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NFTs, or non-fungible tokens, have become ubiquitous in recent years – a phenomenon that is undoubtedly symptomatic of our new post-pandemic, hyper-digitalized lives.
An NFT represents any digitally represented asset that can be bought and sold. Because it is stored on the blockchain (a system that tracks crypto transactions through peer-to-peer networks) and includes unique identifying information, the token cannot be duplicated. Likewise, it is non-fungible, meaning it cannot be traded, unlike a cryptocurrency like Bitcoin, where one coin equals another coin.
Since their debut eight years ago, these blockchain-based digital tokens have disrupted multiple industries. These industries are not just art and collectibles; games, music, De-Fi and virtual reality (or VR) are also expected to reach new heights with NFTs. But, beyond the hype, do NFTs have a real future? I believe the answer is an unequivocal “yes”.
Where do we see NFTs?
All NFTs are associated with smart contracts and can be obtained in exchange for cryptocurrency. Typically, NFT data is stored in files such as image, video, and audio. This is why NFTs have become so inextricably associated with the art world. NFTs have revolutionized the creative industry. Brick-and-mortar galleries no longer define how art is bought and sold. Now artists can monetize their work through a new type of self-publishing, with websites such as OpenSea and Rarible operating as online auction houses. The most expensive NFT ever sold was Pak’s The Merge, which grossed US$91.8 million. Although exorbitant, this is the price consumers are willing to pay for something so rare and unique – a simple example of the principles of market demand.
Of course, these ostentatious displays of wealth give NFTs a controversial sheen, but it’s worth noting the impacts this monetization can have on the broader arts community. The ability for artists to “symbolize” their work is a real game-changer. In addition to being fairly paid for their work, they are also guaranteed the intellectual property rights to their creations and a percentage of the proceeds whenever the NFTs are resold. Yet NFTs are also opening up the market to everyday consumers – more people can now buy the art they admire.
Related: NFTs will soon be inevitable. This is a good thing.
Other Examples of NFTs
NFTs have a life beyond the art world. For decades, music has been a fungible commodity, widely recorded and distributed through CDs, records and online streaming services. With these deals, however, a musician’s royalties are only a tiny fraction of the total money raised. Yet, with NFTs, musicians can now bank millions within hours. Reaping virtually 100% of the gains, it’s no wonder this mode of work sharing is becoming more and more attractive.
NFTs have even emerged in political races. Recently, an Arizona Senate candidate, Blake Masters, created NFTs for his campaign. Masters, a crypto evangelist and protege of legendary tech investor, Peter Thiel, created an NFT from the best-selling book, zero to one, which he co-wrote with Thiel. He made 99 copies as a reward for his campaign’s best donors.
play to win
In addition to music, another industry that has jumped on the NFT bandwagon is gaming. Game content such as skins, avatars, and various add-ons can now be sold as NFT. While downloadable content (DLC) can be sold to millions of players, only one copy of an NFT can exist.
Play-to-earn is one of the most exciting spaces in the NFT world. The niche model allows players to play games on the blockchain and earn in-game rewards. These earnings tend to be NFTs and can be used both in virtual – and real — worlds.
Platforms such as MetaPlay, an all-in-one blockchain incubator for DeFi, GameFi, and Metaverses, offer simple blockchain games to help onboard new crypto users and familiarize them with NFTs and crypto models. game to win. This state-of-the-art platform aims to enhance the esports experience by allowing amateur gamers to compete as if they were professionals in esports tournaments. Impressively, in just a few months, the platform has managed to raise around $13,000,000 from over 16,000 investors.
With the launch of the metaverse comes a bright future for NFTs. Virtual marketplaces are becoming an exciting prospect, with companies creating their own virtual spaces (eg NikeLand). Likewise, museums like the San Francisco Museum of Modern Art are beginning to place their works in metaverses. Without the pretense of gallery space, potential buyers can now browse artwork in the relaxed atmosphere of their home.
Although NFT collaboration with the metaverse is a very new concept, it is nonetheless compelling. And that goes for the future of NFTs too. With the launch of the Metaverse comes a whole new universe (no pun intended) of possibilities. And we would be naïve to ignore the long-term potential of NFTs.
Related: Here’s What to Keep in Mind When Creating and Selling an NFT
Real world assets
However, it’s not just digital assets that can be sold as NFTs. The real-world assets represented by NFTs, although in their infancy, are becoming an increasingly desirable option for investors. For objects whose value must be preserved, such as a rare Greubel Forsey tourbillon watch or a priceless book such as The Leicester Codex — eliminating the physical transfer of the object and storing it in a secure location reduces the risk of damage and fraud.
An effective method of prohibiting the transfer of counterfeits, NFTs have become a popular means of exchanging collectibles. Baseball cards or other sports collectibles, for example, can be traded virtually for prices up to $1 million. The advantage of this is that an item can be traced back to the original seller to prove authenticity, establish provenance and prevent fraudulent reproduction.
Related: Collectibles, NFTs, and Why You Should Care About Both
Why NFTs are here for the long haul
It’s no wonder people call NFTs a fad. The hype surrounding them is somewhat distracting. But that doesn’t mean they’re not here to stay. It’s important to note that, as with all breakthrough technologies, there comes a “productivity plateau” – a phenomenon described in Gartner’s hype cycle, which indicates a period of low interest after a period of considerable hype. This tray was indeed experimented with by the likes of Amazon at the time.
While these headline-grabbing seven-figure NFT buys may seem fickle, there’s no denying the long-term potential of NFTs. Unlike other cryptocurrency-related digital assets, the non-interchangeable nature of NFTs has completely redefined ownership rules. All NFT transactions are recorded on the blockchain and powered by smart contracts. Thus, their technology makes it possible to keep a completely accurate ownership transfer history. Such concrete documentation of ownership has the potential to be revolutionary for certain markets, especially real estate. With only a third of the world’s population having secure legal rights to their property or land, those who do not may find it difficult to invest in their homes or obtain financial support.
When it comes to a decentralized economy, we have only begun to move the proverbial needle. The full extent of NFTs and their potential remains to be imagined. What is certain however, is that this space is transformational in creating new markets, augmenting existing markets, and raising the bar for market integrity and asset authenticity.