What is a Non-Fungible Token?
Non-fungible token “NFT” is a blockchain asset that is increasing in popularity with those interested in the digital world and cypherpunk, generating a new open and decentralized market niche worth billions of dollars a month.
The concept of trustless digital scarcity has found its greatest splendor in NFTs, enhancing the concept after the entry of Bitcoin into our lives. This is possible thanks to the disruptive power of blockchain technology has made it possible to expand the idea of crypto-collectibles, a disruptive niche within the ecosystem since CryptoKitties entered the Ethereum network at the end of 2017.
What is a Non-Fungible Token?
A non-fungible token is defined as a type of token that can be uniquely identified and distinguished during interaction and circulation on the blockchain.
The idea of the NFT was born from the limitation of the fungible tokens. The key innovation of the NFT makes it ideal for representing a large number of indivisible and unique assets such as tickets, a bottle of wine, art, and pieces of jewelry. It allows the benefits implicit in the blockchain with immutability and the ability to track at all times in a public and transparent way.
Evolution of NFTs
It is important to note that the first NFTs were linked to the birth of Bitcoin and the so-called “colored coins”, a series of assets that worked on this blockchain and actually the first cryptographic tokens to tokenize the real world in the digital ecosystem.
However, the primitive way of creating the first NFT tokens of the critical world had its evolution with the ERC-721, standard on the Ethereum blockchain, which generated the first wave of tokens of this type, with CryptoKitties as its first successful example.
Later, the need to unite both sides of fungibility and the non-fungibility of cryptographic assets allowed the Enjin, Horizon Games and The Sandbox to generate the new ERC-1155, a type of token enhanced to mint real-world assets on the blockchain. With the ERC-1155 standard, it is now possible to have unique contracts that contain both fungible and non-fungible tokens, allowing to broaden the horizons for NFTs.
The use of NFTs has created an effective method for blockchain technology to serve the public, where much of it is focusing on games and collectibles, with great future prospects of being expanded to other areas such as copyright, intellectual property, ticket sales, certifications, software licenses, guarantees, birth and death certificates, among others. As NFT can be used in many areas, there are several fields that NFT is actively used.
The first field is undoubtedly gaming. The NFTs have undoubtedly allowed revolutionizing the world of online games especially. Since the entry of Cryptokitties, endless collectible games have emerged on many blockchain platforms that have allowed the average user to ‘convince’ the potential that NFTs have to empower finance in these decentralized applications.
With NFTs in gaming, it is now possible to monetize and allocate the correct intellectual property of the creations generated in virtual worlds such as Decentraland, The Sandbox or Enjin, allowing a more transparent economy and equity in income for the unique and unrepeatable assets generated in each game.
The second is collectibles. It is more frequent to observe that many influencers, stars and average users of cryptocurrencies are focused on exploiting the market of NFTs.
NBA Top Shot, a new blockchain-based collectible collaboration with the NBA launched by Cryptokitties developer, is an example of NFTs used these days broadly. Some of you might have collected baseball cards in the old days, like the 1980s. Now it has returned with NFTs which can be more digitized. If the old cards were only available to have pictures, this NBA Top Shot can hold various things in it, such as the moment of top superstars playing in a video clip.
Another example is Crypto Stamp that is issued by the Austrian Postal Service and connects the digital world with the real world. These stamps are used to transport mail like any other stamp. With the particularity, they are also saved as digital images on the Ethereum blockchain, making it an interchangeable digital collectible.
Lastly, it is digital certifications showing a clear increase in the adoption of NFTs. NFTs provide a way to store contracts, patents, and other documents on the blockchain that prevent forgery and in turn make them traceable. With this digital capability, online certificates can be easily circulated on the blockchain and transferred while registering the intellectual property and copyright of the issuer.
In addition, artists and musicians around the world are already beginning to exploit the distributed registry capacity that the blockchain allows for the creation of their art pieces in order not only to monetize their direct transfer without intermediaries but also to safeguard their rights to intellectual property, thus preventing counterfeiting and fraud.
Rarible is a great example of the exclusive marketplace for digital art and collectibles. They partner with artists and brands to launch rare and valuable NFTs that can cost thousands of dollars in some cases. It is currently ranked as the first marketplace in daily transaction volume according to OpenSea.
It is just the beginning of the application of NFTs in the real world. Many companies and ventures in other sectors such as real estate, water, gas, etc., are emerging. We expect to see more applications of NFTs on the goods and assets that we exchange in the real world be extrapolated to the blockchain.
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