Decentralized finance has become the focus of attention for almost the entire 2020, triggering discussions on a brand new copycat season. Many people believe that the large-scale adoption of DeFi will be realized in the next three to ten years. Nevertheless, other industries in this field are also receiving attention.
Non-homogeneous tokens are a good example. NFT is a tokenization model of assets (digital assets or other types of assets). For example, they are similar to stablecoins, but they are used to represent irreplaceable assets such as artworks, real estate, or collectibles, rather than legal tender. Popular applications of these tokens include virtual games such as CryptoKitties and Decentraland.
This year, especially recently, these types of tokens and related projects have been on the rise. According to data from NonFungible.com, NFT sales reached nearly $1 million in the first week of September. However, in the past 7 days, NFTs worth nearly $2 million have changed hands.
Following the footsteps of DeFi, projects in the NFT industry have also begun to issue their governance tokens. This trend may help the industry gain its appeal just like DeFi in the liquidity field. Ilya Abugov, DappRadar’s project manager, told Cointelegraph:
“There is more publicity about NFT now. To some extent, this is an extension of the DeFi boom. Through DeFi, we have seen that once the trend starts, it will have a snowball effect. Compound issued governance tokens, and others The platform has almost had to issue its governance tokens. Now that Rarible has begun to issue governance tokens in the NFT market, other markets may also be pressured to issue their own tokens.”
How does NFT work?
With the proliferation of activities and the vigorous development of projects, such as the recent Bitcoin-code-inspired artwork sold for more than $130,000, setting a sales record, even celebrities have been using non-homogeneous tokens. For example, Paris Hilton sold a cat painting for 40 ETH in August, which was worth nearly $17,000 at the time. So, what exactly is NFT? Why are they so attractive?
As mentioned earlier, non-homogeneous tokens represent irreplaceable assets. On the surface, NFT is like any other token. However, unlike most tokens, NFT is indivisible, which means that it is impossible to send a small part of NFT tokens like a small part of Bitcoin (BTC). They also have certain characteristics that distinguish them from other types and similar types of tokens.
NFT can be used to represent various assets, such as virtual collections, in-game items, digital art, and even event tickets, real estate, and so on. This opens up a wide range of possibilities for digital and real assets, such as convenient transfers and proof of ownership, and can also help solve old problems in many industries. Abugov said:
“Art and collectibles are the easiest use cases for retail users to understand, so publicity may focus on this for a while. If we see an exciting game and more artists join the ecosystem, then this This trend may get more mainstream attention. However, from asset tokenization to archiving, NFT releases more use cases.”
Let art return to intelligence
So far, the art world represents one of the most popular application areas of NFT. Digital art auctions using NFT technology are becoming more and more common. The highest sales record for the NFT art auction occurred in July, when “Picasso’s Bull” was sold for more than $55,000. Afterwards, the digital artwork “Right Place & Right Time” based on the volatility of Bitcoin was sold on Async Art for more than $100,000. Subsequently, this record was broken on October 7, when a painting “Portraits of a Mind” from the Bitcoin-code-inspired collection was sold through the large auction house Christie for $130,000.
NFT can also help artists such as musicians and filmmakers to register their works, thereby protecting their copyrights from infringement. These projects can even connect artists directly with consumers through blockchain-based payment and transaction solutions, thereby increasing artists’ income and improving their income efficiency. Viberate is a company that uses blockchain technology to help artists solve copyright and other issues. Its co-founder and business development director Vasja Veber told Cointelegraph: “NFT can adjust this chaos.”
“At present, the most obvious use case is music copyright. Songs bring some sources of income for artists: copyright, performance rights, neighboring rights, revenue from recording, traffic, and record sales. For large artists, there are usually many middlemen involved. In its work, each intermediary shares a profit. […] This is a complicated process, and a large amount of funds are stuck somewhere in the system and never reach the rightful owner.”
Game upgrade
NFT has also become very popular in the game industry, which can tokenize the items in the game and make it easy to transfer or exchange. For example, NFT can be used to transfer or exchange items in the game to obtain currency without the credit endorsement of the buyer/seller or a third party. This type of system can be integrated with existing games or used to create brand new games.
NFT can not only improve the game experience itself, make it more real and rewarding, but also create a new economy within the game, so that players can earn real money from their online game time, and game developers can help them The game creates a new incentive system.
Although there are several popular blockchain-based games, many projects also use NFT to provide infrastructure services for gamers, game developers, and other industry participants. These include Enjin, which recently partnered with Coincheck to introduce NFT to certain Minecraft servers. Simon Kertonegoro, vice president of marketing at Enjin, told Cointelegraph:
“We are just beginning to see the impact that the blockchain market can have in games. We hope that NFT will bring more opportunities for game developers, publishers and players to create value. Put assets on the blockchain, Allowing players to trade and being able to prove its scarcity is a proven method to build a large-scale and valuable economy.”
Bring collectibles into the virtual world
In terms of sales volume, collectibles are currently the most popular NFT application area. Nearly 40% of September’s sales came from items related to collectibles. In 2017, CryptoKitties (a game for users to collect and breed digital cats) became one of the most talked-about topics in the crypto industry. In terms of sales volume, it is still one of the largest NFT collectible items.
NFT technology does not stop there, because it is being used to create tokenized versions of athletes, celebrities, and virtual lands. In the first week of October, sales of the virtual football game Sorare exceeded $220,000. This decentralized application allows players to collect “limited edition digital collectibles” while also helping to manage the team.
NFT is not only popular in online games, it is also becoming more and more popular in sports. In February, members of the NFL and NBA spoke at the NFT NYC event hosted by Cointelegraph. Both alliances expressed interest in adopting NFT technology and exploring its benefits.
NFT can also be used to tokenize real-world collectibles such as coins and stamps to provide a constant proof of ownership that can be stored safely, easily transferred and cannot be copied.
The future of the NFT industry
Although the above example is by far the most popular application area of NFT, the possibilities are almost limitless. According to Italian blockchain company LKS, NFTs can be used to tokenize domain names and even help combat fake news.
Record sales may also help promote the development of NFT technology, especially with the addition of venture capital firms such as Morgan Creek. The new governance tokens may also stimulate interest in the crypto field as they did in DeFi.
However, the future path of the NFT project is not very clear. In the future, it may face regulatory obstacles and there are still many challenges to overcome before preparing for the mainstream audience. Abugov explained:
Despite increasing participation, in terms of user experience and user interface, there is not much preparation for mainstream use. In addition, NFT inherits all the typical difficulties of blockchain application projects, and may also have to overcome the challenges of certain traditional industries. For example, artworks and collectibles are not very circulated. Once the hype of liquid mining subsides, the crypto art industry may face similar challenges.