Since the Crypto Kitties craze in 2017, Non-Fungible Tokens (NFTs) have gained a substantial amount of popularity within the crypto community. For those unfamiliar, NFTs are a special type of cryptographic token which are uniquely distinguishable from one another. Each token represents ownership of specific assets which are not interchangeable or modifiable to any degree.

In comparison, fungible digital assets, such as Ether and ERC20 tokens, are all identical to one another and therefore, interchangeable. In other words, an Ether held in one wallet holds the exact same characteristics to the Ether in a different wallet. If we swapped Ether, we would see no difference whatsoever. As such, NFTs do a remarkable job at creating verifiable digital scarcity on a unique asset. With this in mind, some potential applications for NFTs include but are certainly not limited to:

Collectibles — avatars, cosmetics and trading cards

— avatars, cosmetics and trading cards Property — houses, unique artwork

— houses, unique artwork “Negative value” assets — loans, burdens and other liabilities

New applications for these types of cryptographic tokens have grown significantly over the past year. Along with these new applications, a few standards have arisen to increase the usability for non-fungible tokens as a whole.

Common NFT Standards

ERC721: The most widely adopted for non-fungible tokens. EIP-721 is the proposal which got the ball rolling for NFT applications and was the underlying standard for Crypto Kitties along with most other NFT projects.

The most widely adopted for non-fungible tokens. EIP-721 is the proposal which got the ball rolling for NFT applications and was the underlying standard for Crypto Kitties along with most other NFT projects. ERC 1155: Recently finalized on Ethereum’s mainnet by the team at Enjin, ERC-1155 enables the ability to issue a mix fungible and non-fungible tokens inside of one smart contract. This is something which can be extremely valuable when creating different assets within complex gaming ecosystems.

ERC864 — Allows for divisible non-fungible tokens. As such, NFT ownership can be broken down into smaller pieces. This allows a non-fungible asset to become fungible among multiple parties while keeping the parent NFT in tact. This standard is largely in an experimentation phase but could allow for some unique applications including shared ownership of highly desirable collectibles such as Magic the Gathering’s “Black Lotus”.

— Allows for divisible non-fungible tokens. As such, NFT ownership can be broken down into smaller pieces. This allows a non-fungible asset to become fungible among multiple parties while keeping the parent NFT in tact. This standard is largely in an experimentation phase but could allow for some unique applications including shared ownership of highly desirable collectibles such as Magic the Gathering’s “Black Lotus”. ERC998 — Allows for composable NFTs or attachments. By expanding on the ERC721 standard, ERC998 allows unique assets to be attached to a parent ERC721. This can be thought of adding inventory items to an NFT-based avatar. The inventory is automatically attached and transferred when the parent NFT is sold. For example, someone could equip their Crypto Kitty with a hat or a food dish that is automatically included with the kitty when ownership is transferred.

Gaming

The biggest application for NFTs to date is gaming. Gods Unchained has created a digital collectible card game similar to HearthStone, where players can purchase, collect, and trade cards amongst each other and ultimately take their unique deck into a player versus player arena to battle it out. Card packs are sold to players with 10% of the sales going directly to the Gods Unchained World Championship. As of this writing, the prize pool for this tournament sits at $431,000 with a total cap of $1.6M.

As we saw back in 2017, Crypto Kitties was the first basic gaming application which drew massive attention towards NFTs. Crypto Kitties allows users to buy, sell and breed unique digital cats. Players can create collectibles, earn rewards and play games within the KittyVerse. Back in September 2018, a CryptoKitty named Dragon sold for 600 ETH (approximately $156,000 at $260 / ETH) with over 4,800 ETH transacted at peak 24h volume back in 2017. This is just the tip of the iceberg for blockchain-based gaming as more and more games are being released within the ecosystem and other unique models begin to emerge.

Some other gaming-based NFT projects include:

Axie Infinity — Users can breed, battle and trade Axies against one another.

Neon District — RPG-based story in which each avatar can equip NFT-based inventory to deal greater damage or enhance their character’s hitpoints.

Moreover, unique in-game assets, such as skins and other cosmetics, have shown to have increasing value among avid gamers in the traditional world. With the proliferation of free-to-play games such as League of Legends and Fortnite, developers have shifted their entire business model to focus on the sales of unique cosmetics, which tend to offer zero competitive advantage to players. Given that NFTs could naturally represent these types of cosmetics, blending the traditional free-to-play model with NFTs could open up a new world of gaming in the future. If you’re interested in seeing what these applications could look like in an existing game, we wrote about a hypothetical scenario for tokenizing Fortnite in an earlier article.

Real Estate

When thinking about distinguishable and unique assets, real estate is one of the first to come to mind. No single property is the same and to interchange a piece of land for another is impossible. As such, NFTs are a great application for real estate ownership. In example, OpenLaw proposes using the ERC721 standard to carry out transfers of houses, land and other ‘tokenized’ properties through smart contracts on the Ethereum blockchain.

The attributes of NFTs allow buyers and sellers to store property records while establishing a solid foundation for global and immutable land registries. As it relates to blockchain today, Decentraland allows users to claim ownership of digital real-estate by purchasing NFT-based LAND tokens.

In the future, blockchain technology combined with NFTs will allow property owners to leverage an improved medium for tracking the chain of custody surrounding real estate assets. In short, the public nature of blockchain mitigates fraud and avoids the risks inherent in traditional land registries, especially in developing countries.

Art

Given that NFTs are extremely good at representing ownership in a unique and digitally scarce asset, art naturally makes a great fit. With the current web 2.0 system, it’s very difficult for someone to retain ownership of an original piece of digital art as someone can simply copy it and claim ownership over the piece themselves. Fortunately, with web 3.0 and NFTs, artists can now create a new revenue stream by tokenizing their artwork through something like SuperRare and selling their blockchain-verified work to a network of individuals. The artist or the purchaser can confidently retain ownership over that unique asset through its digital representation, ultimately allowing them to resell it on the market at a fair price if they so please.

As of now, the top collector on SuperRare, VK Crypto, owns 247 digital art pieces and has recently spent upwards of $330 on an animated gif. Digital art collectibles is completely unique to web 3.0 and is something that we at Fitzner Blockchain are excited to watch progress in the future.

Companies in the NFT Ecosystem

The NFT ecosystem is growing rapidly with more and more projects providing key pieces of infrastructure. Over the past year, we’ve seen new marketplaces such as OpenSea provide a peer-to-peer trading platform for a majority NFTs in circulation today. If you’re interested in buying or selling Gods Unchained cards on the open market to compete in the world championships, OpenSea allows you to find the right cards to build a winning deck.

More recently, WAX announced a partnership with RTFKT to put a new medium of sneakers on the blockchain.

“All of (RTFKT’s) limited edition custom sneakers will be minted on the WAX Blockchain. Every physical shoe will come with a unique digital copy stored on the WAX Blockchain. People will be able to instantly trade the digital copy,” says Zaptio, CEO and co-founder of RTFKT. “No more waiting for the shoes to be shipped to you — you get the digital version of the shoe straight away. Trade them, sell them or gift them immediately. Take delivery of the physical shoe later. It’s a crazy new brand concept.”

In addition to these use-cases, we’ve seen numerous other platforms allow users to seamlessly tokenize some real asset into a non-fungible token such as Enjin and Loom.

Enjin — Allows developers to leverage a modular platform for creating tokenized gaming assets, economies and other applications. Enjin uses ERC-1155 as their go-to standard for non-fungible tokens.

— Allows developers to leverage a modular platform for creating tokenized gaming assets, economies and other applications. Enjin uses ERC-1155 as their go-to standard for non-fungible tokens. Loom — Similar to Enjin, Loom provides a platform to launch scalable applications with NFTs. While gaming isn’t the only application to build on Loom, it has quickly become one of the de-facto standards for new developers looking to build applications on Ethereum and other major blockchain networks.

Conclusion

The proliferation of NFTs is extremely exciting, especially with more and more key pieces being built and released every month. As more companies start shifting to native blockchains, we’re expecting to see more and more abstract use cases for NFTs. While Ethereum paved the way for a new realm of digital assets, we are only experiencing the very tip of the iceberg with what NFT’s have to offer. As new applications aim to drive the adoption of digital assets to the mainstream, it’s exciting to see the big picture NFT-applications unfold today.

If you’re interested in leveraging NFTs to drive adoption for your business, don’t hesitate to reach out! You can contact us for a free consultation on our official website, or via any of our social media channels below!