The use and future of Non-fungible Tokens
Mitchell
What are NFTs mainly used for?
NFTs can basically be anything, however they mainly pertain to collectibles, artwork, gaming, virtual items, identity, memes, event tickets, music and media, domain names and real-world assets. NFTs are currently and continuing to create new ownership opportunities, whilst remixing old ones, becoming a new way to determine ownership of digital property using blockchain ledgers.
CryptoKitties gave rise to the emergence of NFTs being online collectibles through it’s unique category of digital collectibles (cats). This was done through distinct traits that make them more favourable and popular than others. NFTs are designed to give the user something that can’t be copied, providing ownership of the work and thus making it a collectible. For instance, anyone can buy a Vincent van Gogh print, but there is only one original. This has given rise to artwork becoming a leading candidate for NFTs, usually programmable art that links both creativity and technology that is tipped to revolutionise the art world. It will not only alter how art is bought and sold, but what kind of art is valued, and which artists. In 2021, we saw a record-smashing NFT sale occur, with artist Mike Winkelmann (digital artist known as Beeple), selling an NFT of his work for $69 million, placing him among the top three most valuable living artists.
We have also begun to see a shift in the music and media world, with artists and musicians creating NFTs themselves to auction off various forms of digital media to their fans for cryptocurrencies. Artists have been able to store a rare collectible or collection of their music on a digital ledger, such as Ethereum’s blockchain, putting power back into the hands of artists who can now monetise their art or music in digital form. We have seen artists and musicians such as Grimes make $5.8 million, DJ Steven Aoko making $4.2 million and DJ and music producer 3LAU make $11.6 million selling music NFTs.
NFTs can also be used as in-game items within online games. They can offer a variety of functions, such as proof of ownership for in-game items, providing numerous benefits to users whilst enabling a better experience of the games. As CryptoKitties was a breakthrough in the world of blockchain gaming, we are seeing more and more popular games follow suit whereby players can acquire in-game items, such as cats, and have the ability to develop them and exchange them for cryptocurrencies. This has also provided a means for ‘play-to-earn’ modelled games, in which players play certain games and earn rewards in the form of cryptocurrencies or NFTs. Popular online play-to-earn games can be found here.
Real-world asset NFT (RWANFT) is a token that denotes virtual ownership of a physical good. While similar to established NFTs, these tokens are backed by an underlying physical asset, complete with warranties, insurance, and legal enforceability to create trust in trade. Per the RWANFT website, an example of a RWANFT is an asset passport, being a digital identity for an object in the form of a unique contractual container (legal smart contracts) that records and manages the rights, obligations, and claims associated with a given asset (i.e. paperwork), all the while securing provenance. Another example is real estate, with traditional real estate being riddled with layers of intermediaries and third parties such as solicitors, real estate agencies and banks. Blockchain and decentralised finance has the ability to speed up the transaction process between two parties by replacing these third parties with smart contracts that allow for the faster, cheaper transfer of ownership. NFTs can be used in this sense to enable fractional property ownership, allowing the transfer of property or allowing owners to unlock value from previously illiquid assets and raise financing without having to go to a bank.
Other uses include the sales of memes as NFTs, in which unique meme creators can participate in the buying and selling of memes in an evolving futuristic ecosystem as they continue to be a part of popular culture. Domain names have also grown in popularity in the NFT space, with services such as the Ethereum Name Service (ENS) being introduced to help translate long and complex user addresses to a more user friendly Additionally, event tickets have also become a type of NFT. Users are now able to attend a concert of their favourite artist through verifying themselves, their identity and their ticket via an NFT.
Today, there are also several infamous NFT projects that have become exclusive clubs. One of those is the Bored Ape Yacht Club (BAYC) which launched in April 2021, with influential people such as Eminem, DJ Khaled, Logan Paul and talk show host Jimmy Fallon investing in the project. The project produced a collection of 10,000 unique Bored Apes, with the highest price a BAYC NFT going for 769 ETH, or US $2.3 million at the time.