What Non-Fungible Tokens Really Are, and Why You Should Care
Blockchain technology is on track to disrupt a handful of industries,
especially those that rely on trust and digital ownership. At the moment there
is a lot of innovation happening in the ecosystem, and more recently we have
seen new developments in Ethereum token standards, especially when it
comes to non-fungible tokens. Here at Gamedex, we are very excited about
the future of non-fungible tokens (NFT) and their use cases in gaming and
digital collectables.
Fungible vs. Non-Fungible Tokens
Fungibility, in short, means that an item is exchangeable for an identical
item. Bitcoins are fungible, meaning that every Bitcoin is equal to, and can be exchanged for, another Bitcoin without any loss of utility or change in perceived value. Most of the cryptocurrencies and crypto assets we have today are fungible tokens.
Non-fungible tokens (NFT) are the next step for the blockchain economy. The most significant difference is of course that no tokens in an NFT subset are equal. With NFTs we can create unique digital items and assets that can be traded on a market like Gamedex. At Gamedex our focus is on unique in-game assets and collectables such as cards for digital collectible card games and e-sports.
The potential of NFTs is massive. With non-fungible tokens, one can securely tokenise real-world assets such as real estate or even identity. NFTs take us one step closer to transparently owning our data. The first famous dApp for NFTs on Ethereum, CryptoKitties, caused a massive stir at the end of 2017 when people went crazy about trading unique digital cats online.
The most valuable CryptoKitty was one of the generation zero “genesis” kitties, and it was last sold for 253 ETH, which at the time of writing is roughly $120.000.
Ethereum Token Standards
The Ethereum network is powered by Ether (ETH), which is not a cryptocurrency meant to be used as a currency for day to day payments. It is strictly designed to be a utility token to power the incentive mechanism of the network. Down the road, it will be the main component of securing the validity of token transactions and smart contract interactions performed on the Ethereum network. We expect tokens, both fungible and non-fungible to become a much more significant part of the Ethereum ecosystem in the future as a result of protocol level developments that will make the use of tokens much more user-friendly.
Tradeable and non-fungible tokens are the next step for the mainstream adoption of blockchain technology.
Because of the decentralised nature of the network, anyone can create and deploy tokens on the network. A token is merely an Ethereum-powered smart contract that stores information about the token’s specific characteristics. Up until now, most tokens have been following the ERC-20 token standard, which defines a standard template for creation of fungible tokens. Like any piece of computer code, there is always room for improvement, and that is why Gamedex chose to follow the updated ERC-223 standard when creating our GDX token, compared to ERC-20, ERC-223 has some security and usability improvements.
The current NFTs, such as CryptoKitties, were created with the ERC-721 Beta standard. The token standard itself has recently been finalised, so expect to see more NFTs hit the emerge in the coming months. In the not too distant future services such as Gamedex will allow you to trade digital collectables and assets in a user-friendly interface.
New and Better Token Standards
On a decentralised blockchain like Ethereum, data is one of the most valuable
resources, and it is therefore relatively expensive to write new data to the
blockchain. It is therefore essential that tokens and smart contracts are
developed efficiently to minimise the cost of interacting with them. Reducing
the costs of transfers and interaction with blockchains are one of the main
barriers to overcome before we can see the substantial mainstream adoption of the token economy.
Meet ERC-1155
Recently a new token standard, ERC-1155, has been proposed and is currently
in development. In short, an ERC-1155 compliant smart contract can store
multiple tokens, both fungible and non-fungible. It can also combine multiple
transactions into one single transaction and thus reducing the load on the
blockchain and in turn reducing the cost of transferring tokens. This eases the
development and implementation of crypto collectables in games where there
is a demand for having both kinds of tokens available. It will also reduce the
cost and friction of using these items as interaction is done towards one
efficient smart contract instead of several related contracts and allowing
multiple transactions to be combined. ERC-1155 compliant NFTs are also designed with facilitating trading through decentralised exchanges or peer-
to-peer transactions.
Why You Should Care About Non-Fungible Tokens
Popular mainstream games often have tons of in-game assets that can be purchased, and in fact, it is estimated that the market for in-game items will grow to $32 billion by the year 2020. For most games, these items will be fungible items such as ammunition or spells which can be used in the game. Some games sell so-called ‘rare’ items today, but without a blockchain, there isn’t a way to confirm whether this item is rare or not. With the use of blockchain and non-fungible tokens, we can be sure that items we pay for in games are what they claim to be, and we can trade them on an open market if we want to move to another game or collect other items in the game. Introducing a peer-to-peer economy to gaming and e-sports will bring a new level of interactivity and immersion to the next generation of video games.
Join us at www.gamedex.co, or on Telegram.
Thanks for reading!
