Why Non-Fungible Tokens Matter — The Rise of Crypto-Collectibles

3 min readJul 17, 2018

There are crossover moments in technology trends when developments capture the popular imagination. The launch of Cryptokitties was a turning point of this magnitude for blockchain. Beyond the novelty of owning — and trading — a virtual cat, we could see the potential impact of this project beyond blockchain. Digital ownership, using blockchain, could unlock new ways to generate, secure and monetize all creative content, especially gaming.

The introduction of non-fungible tokens (NFTs) standards like ERC721, through projects like Cryptokitties, introduced the concept of digital scarcity. These digital assets are unique, numerically fixed, programmable, and can be paired with other assets and traded. The tokens can take many forms, depending on the system. In gaming, for example, they can take the form of in-game items. In this context, the blockchain serves as a decentralised and immutable ledger that maintains ownership of NFTs, rather than a fungible cryptocurrency like BTC or ETH.

The ERC721 standard has been developed on the Ethereum blockchain allowing users to own individually identified digital assets in the same manner as physical ones in the real world. Content, from gaming to film and music, becomes irrevocable. Gamers will be able to identify, modify or manipulate, and own a digital asset as they might with a piece of art or car.

To use a tangible example, we can consider real estate. NFTs can be applied to enable fractional ownership of real estate, bringing new liquidity to a number of scenarios. Given the scarcity ensured by NFTs, content owners, such as Major League Baseball in the United States are now using NFTs for blockchain-based collectable baseball cards. The majority of these projects come under the bracket of “digital collectibles,” with a few notable projects where the NFTs have a functional use beyond collecting.

With NFTs, it is the user, not the platform, who owns the digital asset. This opens up a host of use cases for gaming, where the player rather than the game developer owns their virtual item. If digital assets are unique and non-duplicable, there are new revenue opportunities for gamers and developers, which potentially sparks a whole new wave of creativity in gaming and beyond.

CryptoKitties introduced a basic element of gameplay into the crypto-community with their decentralized App (dApp). The cats are ‘crypto collectables’ owned by the player, with some of these cats having different physical traits like a long flowing mane or wings. But there are only two things you can actually do with a Cryptokitty — sell it or breed it.

For years gamers have been trading in-game items as well as creating skins and other customizations to use in games — several successful online marketplaces exclusively engage in the exchange of in-game items. However, there has never been a clear concept of asset ownership in gaming, other than trusting the gaming company as custodian of the players’ assets. Through an NFT, you can now own your in-game characters, skins and customizations– outside the control of a third party, including the game developer.

Digital scarcity will be revolutionary. Our starting point with CryptoCarz is that this first generation of NFTs are only scratching the surface of what is possible. There will be new scenarios where the game doesn’t run on the network but your token becomes your ticket to be part of the game.

In our next post we will explore how gaming will develop using NFTs.

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