In 2022 we are facing a huge advance in technology. There is something new on the market basically every day. If you don’t follow the news, you probably don’t know about dozens of innovations on the market. One innovation worth mentioning are NFTs.
What are NFTs?
NFTs or Non-Fungible Tokens are digital assets which one can buy, just like one would a property. They are basically certificates of ownership for virtual and physical assets (Caudevilla, 2021). The assets can be anything digital, from music, videos and even images.
Let us explain the difference between fungible and non-fungible assets. A fungible asset consists of many identical parts that can be interchanged. An example for this would be money. However, if an asset is non-fungible, it means that it has unique properties and it cannot be interchanged (Caudevilla, 2021).
The NFTs have been around for quite some time, but they have only recently sparked the digital society’s interest. According to Steinbacher, they took over the internet earlier this year, when they started to appear everywhere. The reason behind this is mostly the fact that the interest for crypto technology is rising, but also the fact that there seems to be a lot of money involved. Here are some of the examples Steinbacher lists:
- Mike “Beeple” Winklemann’s NFT “Everydays: The First 5,000 Days” was auctioned for a staggering $69.3 million.
- Furthermore, Jack Dorsey, the Twitter co-founder, had his first tweet sold for $3 million.
- Everyone knows about Nyan cat gif. It sold for nearly $600,000 (Steinbacher, 2021).
Even though many copies of the work exist, NFTs are Digital instruments used to prove that their owner is the only owner of the “original” work. Alonso claims that they are used to “create an ‘artificial scarcity’, that is, to transform into unique or limited something that in essence could be replicated incessantly.” (Alonso, 2021)
What types of NFTs are out there?
Geroni lists some of the most common categories of NFTs and there are three most common ones:
- “Original or copy of work, documented on a blockchain network or DLT
- Digitally native NFTs, which have ownership rights to the work constituting the NFTs
- NFT metadata, which involves the NFT providing representation of ownership for metadata files related to the internet“ (Geroni, 2021)
What does that mean? The first category are NFTs that were created on a blockchain network and remain there. The second category NFTs can be issued to multiple persons and all of them are granted ownership rights. The third category contains a link to the metadata of the given non-fungible token, and as such, you have the right to use it, but you do not get the ownership of it.
How do NFTs work?
Non-fungible tokens work with the crypto technology called blockchain, which is used for cryptocurrencies, as well. That is why NFTs are often linked to cryptocurrencies. This is also why a new term for NFTs came up: crypto art. Even though crypto art museums are starting to appear on the internet, the fact is that you cannot hang your NFT on your wall and display it for public. Yes, it is not valuable for its aesthetics, or creativity. Actually, no matter how new and advanced it is, it is actually based on a very traditional rule: it is worth however much a buyer is ready to pay for it. (Alonso, 2021)
But what can actually be an NFT? Well, a lot of things, really. Geroni lists and explains the application of some of them.
Collectibles
Collectibles were actually among the first NFTs ever, in the form of Cryptokitties. Cryptokitties became very popular back in 2017. People seem to really love cats, and these digital ones with distinct features made the collectible NFTs beginnings.
Artwork
Artwork is a very big part of the non-fungible tokens industry. Artists can sell their digital creations, and new owners can see the artwork’s entire digital history, like previous owners and the prices they were sold fore before. Programmable art, which combines creativity and technology, is also a part of NFTs.
Event tickets
People can use event tickets for actual events, and the owners are able to confirm their identity while entering a festival, or other similar occasion. You can buy them on an auction and stored on one’s mobile phone.
Music and media
Many people make their own music, and NFTs can help creators reach their followers in an entirely new way. This type of NFTs grants exclusive access to newest music by a certain artist. Mintbase and Rarible are some of the platforms where you can access music and media files.
Gaming
When it comes to NFTs in gaming, they usually refer to in-game items, like different skins, weapons, clothes for avatars, etc. Players can sell those items outside the game, while their creators can even earn royalties with each sale.
Real-world assets
When it comes to some tangible items, like real estate, cars and other luxury goods, the use of non-fungible tokens is not only possible but also very convenient. One can have a proof of ownership with NFT for real-world assets.
Memes
The digital economy is definitely changing, and the proof of that is the ability to sell memes. Creators can now sell their work using non-fungible tokens (Geroni, 2021).
Can NFTs change the gaming world?
The simple answer is ‘Yes, it definitely can’. As we have already explained, players can sell the in-game items as non-fungible tokens, making the gaming world an even bigger part of the digital market. While there are many free games available, most of the ‘more exclusive’ in-game items are sold. This is where the NFTs come in handy. Let’s take the example of in-game skins. They affect only the aesthetics of the game and have absolutely no direct impact on the actual game. This means that a $1000 skin will not make you more successful in the game, it will just make the game ‘look nicer’. However, people still buy them. A lot. NTFs can also be used for games like Minecraft, where players can create their own worlds, maps or even buildings and use NFTs to sell them and make profit. (Kao, 2021)
Conclusion
NFTs are growing, and fast. Creators now have endless possibilities, not only for reaching a very specific audience, but also to monetize their work. The possibilities for everyone are endless, since people can now own basically everything. However, the market still dictates the prices, and even though there are proofs for fabulous prices, it will take some time for non-fungible tokens to gain recognition among the general public. However, non-fungible tokens definitely are the next big thing in the digital economy today.
By Nika Kovacev Socio-political academic researcher and content writer.