The crypto market has seen some major advancements over the last twelve years. Cryptocurrencies have developed from purely electronic cash into a diverse collection of coins and tokens. Unlike the original cryptocurrencies, such as Bitcoin, these new token types were meant to serve different purposes in addition to providing a reliable cash system to the masses. One such token type that has seen considerable adoption as of late is NFTs (non-fungible tokens).
NFTs get their name from their non-fungible technical characteristics. Fungibility is a term that refers to the exchangeability of currency within a monetary system. For example, fiat currency has a high level of fungibility. For the most part, every $1 bill is worth the same as any other. The same goes for Bitcoin. You can sell one Bitcoin and buy another with no value changes.
Notably, fungibility is a core requirement of any monetary system. It helps to ensure the system functions fairly in terms of value distribution. You could imagine the chaos that would ensue if all of the sudden, a certain percentage of USD was worth less than the same bills but from a different year or printing press.
While fungibility is vital in providing a monetary system, it’s not important when tokenizing assets. Tokenization is the process of taking an asset and converting it onto a decentralized network. To accomplish this task, developers needed some type of token that could represent an individual asset such as a piece of property or an in-game asset. This desire led to the rise in popularity of non-fungible tokens.
A Quick History on NFTs
Today there are all types of NFTs. These tokens are used to represent everything from avatars to artwork. While the first NFTs were used to represent properties, it wasn’t until Cryptokitties launched in 2017, that the market took flight. Cryptokitties was revolutionary in many aspects.
Cryptokitties took the NFT concept and expanded on it why creating a game that revolved around the scarcity and uniqueness of these tokens. Cryptokitties is an Ethereum-based collector’s game that enables players to purchase digital kitties. The game was so popular that its launch congested the Ethereum network.
In the Cryptokitties universe, every kitty carries a unique number and 256-bit distinct genome with DNA. This DNA holds each Kitty’s special characteristics or Cattributes. Notably, there are twelve different cattributes available for each kitty. Specifically, the pattern, mouth shape, fur, eye shape, base color, accent color, highlight color, and eye color are of interest. You can also see what type of environment your kitty thrives in and if it’s prestigious or secret.
Impressively, the scarcity of each kitty and the overall popularity of the game have sent these NFT’s prices through the roof. Today, there are multiple Cryptokitties worth well over $100,000. On May 12, 2018, a CryptoKitty sold for $140,000 via auction. Cryptokitties now has completed the sale of 2,854,490 digital cats. In total, this equates out to $39,457,576.53 in volume since its launch.
There are a lot of different types of NFTs in use today. Each type of NFT is specially designed to serve a different market or niche in the sector. Understanding the differences between each NFT can help you to make a more informed investment decision. Here are the most popular NFTs in use today.
Branded NFTs operate a lot like your traditional collectibles. When you think of branded NFTs, you should envision reputable name brands such as sports teams or car companies. These NFTs leverage the overall love of the brand to derive value. Sports NFTs are a prime example of this style of token in use.
To find an example of a successfully branded NFT platform, you don’t need to look any further than NBA Top Shot. Impressively, NBA Top Shot secured $147.8 million in sales in its first 7 days. Recently, the platform sold an NBA Top Shot video highlight featuring LeBron James for $208,000.
Another popular NFT type is memorabilia NFTs. These are items that gain in value due to their history. Think of owning a Cryptokitty that was once owned by Vitalik Buterin, Ethereum’s creator. Notably, Memorabilia NFTs derive value from their history rather than their actual usability. This approach provides unlimited ROI potential.
Game-relevant NFTs are another type of NFT gaining momentum in the market. These tokens can be valued based on the underlying game they exist in and their value on that ecosystem. The higher the demand for the game, the more value these tokens hold. Think of a special weapon or digital property in your favorite title.
Now, imagine being able to sell that item for Bitcoin or other real-world cryptocurrencies. The blockchain game, Chain Clash is a pioneer in this sector. The platform enables users to purchase in-game items and characters directly. Unlike previous games, you own the digital assets when you purchase them in the game. You can take these assets and sell them on markets to earn ROIs.
Gameplay Driven NFTs
Gameplay-driven NFTs differ from game-relevant NFTs in that they gain value based on the actual actions of the token holder. These tokens can represent a particular character, class, weapon, vehicle, or piece of digital real estate. In the past, gamers would spend weeks or months building up avatars, weapons, outfits, or vehicles.
Sadly, this value remained locked in the game once they quit. The use of NFTs for these items enables users to unlock this value in new and exciting ways. As such, they also enable developers to provide more value while justifying higher costs for certain items.
Real Estate NFTs and FNFTs
One of the earliest forms of NFTs was in the real estate sector. Tokenized real estate brings a bunch of advantages along with it. For example, you can sell tokenized real estate globally. Additionally, you can sell the property in fractional shares utilizing a new type of NFT called FNFTs (fractional non-fungible tokens). This strategy eliminates the financial barriers usually associated with real estate purchases. Investors can better diversify their holding and sellers gain access to international funding instantly. In these ways, NFTs continue to revolutionize the real estate sector.
NFTs – Tokens for the Future
You can expect to see more NFT usage in the coming weeks as this sector is just getting warmed up. The added efficiency, security, and ROI opportunities are enough to ensure that the NFT market will retain its momentum for the foreseeable future. For now, you can get your hands on NFTs using any popular DEXs including Uniswap or the META Exchange.