April
28, 2021
6 min read
Opinions expressed by Entrepreneur contributors are their own.
What exactly is a non-fungible token?
Fungible tokens such as Bitcoin are not unique, meaning one Bitcoin has exactly the same value as another. A non-fungible token is something totally unique and if swapped with another NFT, will be fundamentally different. An NFT acts as a non-duplicable digital certificate of ownership representing a specific digital asset. Essentially, it is a smart contract that identifies something as unique. The smart contract is then minted into a token (generally ERC 721) on a blockchain, commonly on Ethereum. Popular forms of NFT are things like jpegs, gifs and videos.
Related: What is an NFT? Inside the Next Billion-Dollar Crypto Sensation
When an NFT is purchased, the owner then has the digital rights to resell, distribute or license their asset in any way they choose. In many cases, the original piece of art, gif, tweet or video is still available for others to see, but you own a wholly unique version of this asset. The value of an NFT can vary greatly based on how desirable it is. NFTs such as those from celebrities, popular influencers, or those which capture a momentous occasion, can be extremely valuable. Typically, this value is driven by scarcity — something unique within the NFT space, as a creator, might only mint one specific version.
What are the current trends within the NFT space?
NFTs have so many unique applications outside of collectibles and art. Let’s take a look at some of the most interesting use cases which are already disrupting established sectors.
By leveraging blockchain-powered decentralization, the next generation of social media networks is set to remedy the flaws commonly found within the traditional Big Tech social companies. Open-source code, decentralized control, democratic decision-making and greater control of how influence is monetized sits at the heart of this change. Distributing control away from Big Tech, and into the hands of creators and fans in a way not possible before.
Projects such as BitClout are providing new and innovative ways for social media stars, fans and peers to monetize their influence. Within BitClout, NFTs are used to build Creator Coins which represent a popular identity such as Elon Musk (CEO Tesla), Chamath Palihapitiya (venture capitalist) or Logan Paul (YouTuber). The value of the Creator Coins relies entirely on that person’s popularity, meaning the value can also rise or fall based on whether that celebrity does something positive or negative with their content.
Another interesting example is Hyprr. This social network supports content creators from TikTok and Instagram by allowing a fair way to get paid for the content they produce. Creators can turn their content into exclusive digital collectibles using NFTs, meaning ownership and authenticity are guaranteed. Users of the network (fans, followers and other creators) can exchange, collect and trade these NFTs within the marketplace.
Ecommerce
The very nature of non-fungible assets allows for an explosion of different opportunities within the ecommerce sector. In fact, it is already being described as dCommerce. Within traditional ecommerce, transactions are often centralized by several high-profile intermediaries — just look at Amazon, which in 2020 accounted for 50% of all ecommerce sales. These monopolies hoover data, prevent pricing and product transparency while leveraging surplus value created by their users. In a decentralized ecosystem, however, NFTs could place the power back into the hands of consumers, alongside individual brands and creators.
Splyt is definitely at the forefront of this movement. Its eNFT (Ecommerce-Non-Fungible-Token) tokenizes off-chain products on the blockchain. This creates a universal, standardized protocol for how data and funds are shared securely between all parties in ecommerce transactions. In an age where more and more products are entirely digital, the ability to add transparency to the center of transitions between buyers, sellers and resellers opens up huge opportunities.
Gaming
A huge area of growth for NFTs resides within the gaming space through crypto gaming. Crypto gaming enables players to collect and trade virtual assets anywhere in the world. As you can imagine, NFTs are playing a large role in the expansion of these types of games. The earliest forms of crypto games such as CryptoKitties centered around one-of-a-kind cat collectibles, allowing gamers to earn, buy, sell and swap these NFT “kitties” among themselves. As time has moved on, however, NFTs have started to make more of an impact within this space by allowing scarcity, valuable rewards, competition benefits, and ultimately, real-world value to in-game items.
One of the most interesting examples within this new breed of game producers is AnRKey X. The team has built a gDEX (Decentralized Finance Gaming Platform Exchange) protocol that merges the worlds of DeFi (Decentralized Finance) yield farming, NFTs and competitive esports into what they are terming M$ports (Money Sports). This allows teams of gamers to compete against each other to earn yield, with NFTs featuring key in-game characters providing valuable power-ups to increase APYs. This area is really catching attention — allowing in-game items to have their own unique value outside of the game ecosystem while providing a compelling use case for NFTs within games.
Fashion
Gucci recently began selling digital sneakers for $12 a pair. These could only be worn within an AR (Augmented Reality) environment, but allows for a new and exciting way for fans of fashion brands, both big and small, to engage with the labels they love by owning unique clothing and accessories. It also represents a huge opportunity for fashion brands to scale across totally digital ecosystems.
Scandinavian brand Carlings began selling 3D versions of their clothes back in 2018. They recently put a 19-piece collection comprised of unique, virtual clothing pieces up for sale. It’s another great example of how fashion brands could begin to leverage NFTs to create entirely new product categories — and proves there is a demand.
What does the future hold for NFTs?
We’ve already seen what’s currently taking shape through NFTs, but as more players enter the space, the best story wins. Some incredible use cases could significantly change the way we interact with each other, with brands and with celebrities digitally. Imagine attending a concert, an exhibition, or a performance and owning a unique souvenir from that experience. Or perhaps owning a limited edition set of outfits from your favorite designer that can be used across your social media avatars or when gaming.
Perhaps we could even see the day when ownership of offline assets such as your car, or even your house could be on-chain through NFTs. This a truly interesting space, and one in which content is king.