable and unique attributes. Being different from each other non-fungible assets cannot be interchangeable, which kind of explains the term. Just like the real assets, these come with proof of authenticity and verifiable ownership records. NFTs differ from cryptos as these use varied token standards, deploying different types of smart contracts. The recent rise in popularity of NFT has initiated the development of a new kind of virtual economy that changes how realtors, gamers, and art enthusiast transact leveraging the assets.
If we draw a comparison of concepts between the fungible and non-fungible tokens, then from an economic perspective, fungible assets can be interchanged with another form of asset or goods, for a similar value. For instance, gold is a fungible asset. The value of 1 kilo of 24-carat gold in a country will be the same in another. Cryptocurrencies are fungible assets.
While non-fungible assets have been in existence for a long, the non-fungible tokens have risen to prominence recently after the world became obsessed with CryptoKitties. It is an online game that allows one to collect, sell, and breed virtual kittens or cats. Each CryptoKitty has unique genetic identification that is created by the Genetic Algorithm. The rule here is that no two kittens can be similar. Crypto Kitty initiated the trend of creating NFTs in the gaming industry in the form of in-game assets. The trending of CryptoKitties followed by heavy tokenization within the gaming industry has contributed to the mass adoption of digital assets.
The gaming industry at present has the most active use cases for non-fungible tokens. But the other industries are not far behind. They are gradually integrating tokenization of assets and blockchain within their existing architecture. As the mainstream adoption of blockchain accelerates, the use of NFTs is becoming a secondary on-ramp to the new users within the crypto domain.
1. Gaming Industry:
For years the gaming industry has created virtual economies within a game’s ecosystem and has been a staple in games like the Fortnite and World of Warcraft. In-game collectibles, currencies, and marketplaces are central to these games leveraging which the gamers level up and progress through the game. The prominent gaming accounts are a great commodity for those who do not want to spend time or effort to unlock the bonus gaming features. Due to that, there is an expanding unregulated market for such accounts.
Blockchain-based gaming and the use of NFTs allows the players to trade in-game collectibles securely while providing authenticity and validation to the players. It also facilitates the trading of rare items openly in exchange for fiat in a safe and secure gaming ecosystem. NFTs offer a great solution for the virtual ownership of rare and unique gaming collectibles, allowing the generation of revenue by leveraging the user’s gaming skills.
Users are also allowed to participate in the governance to make decisions on future developments in a game. It provides users with an opportunity to create their very own virtual world, operating the same within verifiable gaming marketplaces.
The sports industry suffers a lot due to counterfeit merchandise and tickets, which blockchain can help in eliminating. The immutability of blockchain prevents counterfeit collectibles and tickets, with the help of tokenized game tickets getting issued on the blockchain network. This is a great use case for non-fungible tokens. Each game ticket might be similar, but each will hold unique identifiable information connecting it with the designated owner on the blockchain. Sports NFTs have gained recent popularity with prominent athletes becoming tokenized assets on the blockchain, and their value getting determined by how the perform. There is ongoing work on turning merchandise into NFTs allowing the owner to register and verify the official merchandise as theirs.
3. Real Estate
This happens to be the most interesting project for tokenization, where the property is getting tokenized in a blockchain platform. A single property is fractionalized into multiple assets that can be purchased by investors on a blockchain-based exchange allowing people to own a part of a property. Tokenization of real estate allows for seamless transactions when one is buying or selling the house, eliminating any third-party intermediary, preventing any kind of conflict over the ownership of land or estate.
Blockchain provides provenance, which is proof of ownership and origin of the art pieces. Digital artists find it increasingly difficult to copyright of their artwork. The use of NFTs can enable one to buy a work of art and showcase it within a digital space, being fully aware of the history of the asset, such as artist name, date of creation, list of other owners, and value of the asset throughout its lifecycle. It will also allow the artists to get better payment for their work through the elimination of brokers by initiating P2P payments.
After reviewing it all, we can claim that the non-fungible tokens are creating a strong foundation for blockchain and crypto adoption, with a broad spectrum of use cases aiding industries to save money on counterfeit products, copyright issues, while helping people safeguard their data and privacy.