Augmented NFTs: Non-Fungible Tokens on Steroids
When financial institutions and venture capital firms are massively investing in a specific marketplace, for people like you and me (also called the “retail investors”) it usually means that it’s worth checking out. In 2021, massive investments were made in non-fungible token (NFT) marketplaces. OpenSea, the most popular platform to buy and sell NFTs, raised $23 million from Andreessen Horowitz in March 2021. In October 2021, NFT sci-fi card game Parallel raised $50 million at a half-billion-dollar valuation from crypto VC firm Paradigm. I meant the upcoming NFT sci-fi game… Anyway, who could remain ambivalent towards a year-to-year 220-fold growth? The NFT market size (trading of NFTs) reached $22 billion in 2021 from $100 million in 2020. An NFT is not a security as per the definition from the Securities and Exchange Commission, so the creation of an NFT marketplace is not subjected to any authority that would normally require proper registration, as well as a series of compliance measures to follow and enforce. That fact alone instantly makes it more attractive.
Let’s take a closer look at what NFTs are, the craze that’s been surrounding them in the last thirteen months, their obvious limitations in terms of usability, and what an “NFT on steroids” looks like.
NFTs: The New Gold Rush?
When you ask the average person about NFTs, they stare at you, somewhat like a deer in the headlights. When you ask an NFT collector about non-fungible tokens, you can almost see the dopamine flowing inside their brain and their hands starting to shake, as the first words coming out of their mouth is, “What, where, who, how much, which wallet, how often did it change hands?” That’s because NFTs are mostly collectibles under the form of digital files such as photos, videos, and audio. And collectors are often ready to do whatever it takes to complete their collections or find the next one-of-a-kind NFT creator who’s going to make them a lot of money. And let’s face it, NFT creators have understood this psychology well. To that effect, the minting (publishing) of rare NFTs have reached insane prices. For example, 41-year-old artist Mike Winkelmann (aka Beeple) sold a piece of digital art in the form of an NFT called “Everydays: The First 5000 Days” for $69.3 million.
Besides the rare occasion where an NFT sells for over $60 million, there is a tremendous volume of noise in the NFT world. What does it mean? According to a Bloomberg report for August 2021, 3 percent of NFTs available on different marketplaces have accounted for 97 percent of total money traded. 82 percent of primary NFT sales at the end of the first quarter of 2021 were below $700–52 percent of which were below $200. On the NFT trading platform Rarible, the average price of acquisition for an NFT was below ten cents. Finally, 73% of NFTs have made only one transaction throughout the first quarter of 2021. The NFT market can be compared to a Gold Rush in that only a very few discoveries provided wealth for their prospectors. And what did the Gold Rush give us besides the name “49ers” — the moniker for a San Francisco NFL team? Something to ponder…
NFTs’ Biggest Limitation: Limited Usability
NFTs are mostly objects of collection. In other words, NFTs transform digital works of art and other collectibles into one-of-a-kind, verifiable assets that are easy to trade on the blockchain. One of the first NFT projects was called CryptoKitties, launched in November 2017. CryptoKitties is a digital trading game running on Ethereum, that allows users to buy and sell virtual unique cats stored on the blockchain. Since then, NFTs have not really evolved. Five years later, they are still all about a transaction between two parties on a marketplace like OpenSea or Rarible. An NFT creator creates an NFT, which he or she uploads to an NFT marketplace with the hope to “make it big,” so his or her next NFTs sell for more than less than a dime. An initial retail investor or collector acquires the NFT with the hope that the creator will end up being famous, so the NFT is resold with a significant profit. And so on and so on…. The NFT is limited to the role of commodities that change hands based on hype and hope.
Platforms like Axie Infinity propose play-to-earn tokens and NFTs for playing their video games (longer), which provides NFTs with another level of interest or incentive outside of the normal buy, hold and sell options. But in the end, the NFT remains treated as a commodity, redeemable for cryptos on a marketplace.
Augmented NFTs: NFTs Have Finally Found Their Meaning
To “augment” an NFT is the action or ability to enrich a non-fungible token with virtual components that communicate with the user’s environment at the user’s request. More precisely, take a pinch of virtual reality (VR), maybe combine it with some augmented reality (AR), assign missions to your NFT along with the milestones it needs to reach to ensure success, add in all the benefits that blockchain technology offers (security, anonymity, absence of intermediaries), among other features and capabilities, then mix it all up and you have an Augmented NFT. In other words, once augmented, NFTs are capable of becoming so much more than just collectibles or play-to-earn rewards by integrating any virtual component and by being integrated into any virtual environment where they can take on a life of their own.
Augmented NFTs turn non-fungible tokens into true dynamic assets, which represents a paradigm shift in the way users have always known NFTs. Once augmented, NFTs become meaningful and the possibilities are endless, whether they pertain to gaming, entertainment, or evolve in the metaverse. Augmented NFTs truly are NFTs on steroids.
