Blockchain-based tokens are not limited solely to (fungible) cryptocurrencies, which are divisible and interchangeable. Each non-fungible token (NFT) is unique, allowing for a novel way to ensure digital scarcity and verify the ownership of one-off assets on the blockchain.
NFTs have many potential uses, most of which are still in the process of being fully developed. The articles below provide an introduction to NFTs in a variety of applications - explore the content and try the quiz to see what you’ve learned!
1. What are NFTs?
NFTs are different from the tokens used for cryptocurrency because each token is unique. This has opened up the possibility of verifiably owning digital assets that were previously very easy to make copies of. Despite their initial boom in popularity as online status symbols, this is just one use of NFTs, and new applications are in constant development.
2. NFTs as Art and Collectables
NFTs allow collectors and investors to own tokenised digital artworks and collectables via the transparent, decentralised database that is the blockchain. Many NFT collections are created via algorithmically generated art and some pieces are highly sought after for their rarity, driving highly speculative launch events and auctions on the secondary market.
3. NFTs in Gaming
NFTs offer users a way to own their in-game items outside of the ‘walled garden’ that is their favourite game and the potential to bring items or skins across different digital worlds is an exciting prospect. NFTs are also playing a crucial part in the nascent play-to-earn gaming industry, where costlier examples present a better chance of turning a profit.
4. NFTs in The Metaverse
‘The Metaverse’ is a catch-all term to refer to many visions of immersive online spaces where many believe we will come to spend an increasing amount of time. NFTs are set to play their part in how we interact with one another and organise activities within these spaces, as well as the ownership of the spaces themselves. ‘Unreal estate’ is already big business…
5. NFTs as Membership and Authentication
Holding an NFT from certain collections can grant access to private online (and IRL) communities. The same trustless access mechanism could be applied where sensitive information is involved, to maintain privacy, or for event ticketing. The authenticity of luxury goods can also be verified by linking an NFT to the object via an NFC tag or QR code.
6. NFTs in Finance
NFTs can be used in conjunction with cryptocurrencies to create ever more sophisticated financial instruments. NFTs representing investment positions are already in use by some of DeFi’s most well-known protocols and new use-cases are in constant development. It is also possible to fractionalise an NFT into (fungible) parts which can be traded like any other cryptocurrency.
NFTs are an exciting development in the blockchain ecosystem and are gradually becoming integrated into many parts of online life. Although their rise has so far been mostly focused on speculation around generative art collections, the variety of their potential uses is constantly expanding.