There is no doubt that the world of non-fungible tokens (NFT) has taken the world by storm in 2021. With a transaction volume of $ 8.8 billion in 2021, the NFT sector in the crypto world currency has established itself as a household name that cannot be ignored. .
The year saw a record amount of NFT digital art traded, as fine art and collectibles made up 59% of the NFT trading volume seen in 2021. 2021 also saw the biggest NFT sale in the world. ever seen. A Beeple’s Everydays: The First 5000 Days digital art, which is considered the world’s first purely digital artwork based on NFT, sold for 38,525 ETH. At the time, the trade was worth around $ 69 million.
Besides the biggest NFT sale, let’s dive into the biggest NFT collection. Bored Ape Yacht Club (BAYC) is an NFT collection of 10,000 NFT of monkeys, all with different traits that make some rarer than others. The rare ones are sold for over a million dollars while the common variants cost around $ 200,000. The astronomical growth of this collection is over 1000 times, because at the time of the collection’s launch, the developers at BAYC sold the NFTs for $ 190 each.
That being said, there is a lot of confusion as to what NFTs are, what role they play, and what possible use cases they have. Many experts have criticized the NFT space as a bubble waiting to burst when people realize they can take screenshots of their digital arts. However, many want to know if these digital arts are just pictures on the blockchain or if they have significant value beyond what the world sees today.
What are NFTs?
Investopedia defines NFTs as crypto assets on a blockchain with unique identifying codes and metadata that distinguish them from one another. However, in layman’s terms, NFTs are digital tokens on the blockchain network.
Blockchain is the underlying technology in which cryptocurrencies operate. NFTs allow the tokenization of everything from pictures, music and even tweets. NFTs are any digital collector’s item that can be designed to hold value based on its own will. The term “non-fungible” comes from the fact that each token is unique and cannot be exchanged for something the same.
Here’s an example, former Twitter CEO and now Block (formerly Square) CEO Jack Dorsey turned his very first tweet into an NFT, which was then sold for $ 2.9 million.
Difference Between NFTs and Cryptocurrencies
Cryptocurrencies are a non-physical currency issued by distributed ledger technology (DLT). It is decentralized, unregulated by any government authority, and runs on blockchain technology. NFTs, on the other hand, are digital assets that denote real-world items such as music, art, memes, fashion, and more. From collectible sports cards to memes, NFTs can represent any entity or be used to monetize any skill.
Although both are decentralized and regulated by the communities that manage them, NFTs cannot be traded as they are unique representations of real world assets. This means that they cannot be traded or traded on an equivalent basis. Cryptocurrencies can be traded against each other as there will be no loss in value.
NFT: beyond digital art
While we all know the application of NFTs to the art world and how powerful the growth of the industry was in 2021, here’s a look at other use cases that haven’t really become mainstream:
One use case of NFTs is their ability to provide access. Since NFTs provide a form of unique signature that cannot be replicated, innovators are exploring the use of NFTs to provide access by using them as a ticket-stub. Since NFTs are non-fungible and can easily be tracked through the blockchain, they are the perfect solution to eliminate physical stubs and provide users with a digital, traceable, and traceable option.
Additionally, with smart contract capabilities in combination with NFTs, you can set up ticket terms and conditions, expiration dates, and any other limitations. This allows both parties to easily track their tickets and the information stored on the ticket.
A perfect example of NFTs providing access is Gary Vaynerchuck’s NFT project, VeeFriends. All VeeFriends token holders have access to VeeCon, a multi-day event exclusively for VeeFriends NFT holders.
Contracts / Loans
NFTs can also be used in place of a traditional financial loan. With NFT Secured Loans, you can access and track the leased NFT by tracking the transaction from the original loan date. If a loan repayment is not made on time, the NFT can be automatically returned to the owner and the whole process takes place without intermediaries. This allows loans to be strictly peer-to-peer, keeping fees low, trust high, and transparency at the forefront of the entire contract.
Some of the NFT loans you will find today include marketplaces that allow you to offer your NFTs as collateral in exchange for a loan, and even offer other users a loan using their NFT as collateral. These loans are immediate, automated, and decentralized, all of which you won’t find with traditional loans.
Play to win (P2E)
Playing to win is huge for NFT players and collectors alike. A very good example of this use case is the success of a Pokémon-like game, Axie Infinity. The game provides a way for players to earn money by investing and spending time in the game. Players earn cryptocurrency, which they can exchange for real money, raising, trading and fighting Axies.
The Axie Infinity platform tops the all-time sales chart with aftermarket sales of around $ 3.2 billion with 9.3 million transactions in 2021, according to research from The Block. This use case of NFTs is literally a game-changer, and many projects offer their own P2E models. With the possibility of making real money by playing a game, more and more people will want to play these types of P2E NFT games, as well as invest more money in them and of course more time.
The AXS token, one of the native tokens of the Axie Infinity platform, gained over 15,000% in 2021.
Axie Infinity is just one example of P2E NFT games in space right now, however, there are many more available to play, and I expect to see a majority of the gaming industry continue to do so. evolve into this P2E style of play.
Before NFTs, blockchain technology was used in the logistics industry, especially because of its immutability and transparency. These aspects ensure that supply chain data remains authentic and reliable. With food, basic necessities and other perishables, it is important to know where they have been and for how long.
With the application of NFTs, it brings an additional advantage of representing unique elements. This means that NFTs can be used to track a product that contains metadata about its origins, route, and location of its warehouse. An example would be using NFTs to track whether a pair of high-end luxury shoes were created in a factory in Italy. It is assigned an NFT that you can quickly scan on its packaging. Time-stamped metadata shows when and where the shoes were created. As the product moves through the supply chain, the NFT is scanned and new time-stamped metadata is added. The data could include the location of its warehouse and the time of arrival or departure. Once the shoes arrive at their final destination, a store can scan them and mark them as received. An exact detailed history is available to visualize and confirm the authenticity and the logistic path of the shoes.
Currently, MAERSK’s TradeLens system and IBM’s Foot Trust are two examples of large blockchain logistics solutions. They both use Hyperledger Fabric, an IBM blockchain that supports the use of NFTs. However, it is not clear whether NFTs play a role in their operations.
Sovereign Identity (SSID) has long been one of the most intriguing applications of blockchain technology, and NFTs could be the key to unlocking the door. With NFTs, it allows everyone to have a unique digital identity that cannot be replicated due to its non-fungible nature. Since NFTs can be unique representations of real-world assets, what prevents them from being a benchmark for digital identity? The possibility of this is endless as it will truly make travel, for example, fully digital, as international passports and travel history can be stored as NFTs on the blockchain.