In recent years, ICOs in 2017, smart contracts in 2018, stablecoins in 2019 and DeFi in 2020. 2021 is the time for non-fungible tokens (NFT) to show their talents.
It’s no secret that people like to collect things. The types of items collected depend on your specific interests and hobbies, or whether these collections resonate with you on an emotional level. Think about when you were a kid you might have collected Pokémon cards, stamps, video games, books, posters, maybe even marbles or bugs. As an adult, your collection may look very different. Maybe you are collecting fashionable bags and shoes, technological gadgets, antiques or art. Maybe you are still collecting the same things as when you were a kid.
What if your physical collection can be extended to the digital virtual world? What if UFC fans can collect and own their favorite Conor McGregor (or other boxer) moments? For Nike fans, how about traveling through the virtual game world while putting on your favorite sneakers? What if you can now have the pet dragon you have secretly wanted in a virtual family? For art collectors, imagine having a virtual digital art gallery that you can put in your pocket and show it to your friends and family with it. How about owning souvenirs and behind-the-scenes treasures of your favorite celebrities? Well, you may not need to imagine any longer, because the rise of NFT in the crypto world will make your wildest imaginations and dreams become reality, almost real. And here is a reminder for StarCraft fans, you may soon have the tokenized memory of William Shatner in the form of a trading card, one of which will be a poignant picture of Shatner hugging his long-time friend Leonard Nimoy.
Star Trek fans may soon have the tokenized memory of William Shatner in the form of trading cards.
In the past few months, NFT has been the center of global whispering topics, and it is a strong contender to grab the focus in the crypto world in 2021. The crypto world has a relatively short history and is characterized by trend waves: the ICO boom in 2017, the smart contract era in 2017-18, the stable coin era in 2018-19, and the DeFi boom in 2020. Although DeFi has been the focus for most of 2020, the transaction volume of NFT has also been steadily increasing in recent months. Ilya Abugov, project manager of DappRadar, said in a recent interview with Cointelegraph that “there is a lot of hype around NFT. To some extent, this is an extension of DeFi’s excitement.”
1. What is NFT
NFT is a tokenized version of non-fungible assets such as artworks, real estate or collectibles. Non-homogeneous tokens have attributes and individual characteristics that make them unique and valuable.
Judging from the emergence of currencies, in the past decade, the cryptocurrency world has been dominated by alternative currencies. “Substitutability” is a complicated concept. But the premise is very simple. It is talking about the fungibility of assets. If there is no point in exchanging two items, then the two items are interchangeable. For example, if two people exchange a dollar bill with each other, there is no difference in the value and meaning of the exchange. Only when either party cares about the serial number of the US dollar bill and where it was made, the exchange will become irreplaceable.
In another sense, NFT is all unique and rare things in the world. Remember the example above, the highlight moment of Cornor McGregor? That moment is likely to never reappear, this is its uniqueness and value. By tokenizing that spectacular picture and writing its unique attributes into smart contracts, fans can own or trade their favorite moments. NFT can be used to represent various assets, such as virtual collections, in-game items, virtual assets, digital art, real estate, etc. But because each token is unique, they cannot be exchanged or swapped as easily as fungible assets. For example, you cannot exchange a very rare, old and valuable car with an ordinary car. Decrypt explains NFT like this:
“Since no two are the same, they cannot be exchanged like exchanges”-Decrypt
Another reason why NFT is different from cryptocurrency is that NFT is indivisible and you cannot trade a small part of it like Bitcoin. For example, you can’t cut out a small part of a concert ticket and send it to a friend, and neither of you can pass the security check with the part of a ticket.
2. Why is NFT only receiving attention now?
NFT is not a new concept. The first token similar to NFT was 2012 Bitcoin 2.X (also known as lottery coins). In terms of market value, the NFT industry grew by 17% in 2019 and is expected to grow by 50% by the end of 2020. This market value is very attractive because it represents a total value of more than $200 million created from scratch in less than two years. According to the NFT data resource NonFungible.com, since September 2020, NFT sales have increased sharply and have remained higher than the previous few months of this year. In the first week of September 2020, NFT sales approached $1 million, because the blockchain-based fantasy football card game Sorare reached more than $211,000 in sales. This momentum shows no signs of slowing down, because in the first week of December 2020, NFT worth $2 million was exchanged. According to CoinGecko’s data, the market value of NFT has exceeded its 2020 forecast, reaching more than US$550 million.
One of the first NFT projects that really broke out and gained a lot of attention was the CryptoKitties boom in November 2017. CryptoKitties is a game built on the Ethereum blockchain that allows users to collect, breed and exchange virtual cats. As early as 2017, this game was known for decelerating the Ethereum network by stimulating a large number of activities. It embodies a blockchain use case for entertainment and leisure rather than currency. These virtual cats are obviously attractive enough to cost millions of dollars, while the more rare cats are worth hundreds of dollars each.
Dapper Labs is the company behind CryptoKitties. Their goal is simple, to introduce blockchain to 1 billion people. Co-founder Mik Naayem explained that they decided to focus on entertainment and gaming because it was an “easier way to introduce people to decentralization.” “Gamers are the perfect target market because they already understand Virtual currency and virtual world”. He went on to say “When we created CryptoKitties, what we wanted to do was to test whether it could be used by people who had never used the blockchain…and understand why it is different and why it is valuable.” They did well It really succeeded, because CryptoKitties taught new users the knowledge of blockchain and introduced the concept of NFT to hundreds of thousands of people.
After the prosperity of CryptoKitties at the end of 2017, the NFT market remained quite stagnant throughout 2018 and 2019. NonFungible’s annual report designated 2019 as a stable year for the NFT ecosystem because it entered the “integration and stability phase” after the ICO mania. The report pointed out that in the past two years, the retention rate of most NFT projects was very poor, and the use time of most projects in 2019 was three months or less. It then revealed that only a little over 10% of the newly created NFT assets were in circulation throughout the year, a ratio similar to 2018.
Although the speed has slowed down after the initial excitement in 2017, there are continuous new developments in the NFT field, especially in recent months, some activities and projects have attracted people’s attention. Project sales have reached record levels, such as the recent Bitcoin-code-inspired artwork sold for more than $130,000, and the blockchain-based Paris Saint-Germain forward Kylian Mbappé’s transaction card at 66850 Sold at the price of US dollars. Although CryptoKitty Dragon still maintains the record of the most expensive non-homogeneous token sales ever, the two most expensive NFTs sold in 2019 include the unique digital sports car F1 Delta Time Apex Race Car “1-1-1” ( 415.9 ETH, US$113,124) and a piece of land called “The Secret of Satoshi Tea Plantation” (1.3M MANA, US$80663) on the virtual reality platform Decentraland. Even celebrities have begun to participate in NFT. For example, in August, Paris-Hilton auctioned the cryptographic painting of her pet cat Munchkin for 40 ETH (worth $17,000 at the time) to raise funds for charity.
With the uproar of NFT, major companies and brands have become interested in and participate in this industry. Several of the world’s largest brands are now developing blockchain-based games, collectibles and virtual worlds. These include the National Basketball Association (NBA), National Football League (NFL), Ultimate Fighting Championship (UFC), Formula One, Louis Vuitton, Samsung, Nike and more. The participation of these big brands is the way to mainstream NFT, because new users can understand the concept of NFT through channels that they are passionate about and already familiar with.
Several of the world’s largest brands are now developing blockchain-based games, collectibles and virtual worlds. These include the National Basketball Association (NBA), the National Football League (NFL), the Ultimate Fighting Championship (UFC), Formula One, Louis Vuitton, Samsung, Nike and more.
3. How does NFT work?
NFT’s unique information is stored in its smart contract and recorded on the token’s blockchain. Most of the NFTs are ERC-721 tokens using the Ethereum protocol and blockchain. The main feature of ERC-721 tokens is that when a token is created, only one exists. Users can create their own ERC-721 tokens by writing a piece of code in a smart contract. This code follows a basic template and then adds unique details about the token. These unique details can include the owner’s name, rich metadata, or secure file links.
Enjin co-founder and CTO Witek Radomski developed ERC-1155. ERC-1155 is a new standard that allows a smart contract to manage an unlimited number of tokens. Different from the ERC-721 token standard, the ERC-721 token standard can only generate NFTs and force developers to deploy a new smart contract for each new token. The ERC-1155 token standard allows developers to deploy A single smart contract, and then mint new tokens (fungible and non-fungible) an unlimited number of times within a few seconds. The ERC-1155 contract has now powered more than 40 games, because a contract made for a game can flexibly contain a variety of items, from weapons and armor to health potions and superpowers. However, ERC-1155 is not just for games, it can be applied to all walks of life.
In addition to Ethereum, other blockchains also support NFT, including the Flow blockchain of the TRON Foundation, eosio, NEO LastSamurai and Dapper Labs. Unlike Bitcoin and other alternative cryptocurrencies that can be traded on standard cryptocurrency exchanges, NFTs are bought and sold on open markets that connect buyers and sellers (such as OpenSea or Decentraland’s LAND market).
Fourth, the characteristics of NFT-this is their charm
NFT has three desirable features, that is, it can prove authenticity, provide ownership and be transferable.
1. Authenticity
The standardization of NFTs and the detailed properties of their smart contracts make each of them uniquely identifiable and authentic. Users know that only one NFT exists, so they cannot be copied or copied, and there will be no fraudulent items in the end. The transparency of blockchain technology also means that the authenticity can be verified and proven.
For many industries such as art or luxury brands, counterfeiting and fraud are a big problem, but Cointelegraph points out: “Blockchain powers NFTs, can curb counterfeiting, and gives buyers the confidence that they get what they pay for. “Coindesk reported that the luxury brand group LVMH, the owner of the iconic Louis Vuitton brand, is riding the NFT wave and preparing to launch a blockchain to prove the authenticity of its luxury products. The goal is to provide an NFT for the product so that its authenticity can be verified. It is also possible to track the life cycle journey of a single handbag, from the crocodile skin farm to the store where the store is sold, and subsequent owners who have bought and sold it.
2. Ownership
Blockchain technology enables people to truly start to own their own things. It is worth noting here that due to its smart contract and related rights, NFT can only be traded and transferred by the owner of the asset. This means that even the issuer of the NFT cannot copy or transfer the NFT without the permission of its owner.
For many years, gamers have been trading virtual currencies and assets, from Fortnite cosmetics, characters, skins to the gold of World of Warcraft. But in traditional games, you can’t really own anything in the virtual world, because it only exists in a closed market. You may have spent 60 dollars to have the program authorization, played for a month, beat the game, and then put it away, there is nothing else to show. In other words, you cannot use the currency or items in the game to exchange for fiat currency, nor can you take it to other games, because you don’t really own it. But in the world of blockchain games, you own all the tokenized in-game assets (in the form of NFT) in your wallet, and you can carry them in multiple games for trading and competition. You own and control all these assets, whether they are magic swords, skins or currency. In the topic of the future of games and non-fungible currencies at the 2020 Future Conference, Dr. Jesse Reich (CEO of Splinterlands) explained that owning assets is a one-way valve. Once you start to own your sword, your armor, and your role With some customized things, you will play other games, and the idea of spending hundreds or thousands of dollars without owning these things is no longer attractive. “Naayem of Dapper Lab also agrees with this. He believes that once users experience uniqueness, scarcity and ownership in the virtual world, paying cash in ordinary games will completely lose their appeal.
3. Transferability
Since NFTs are decentralized, there is no need for a central issuing institution, and their circulation is easier. It allows users to enter unlicensed peer-to-peer interactions, transactions, and professional markets without troublesome third-party intervention, which may slow or complicate this process.
According to the game example above, NFT solves the problem of exclusivity in traditional games, because assets can be easily transferred to different blockchain games. Since the assets you build or buy in a game are owned by you, not the game company, they can be taken from one game to another. These tokens are transferable because they can be accessed by millions of people and they can be exchanged for other cryptocurrencies.
5. Why is NFT so exciting?
NFT is creating opportunities for all types of creators (visual arts, game designers, musicians, etc.) and releasing new sources of income. Part of the excitement is that NFTs can represent various assets: virtual collectibles, game items, digital art, event tickets, real estate, ID cards, certificates, etc. WAX co-founder William E. Quigley boldly stated:
“NFT will stand side by side with movies, music and video games as a unique form of entertainment. Every consumer product that cannot be eaten will become NFT.” -William E. Quigley
Due to the ease of transfer and proof of ownership, NFT undoubtedly provides a wide range of possibilities for real world and virtual assets. The current crypto market mainly revolves around Bitcoin and cryptocurrency trading and mining. But in order to encourage mass adoption, it needs to stay away from this field. NFTs are promoting this process because they have the ability to capture the hearts and thoughts of individuals and incorporate them into the blockchain field, which is not yet possible with alternative currencies. Taking CryptoKitties as an example, Naayem of Dapper Labs revealed that “a little over 40% of our audience has never owned a cryptocurrency before.” Through entertainment and leisure channels, new users are introduced into the encrypted world, making it easier for beginners to access and understand the value that blockchain technology and decentralization can bring to them. Ilya Abugov, project manager of Dapp Radar, told Cointelegraph:
“Art and collectibles are the easiest use cases for retail users to understand, so the hype may continue for a while. If we see exciting games and more artists join the ecosystem, then this trend may get More mainstream attention. However, from asset tokenization to documentation, there are more use cases that can be unlocked through NFT.”-Ilya Abugov(Dapp Radar)
Six, current use cases of NFT
The current use cases of NFT are mainly concentrated in categories such as collectibles, artworks, games, and virtual worlds. But other categories such as sports, fashion, and real-world assets are also developing steadily. An interesting Weibo by virtual land investor Dclblogger lists about 25 industries that the NFT ecosystem is disrupting.
Terra Virtua is one of the world’s first immersive digital collectibles platforms. It has established partnerships with some big-name companies in the film industry, including “Topgun”, “The Godfather” series, “Pacific Rim”, “Sunset Boulevard” and “Lost Space” provides mobile collections. In addition, it also cooperates with Paramount Pictures.
1. Collectibles
In terms of sales volume, collectibles is currently one of the most popular NFT applications. About 23.6% of sales last month came from collectibles-related items. CryptoPunks was launched in June 2017. It is one of the first collectible NFTs on Ethereum and sold for thousands of dollars. They were actually developed before the introduction of ERC-721, and wrappers must be introduced so that they can be traded on exchanges such as OpenSea. Since its launch in November 2017, CryptoKitties remains one of the most notorious examples of collectibles, with sales of virtual cats surpassing an all-time high of $38 million.
With the use of NFT technology, this category continues to develop and expand, and tokenized versions of star athletes and celebrities have been created for fans to collect. The fantasy football game Sorare allows players to collect “limited edition digital collectibles” of their favorite athletes from 100 football clubs. As early as February 2020, members of the NFL and NBA expressed interest in cooperating with NFT technology. Since then, in cooperation with the NBA, Dapper Labs, the creator of CryptoKitties, launched the token-driven NBA TopShot. In a conversation with Cointelegraph, Cathy Tedman, head of partnership and marketing at Dapper Labs, said: “This product is designed to give fans ownership of the actions that take place on the court.” By tapping the enthusiastic fan base, the NFT collection has been Demonstrating their potential and power to bring these communities into the blockchain. NFT is also dragging more traditional collectibles into blockchain technology, such as transaction cards, coins, and stamps (such as encrypted stamps).
Terra Virtua, a digital collectibles ecosystem, is at the forefront of the NFT collectibles movement. The platform aims to provide users with a “deep sensory experience” by bringing digital collections into the multi-platform VR and AR world.
Terra Virtua users can put their digital collections into action in the AR environment.
Terra Virtua has launched a series of character-based 3D animated creatures called “vFlects”, as well as 2D and 3D authorized collectibles from “The Godfather”, “Ready Player One”, “Sunset Boulevard” and “Lost Space”. They provided a market for interactive unique and licensed digital collections, and at the same time launched an ecosystem through their art gallery app and Terra Virtua Fancave to create a cross-platform journey. The gallery app allows owners to store, display, interact and show off their unique digital art collections. Terra Virtua Fancave is a personalized and customizable VR environment where users can display their collections. Gary Bracey (CEO of Terra Virtua) said: “Terra Virtua’s main mission is to bring NFT to the mass market. The core team’s video game experience allows us to pay great attention to user experience and user interface, by making this process smooth and attractive. It’s eye-catching, and we hope to bring the world of interactive digital collectibles into the mainstream. “The sensory elements and cross-platform features that Terra Virtua provides users enable NFT to surpass the current label as a product, thus bringing a truly engaging interactive experience.
2. Gaming
As mentioned earlier, gamers are the perfect target market for NFT because they are already familiar with the concept of virtual worlds and currencies. NFTs are thriving in the gaming industry because they allow in-game items to be tokenized and easily transferred or exchanged with peer-to-peer transactions and markets. This is completely different from traditional games where in-game items such as rare weapons and skins are prohibited from being sold or transferred. NFT also makes the gaming experience more specific and valuable, because players have real ownership of their digital assets. They also created a new economy because players now have the possibility to make money by building and developing their in-game assets. “
The core of the potential of the blockchain here is the theory that when players have more skins in the game, their loyalty will increase: when their digital assets can be transferred between games or platforms, or on the open market They will invest more cash in the transaction. “-Cointelegraph
The Galaxy Interactive Manual explains that because virtual goods have the same status as physical goods, “the value we create inside the virtual world will become indistinguishable from the value we create outside the virtual world.” As players begin to trade through peer-to-peer In terms of building an inherent community, incorporating NFT into the game world also encourages the development of interactive and interactive communities.
The three popular blockchain games that are really popular are Axie Infinity, Gods Unchained and My Crypto Heroes. Axie Infinity is a digital pet community whose core is to collect, train, raise and fight against fantasy creatures called Axie. The game is built on the Ethereum blockchain and is the first game on the blockchain with animated characters and rich immersive gameplay. Gods Unchained is a digital collectible card game in which cards are issued in the form of NFT, and players can own and trade them at the same ownership level as physical cards. “My Crypto Hero” is a Japanese multiplayer role-playing battle game. Heroes and in-game items are issued as tokens on the Ethereum blockchain. Players can upgrade historical heroes through missions and tournaments.
Games must be fun to succeed, but another key aspect that plays an important role in the mass adoption of NFT games is Play2Earn. The fact that people can earn something by playing games is very attractive to many people, especially in developing countries, where you can earn as much money as your salary by playing Axie Infinity. Cryptopick is another example of a game where users are rewarded for their participation. Players can learn encryption technology without taking any financial risks, and more importantly, get their first cryptocurrency (ETH) and NFT. Owning the first batch of Crypto & NFT means that they will learn how to own wallets, conduct transactions, etc., making the game an attractive way to attract many people to the Crypto field.
3. Art
One of the biggest challenges for digital artists is to protect their works from copyright infringement, but NFTs are a solution because they provide proof of ownership, authenticity, and eliminate counterfeiting and fraud problems. An article from Coindesk pointed out that due to the forced closure of museums and galleries in the face of COVID-19, many artists have turned to NFT and online exhibition halls, “Just as Bitcoin paved the way for trustless peer-to-peer transactions by creating a shared event ledger. Road, encrypted art […] has a built-in provenance. “The first record of the highest value of NFT art auction sales occurred in July, when “Picasso’s Cow” was sold for more than $55,000. Other subsequent records include “Right Place&Right Time” (sold at more than $100,000) and “Portraits of a Mind” (sold at more than $130,000). Cointelegraph pointed out, “These projects can even directly connect artists and consumers through blockchain-based payments, thereby improving artists’ income.”
“Just as Bitcoin paved the way for untrusted peer-to-peer transactions by creating a shared ledger, so does the art of encryption have built-in sources.” -Coindesk
Examples of platforms and markets for digital art include SuperRare, Makersplace, and Rarible. These platforms and markets operate similarly to each other, allowing users to easily create original digital artworks and sell them on their markets. Rarible is a particularly interesting example because it combines some of the more interesting DeFi trends in 2020 by combining digital collectibles with yield farming and liquidity mining. They achieve this goal by issuing their governance token $RARI. This adoption strategy is one of the reasons for the renewed interest in NFTs in the last few months of 2020. When users sell and trade their NFT on the platform, they will get rewards and incentives from Rarible’s governance token ($RARI). Therefore, Rarible is a community governance market that aims to become a fully decentralized autonomous organization (DAO), and the $RARI token is the first step in this direction. In addition to Rarible, many other platforms and NFT markets have also begun to issue and distribute governance tokens. Sandbox ($SAND), Somnium Space ($CUBES), Decentraland ($MANA), the complete list can be found on Coingecko.
4. Virtual world
Another use case of NFT is the virtual world. Decentralized virtual reality platforms such as Decentraland, The Sandbox, and Cryptovoxels allow users to create, own, and monetize plots of virtual land and other NFT projects in games. LAND in Decentraland is permanently owned by the community and allows players to fully control their creations and virtual assets. Considering the familiarity of Generation Z with the virtual world and the difference between their concept of valuable assets and the older generation, the assets in the virtual world give them choices and flexibility, consistent with their values. “So maybe our children won’t have the roof above them, but they will have a lot of digital assets.”
5. Real-world assets and files
Real-world assets, such as real estate and stocks, or documents, such as qualification certificates, licenses, medical records, birth certificates, and death certificates, can be tokenized. However, this type of development is still in its early stages, and its use cases are relatively few. But with the continuous development and expansion of the crypto world and NFT, who can say that you will not one day (maybe soon) be able to own a vineyard in another country thousands of miles away. As far as we know, your digital wallet may soon contain proof of every certificate, license and asset you have.
7. What is the future of NFT?
The possibilities and potential of NFT are limitless, and the recent record sales have helped to promote the development of NFT technology. One of the current obstacles to its mass adoption is the lack of extensive education on blockchain technology and the world of encryption. “If you educate people, let them taste and experience it, then they won’t be intimidated by it,” said John G Fields, creator of Grow Your Base.
Part of this education includes the popularization of security knowledge, because new users entering the blockchain field need to understand how to protect their wallets and private keys so that their valuable digital assets will not be attacked by hackers. Due to their rarity, many digital assets, collectibles, and investment items are very valuable, and losing them will undoubtedly hurt. Developers and creators of digital assets also need to ensure that reliable copyrights and authorizations are written into smart contracts to protect their value. At present, most crypto wallets are quite complicated, and it is difficult for new users and mainstream beginners to get started. But wallets designed to improve this situation are constantly being developed and released, such as Pillar wallet, Coinbase wallet, Enjin wallet or WAX Cloud Wallet (WCW) and so on. NGRAVE ZERO is another product worthy of attention, because it is designed to be the most secure crypto wallet, but also incredibly user-friendly and seamless to use, essentially providing full peace of mind when interacting with your NFT . In addition to providing users with a safe and protected environment to store and trade their virtual assets, ZERO’s high-quality touch screen also provides an interesting potential prospect, enabling owners to show their assets to others from small portable devices. Virtual collections and assets.
Another aspect of mass education needs to consider how NFT and blockchain technology are still very annoying, annoying and technical. It is necessary to simplify further so that people who don’t know anything about blockchain become easy to use and access. Dr. Jesse Reich (CEO of Splinterlands) mentioned the problem in the topic “Games and the future of non-fungible currencies”, namely “making the blockchain invisible to new users and unavailable to advanced users”. Although projects such as CryptoKitties have successfully introduced new users to the blockchain, and the development and rise of NFT use cases in recent months have driven its adoption, there is still a long way to go. The excitement of NFT is currently focused on the swelling of games, art and collectibles, but new projects that are constantly emerging are slowly but surely expanding NFT to other aspects of our lives. As more and more big brands (such as Nike owns NFT patented shoes, Nike shoes called CryptoKicks, which allow users to “breed” different shoes to make custom sports shoes), we will see how NFT Growth can be transferred between different worlds-virtual and physical the same. As Yat Siu, CEO of Animoca Brands aptly pointed out:
“If suddenly millions of people end up with Nike virtual shoes, how many game companies might really say, let us use these Nike shoes in virtual games?”-Yat Sie, CEO of Animoca Brands
As people become more aware of the potential and value that NFT can provide, more and more big brands, major investors and venture capital companies have begun to pay attention to and participate in it. According to reports, Morgan Creek digital co-founders Anthony Pompliano and Jason Williams have made a “big bet” on digital art NFTs beyond the physical art market.
Independent blockchain game developers have also begun to successfully attract venture capital because their product life cycle is very long and they can provide changing monetization models, which makes them ideal investment targets. The new governance tokens in the NFT field have also aroused people’s interest. Just like DeFi, I don’t know what exciting new ways NFT and DeFi will find to blend together. However, the future path of NFTs is not without challenges, as they may face regulatory obstacles. In any case, the encryption field is still very young and needs to continue to develop as the entire community as more projects emerge, even if these projects come, fail, and go.
