The Future of NFTs
Utilizing NFTs to drive innovation in RFTs, data economies, and the Web3 stack.
Written by Conflux Network’s Research Engineer Aaron Lu
In 2017, CryptoKitties was the first viral application that utilized non-fungible tokens (NFTs) to create digital cats that could be bred to create new, and unique cats with varying levels of rarity. However, in 2018 there was a sharp decline of interest in NFTs and the space has not achieved the same volume. In the last few months, there has been a resurgence in interest in NFTs for gaming, DeFi, and digital art. As of October 2020, there are many NFT art markets and games that have achieved $5 million in sales, but the market is still dominated by Cryptokitties and Decentraland with total sales of $37.6 and $25.5 million, respectively.
At Conflux Network, we have been excitedly exploring future applications of NFTs as an asset class for digital content that holds transformative value in gaming, art, and even beyond with data. In addition to the increasing number of use cases for NFTs, NFT marketplaces also hold incredible potential as a part of the Web3 technology stack.
NFTs in Gaming and Art
NFTs are based on the ERC-721 standard, and the ledger operates as a one-to-one matching of a product ID with a user address. This is compared to ERC-20 (fungible) tokens where the ledger records addresses and balances. The capability of one-to-one user to token matching allows a digital asset to be unique and valuable because of scarcity which has driven the use of NFTs in the gaming and art space.
While there are other NFT implementations with decentralized finance or domain names, the most popular implementations of NFT standards today are typical with digital assets in games or art. In gaming, players can collect NFT tokens that represent an asset like NBA players (Top Shot), real estate (Decentraland), playing cards (SkyWeaver), etc. These assets can be used to interact with other assets in a way reminiscent of collecting Pokemon cards (or other cards) and battling, but with NFTs each “card” has a unique identifier to validate it on a blockchain. Additionally, the NFT gaming is moving beyond static “cards” and into role-playing games like Marguerite deCourcelle’s (@coin_artist) Neon District where players venture through story-driven missions to collect characters and assets backed by on-chain NFTs.
Similarly, artists such as aeforia (@aeforiadesign) and Josie Bellini (@josiebellini) have utilized the unique identifier of NFTs to monetize art and verify authenticity. NFTs provide a way to easily transfer ownership of digital art while preserving the integrity of the art by clearly indicating who owns the rights — simply put: “NFTs are intellectual property rights to digital content”. While NFTs are important for verifying the uniqueness of a digital asset, they also go hand-in-hand with marketplaces that facilitate the purchasing and selling of them. These marketplaces can be community-based where anyone can list an NFT (OpenSea, Rarible) or can be curated to create lists that appeal to specific market niches (SuperRare).
The Future of NFTs
While NFTs in art and gaming have been useful for generating new attention for the crypto space, NFTs have yet to jump from novelty item to a day-to-day necessity. At Conflux Network, we see even more use cases with real-world asset tracking, data economies, and re-fungible tokens.
Digital asset tracking is already commonplace (art and gaming), but tracking real-world assets like luxury goods has only just begun. NFTs can prove provenance to combat counterfeit products, and improve marketplace efficiencies by facilitating transactions through smart contracts (albeit slower than digital goods). Physical goods can use a variety of tags to connect them to NFT identification ranging from QR codes to electronic NFC tags and even DataDots — microscopic laser-engraved identifiers sprayed or painted on to products.
Data economies can use NFTs as a representation of specific data. Fungible tokens could be used to indicate general access to a data set, but NFTs can be used to create even more specificity such as the data set generated over 15 minutes. In a data economy, that allows the specific data to be traded and utilized. While the current use cases for data economies remain at a more industrial scale, NFTs could potentially help enable long tail data economies and marketplaces.
On a more technical level, re-fungible tokens (RFTs) provide an even greater level of flexibility to a standard NFT. The RFT standard (described as a proposed ERC-1633) allows for an NFT asset (ERC-721) to be divided up as ERC-20 tokens.
interface RFT /* is ERC20, ERC165 */ {
function parentToken() external view returns(address _parentToken);
function parentTokenId() external view returns(uint256 _parentTokenId);
}The ability to divide up an NFT into smaller “shares” has huge possibilities especially for NFTs that represent expensive assets. For example, an NFT can represent a real-estate property, and the RFTs can allow multiple individuals to receive corresponding shares to their investment in the property. Because RFTs are compatible with ERC20 tokens, this also can create a market for the fraction of the assets they represent which can range from fractional shares of stocks, partial ownership of property, and even the monetization of intellectual property.
Token Marketplaces in the Web3 Stack
NFTs and marketplaces are also an integral part of the Web3 stack. While NFT/RFTs exist on the blockchain layer, the marketplace is closest to the user to provide a friendly UI/UX for assets to be traded. By combining NFT/RFTs with various other parts of the Web3 stack, we can unlock faster, interoperable marketplaces with autonomous agents.
At the first layer, deploying NFT/RFTs on Conflux Network would utilize 3000+ transactions per second (TPS) to power applications ranging from DeFi transactions to purchasing digital assets in gaming. TPS no longer is an issue when using public blockchains as the ledger layer for NFTs. Rather than waiting minutes for assets to exchange and interact, games and other NFT interactions would experience near-instantaneous transactions with minuscule fees.
By adding token bridges, cross-chain NFTs can be created. This allows assets in NFT or RFT form to be traded across many different ecosystems and also helps drive a unified Web3 ecosystem rather than reliance on a single blockchain network to power all NFT activity. While gaming is the easiest implementation where users can trade assets between various games on different networks, this could also hold implications in real-world assets. Imagine buying and selling RFTs that represent land rights in blockchains that represent specific or even regulated markets in different countries, types of buildings, etc. The possibilities are endless.
While marketplaces can be built to directly interact with blockchain networks, querying data like the history of an NFT can often be too slow. By adding decentralized query protocols, data can be queried in an efficient manner to create faster marketplaces. Users would be able to easily research the history of an NFT/RFT which can further inform the price discovery.
The real power of decentralized query is unlocked by introducing autonomous agents like Fetch AI’s Autonomous Economic Agents (AEAs). AI agents require information to train models and “learn,” and the speed of acquiring information is vital in trading assets to prevent price slippage. AEAs could use information from decentralized query protocols to trade NFT or RFTs across various networks and marketplaces. AEAs could even leverage skills to create NFTs like digital art for trading! While this may not seem applicable to gaming implementations, combining NFT marketplaces and AEAs could accomplish the vision of a fair data economy where data from individuals is bought and sold automatically.
At Conflux Network, we believe there are many different possibilities surrounding NFTs and RFTs, and that they are an under-utilized tool for transforming existing systems. While there are existing implementations of NFTs with gaming and art, Conflux Network unlocks even more potential with its technical advantages of 3000+ TPS while being more secure for applications to develop on through PoW and removing the potential for reentrancy attacks. NFTs have only just begun to tap into their full potential, and we believe that Conflux Network has the tools to fully unleash them.
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