Non-Fungible Tokens (Part 2): A Revolution Powered by nahmii
In preparation for nahmii’s upcoming release on mainnet, we’re continuing our series of blog posts on possible use cases for hubii’s innovative technology. Today’s post is the second of two about non-fungible tokens, focusing on how nahmii solves their performance issues and what this means for business. You can find the first post here, which discusses the concept of non-fungible tokens in more detail.
Previous blog posts have covered the technical challenges of developing nahmii, the tools we’ve built to help users interact with the system (the CLI and SDK) and the potential of non-fungible tokens.
This article is the second in a series of blog posts on nahmii uses cases, so stay tuned for further articles on financial services, online gaming and IoT (amongst others!).
Non-Fungible Tokens (NFTs)
As explained in the previous blog post, non-fungible tokens (NFTs) are a special class of Ethereum token which represent non-interchangeable assets. In contrast to standard ERC-20 tokens, no two NFTs are alike; this is because each NFT is marked with unique metadata, which acts like a fingerprint or serial number. NFTs allow us to replicate the trade in physical unique items on the blockchain, with many interesting and exciting use cases. Before nahmii, NFTs have been held back by the performance of the Ethereum network. In the previous blog post we discussed these problems in detail, here we’re focusing instead on the solution — nahmii — and what kind of use cases are now possible using hubii’s scaling solution.
Barriers to Adoption
Before NFTs can achieve mainstream adoption, there are four key technical issues which must be addressed: throughput, fees, latency and finality. Each of these points has been covered in more detail in the previous blog post, but it’s helpful to begin with a short recap here.
Starting with throughput, we know that the Ethereum network is currently unable to meet the demands of even relatively basic applications like Cryptokittes. Transactions are also subject to unpredictable fees and high latency, with the further drawback of delayed finality. Taken together, these four obstacles have prevented NFTs (and Ethereum-based applications in general) from reaching their true potential. That will all change with nahmii.
Each of the problems set out in the previous section will be solved by nahmii, hubii’s revolutionary scaling solution for the Ethereum blockchain. nahmii represents a transformational leap in performance, providing at least 15 transactions per second throughput for each user address. Importantly, there is no effective limit to the number of user addresses on the system; nahmii therefore offers almost unlimited scaling.
Transactions within nahmii are subject to predictable fees and low latency, with near-instant finality. These features of nahmii are just as important as the radically improved throughput; it is not enough to build a high-capacity system, commercial applications require predictable costs and outstanding performance, responsiveness and security.
What Does This Mean for NFTs?
With nahmii, developers can now build commercial-scale NFT applications. The most obvious use cases for NFTs centre on collectible digital assets, like Cryptokitties. Using nahmii, NFTs can be distributed, traded and removed from circulation. Importantly, collectors can see exactly how rare their items are; NFTs create provable digital rarity. While this is all possible today using Ethereum, applications like Cryptokitties are subject to all of the problems listed above. With nahmii, users will know in advance how much each transaction will cost thanks to the predictable fee structure. Similarly, trades using nahmii are final; users do not need to wait for multiple block confirmations on the Ethereum mainchain to have confidence that their transaction has been accepted.
NFTs are perfect for representing unique or limited edition video game assets, such as those distributed by loot boxes. These assets can be distributed and traded trustlessly using nahmii, with the developer taking a cut of each transaction. The ability to trade in-game items for real money is a potential new market for video games companies. Perhaps most interestingly, NFTs also offer a solution to the current loot box controversy. Using nahmii, players and regulators can see the drop rates of loot boxes directly; this removes the need for third-party auditing, satisfying many of the new regulations imposed by governments in the last year.
One of the most exciting use cases for NFTs is tokenising single-use items, where the token acts as a coupon, ticket or redeemable prize. Imagine that a company wants to run a promotion like Willy Wonka, distributing prizes in the form of five golden tickets. These tickets are numbered and unique, a perfect use case for NFTs. Players can see how many tokens are in existence and track how many of the prizes have been won, making the process clear and transparent. Because the tokens are unique and secure, they cannot be duplicated. Even better, nahmii allows for tokens to be removed from circulation or destroyed upon use; this means companies can safely issue single-use promotional items or tickets without the risk of fraud.
On top of simple item trading using NFTs, further opportunities for new business models exist around item rental. Consider the example from Hearthstone, a popular digital collectible card game in which players build a ‘deck’ of collectible cards from loot box drops. It can be prohibitively expensive to build the best decks in Hearthstone and players are often reluctant to commit precious in-game resources to experimental decks. The ability to rent a card for a fixed period of time in exchange for a small fee, using NFTs on nahmii, would be hugely popular and open up an innovative new revenue stream. This is a classic use case example for NFTs: it benefits players, developers and publishers — a true win-win.
Item rental using NFTs can also accommodate sharing digital resources. Some assets, like season passes, grant the owner rights over a period of time. With NFTs, the owner can easily share or rent their asset with another person for a fee. Unlike with the equivalent physical ticket, this process is both easier to monetise and far more resistant to fraud.
NFTs as Licenses
Many of the NFT use cases discussed here already exist in a heavily restricted form on centralised servers, such as in-game items on the Steam platform. Currently, Steam users can buy and trade in-game items but cannot convert their sales into withdrawable real money without using unauthorised third-party website. Gamers on the Steam platform are also limited by who they can trade with, as all trades must be within Steam only. Using nahmii, players could buy, sell and trade items across all platforms — requiring only one account — and convert the revenue from these sales into real money if the operator of the system allowed it.
The comparison between Steam and nahmii is instructive in another sense; software purchased through Steam cannot currently be sold or traded, leading to huge backlogs of unplayed games and unwanted products. Software licenses are unique and digital — a perfect nahmii NFT use case. Using nahmii, software licenses can be bought and resold in a controlled environment. This would provide a further revenue stream for publishers and provide much greater freedom for users.
NFTs and nahmii: Incredible Potential
The use cases set out in this blog are just the tip of the iceberg. We at hubii are genuinely excited by the potential of NFTs; powered by nahmii, NFTs have the power to revolutionise entire industries. Interestingly, the discussion around NFTs has focused mainly on replicating digital asset trading on the blockchain. We believe this only tells part of the story: any asset, physical or digital, can be tokenised and moved onto the blockchain. Imagine a world where all proof of ownership is represented as a NFT on nahmii. Items could be bought, sold, rented out and used all within hubii’s secure ecosystem. This is the true potential of NFTs, a vision that is becoming reality thanks to nahmii.