NFTs represent a different world in decentralization. Although the first of them was created in 2014 by New York artist Kevin McCoy, and the term was defined later, in 2017, it is in 2021 that the popularity of these tokens has seen significant growth.But, what are NFTs, and what's special about them?
The Concept and Working Principles of NFTs
The word NFT stands for non-fungible token. This means NFTs are unique digital assets that can be in the form of digital art, sports cards, and much more. Being cryptocurrencies, these tokens are created via distributed ledger technology (DLT), otherwise called blockchain.
The uniqueness of the assets is reached via tokenization, and the ownership rights are preserved by blockchain. Unlike other crypto assets, like BTC, NFTs can't be exchanged or divided into smaller units. Powered by smart contracts, they store data that makes them different from other tokens.
Although initially NFTs were created on top of Ethereum, now various blockchains, including Binance Smart Chain (BSC), Tron, and Solana allow developers to create them. People mainly acquire NFTs with the help of web 3 wallets like MetaMask.
Gaining ownership allows controlling and managing the token. What are the use cases of NFTs? The idea of NFTs was revolutionary as due to the unique code, it is the most effective way to protect ownership rights. The tokens have various use cases, with new ones appearing quite frequently.
Below are some of the most common NFT use cases
Crypto art based on blockchain and smart contracts is the most widely used NFT category. The decentralized nature of these tokens allows everyone to create artworks and protect ownership rights. Moreover, due to blockchain, it is possible to tokenize physical artwork. Various interesting photos, animations, Gifs, and other types of art have found their way through NFTs and many digital artists have expressed themselves through them.
Blockchain technology provides incredible opportunities for artists. For instance, they can create works able to change over time. Depending on the code written by developers, the tokens can respond to the owner's actions. They can also respond to weather or a game score. It's all up to the creator's imagination. The most expensive NFT at the moment is the artwork called “Everydays The First 5000 Days,” created by famous digital artist Beeple. The piece was sold for $69 M.
This type of NFTs represents historical moments finding their depiction through blockchain. The demand for them is high. An example of the most famous collectibles is NBA Top Shot trading cards. The tokens reflect major moments from basketball history in the form of a short video clip.
In March 2021, entrepreneur, the CEO of popular social media platform Twitter, Jack Dorsey sold his first-ever NFT for over $2.9 million. He contributed the amount to a charity fund to help people living in poverty.
Blockchain technology brought innovation to the music industry as well by allowing everyone to store and program songs and videos in the form of non-fungible tokens.
This alternative way of presenting records provides musicians the opportunity of choosing the cost at which the NFT will be sold and a percentage commission on future sales.
Another advantage of music NFTs is that they make it simpler, more transparent, and efficient to track the generated payments, otherwise called royalties. Through NFTs, fans can get unique content from their preferred artists.
Among famous singers that have released their NFTs are Grimes, Shawn Mendes, Kings of Leon, Apl.de.Ap, and Halsey.
Turning in-game items into NFTs is revolutionary. This means players own what they buy, earn or create. They can trade in-game items outside of the game, moving them between various platforms.
One of the famous NFT games is Cryptokitties launched in late 2017. It's an Ethereum-based game developed by Canadian studio Dapper Labs. Through it, players can purchase, collect, breed, and sell virtual cats.
Physical products NFTs
NFTs can be used to connect real and virtual worlds, denoting virtual ownership of a physical thing.
For instance, popular sportswear brand Nike announced tokenizing shoe ownership on Ethereum. The shoes called "CryptoKicks" become linked to a unique owner, all recorded via blockchain technology. The patent or official ownership rights also provide buyers the added control of their footwear, with the capability to ‘breed’ custom shoes that can be manufactured to produce a tangible product.
The Role of NFTs in Decentralization
The NFT space has been booming and interest in these tokens continues to be high. Various companies and people from different industries come up with new solutions for their use cases.
Sports, science, music, filmmaking, gaming, logistics, and other fields integrate NFTs.