The gaming industry is now worth a staggering £5.7 billion — which is more than the film and music industries combined.
If the crypto and blockchain space could tap into just one-fifth of this market, then it could add around £1 billion to the market valuation.
These figures alone highlight how significant blockchain gaming could become in the future.
What is a non-fungible token?
An NFT can be thought of as simply a crypto collectible — an item you obtain within a video game.
There are typically meta descriptions or meta tags attached to an NFT to help ensure it is unique and identifiable.
The key difference between an NFT and a regular cryptocurrency token is ‘fungibility’.
If a coin or token is fungible, it means they can be exchanged for another token or coin. A non-fungible token is precisely the opposite — it cannot be exchanged.
This in turn creates intrinsic value through its limited supply. In the scope of gaming, a limited supply creates scarcity, thereby ramping up the value of certain in-game items.
In a decentralized marketplace — one that is not controlled by a governing entity — this would allow players to freely trade rare items much like trading crypto on an exchange.
This drastically alters the dynamic of trading inside of a video game, particularly when blockchain technology is powering the marketplace.
The benefit for NFTs is that blockchain technology enables people to truly own an item — it cannot be stolen or duplicated with ease.
Another quintessential aspect to NFTs is that they typically are non-divisible. They have to be sold in their entirety. Whereas with cryptocurrency, for example, Bitcoin, you could purchase a fraction of one Bitcoin — you cannot buy a fraction of an NFT.
Once again this adds to an NFTs intrinsic value because it cannot be accumulated over time — it must be acquired as a whole token.
Possible applications for NFTs
Artwork
One example the company illustrated was how NFTs can prove provenance. The artwork is often contested in wills, particularly artwork with historical significance.
In times of war, artwork could be stolen — which creates a muddled mess when trying to return the artwork to its rightful owner or work out its origins for authentication purposes.
By embedding artwork with an NFT, it suddenly has a unique and extremely identifiable tag. Being stored on the blockchain enables a seamless and easy method to prove provenance.
In theory, and with the right application, no longer would there need to be lengthy legal disputes over who is the rightful owner because the technology could solve the issue easily.
Sports
When attending a football match in the UK, fans can earn a stamp on their season ticket to prove they attended a game.
However, if NFTs were implemented, this dynamic could be altered. It is easy to lend or rent a season ticket to a family member, friend, or perhaps someone looking to attend a game when you cannot go.
This allows for a stamp to be collected on the season ticket even if the owner didn’t attend.
By applying an NFT-type system, suddenly you could have the NFT attached to the person who actually attended the game. Football clubs could then implement a loyalty service.
If you collect every NFT for the season, there could be a reward such as VIP access or meeting the football team. This isn’t possible with stamps on a season ticket because it is so easy to obtain the stamps.
Music
Creators have struggled with developing mechanisms in which to attracts fans to their art, whether that be music, film, and other creative industries. NFT provide an innovative way in which to engage with prospective fans by offering a digital token that can be tied to a unique item such as memorabilia or unique experiences. For example, a guitar that was used on a concert tour, that a fan would value, could be attached to NFT and offered to fans.
Similarly, NFT can be applied to experiences, whether that be VIP access to a concert or being part of the production of a film e.g. an extra.
NFT enable the creative industries to develop scarcity in their output enabling a value to be attached to that scarcity and for the creators to be able to reap the rewards for the creative endeavors
Fashion
Recent reports have suggested that Louis Vuitton is implementing certificates of authenticity with its handbags alongside tracking the supply chain of products on a blockchain.
A certificate of authenticity is fundamentally an NFT. It is unique, limited, and to some extent cryptographic if it is traceable on a blockchain.
If the rumors are true, the primary purpose for such a venture is to reduce the number of fraudulent recreations of the brand’s signature products.
With NFTs and blockchain technology, fakes can be easily identified, and furthermore, theft would be reduced because stolen bags cannot be resold since the buyer will be able to check to see whether the seller is the rightful owner.
Investors
This example is tied to the ERC-1155 standard. Having the ability to issue multiple assets in a single contract while having a mix of fungible and non-fungible tokens is a remarkable tool.
This in theory could enable opportunities that are currently not feasible in today’s financial system. For example, let’s say you are an investor looking to invest in farmers, but you are offered 1,000 farmers to choose from.
You would need to assess a series of factors to determine which farmer to invest in, but even then there is a substantial risk. There is a wide range of factors that could result in a loss, such as bad weather leading to a poor yield of crops.
You’re looking to front £1,000 and make a profit of £100. Instead of figuring out which farmer will net you a profit, you could use an ERC-1155 NFT to invest in all of them. This helps mitigate risk.
This is an interesting application of NFTs and how the market could operate.
NFTs are a powerful asset class
Hopefully, this introduction to non-fungible tokens and their applications has helped you understand just how truly remarkable this asset class could become with the right applications.
Fundamentally, NFTs were built for gaming, yet they can be extended to benefit artists, sports fans, investors, and brands.
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