This year, the market for NFT, or non-interchangeable tokens, is rapidly gaining momentum. But what are the prospects for the development of this industry?
If you're new to the topic, read FAQ NFTs: Everything You Need to Know About NFTs.
NFT application areas
NFT allows you to convert any digital asset into tokens. Thanks to this, several new markets are now emerging, such as collectible tokens, in-game items, and digital art. Let's analyze these markets in more detail.
In 2017, the first mass use of NFT in the Ethereum game CryptoKitties took place on the crypto market. Users were invited to breed and collect blockchain cats that exist in the form of non-interchangeable tokens. For any action, the player must pay ETH, so the developers' earnings are formed at the expense of game commissions.
At the end of 2017, there was a huge hype around CryptoKitties: users were willing to pay tens of thousands of dollars for seals, and the game took up 15% of the Ethereum traffic, greatly overloading the network. But the hype quickly passed. Now CryptoKitties has several hundred new users every day (against 15,000 people at the peak), and most seals cost only a couple of cents, instead of hundreds of thousands of dollars (the most expensive crypto wallet was sold for 600 ETH, or $170,000 at the then exchange rate).
CryptoKitties have spawned a wave of collectible NFT cards: digital assets with the names of athletes, artists and their unique image. Fan tokens are the most actively developed, allowing fans to collect cards of top athletes or participate in the life of their favorite club.
Moreover, startups such as Chiliz, Sorare, and Socios are creating an entire infrastructure of football club tokens. Barcelona, Atletico Madrid, Paris Saint-Germain, Juventus, West Ham United, Galatasaray and Roma, among others, already have such tokens.
Today, a significant part of the NFT is also used to confirm ownership, in particular, for digital art. At the same time, most works in the format of such tokens are sold on specialized art sites: SuperRare, Known Origin, MakersPlace, Rare Art Labs. 2muchcoffee team researched the topic and come up with great paper Will NFTs be Used Outside of Digital Art?
In-game items in the form of NFT will allow gamers to truly own them, without depending on the developers of the video game. This can significantly change the gaming industry: thanks to NFT, users can transfer their trophies, achievements, and even rankings from one game to another. At the same time, developers will not be able to take away the player's items for violating the rules of the game or in the event of its closure.
Examples of the most popular games using NFT:
- MyCryptoHeroes-An RPG in which users can upgrade their characters through quests and battles;
- Decentraland is an analog of Minecraft, in which users create their own spaces, trade virtual land and buildings;
- Cryptovoxels and Sandbox — two more virtual worlds that allow you to become the owner of digital real estate;
- Gods Unchained, SkyWeaver, Epics, CryptoSpells — digital collectible card games.
Proof of identity and authenticity.
NFT tokens can be used for more than just entertainment. They are perfect for any field where you need to confirm the identity, authenticity of documents or items: for the field of law, insurance, real estate and antiques, certification, licensing, and so on. For example, the Bridge protocol through NFT provides access to a single digital identity for verification, management and transfer of your personal data.
Tokenization of real assets.
The NFT may reflect the fact of ownership of a real asset or a share in it. This would add liquidity to many markets, such as the already mentioned markets for fine art, real estate, rare collectibles, and others.
Other areas of application.
DeFi platforms are starting to use NFT as collateral for loans or derivatives. Also, non-interchangeable tokens are used in the services Ethereum Name Service (Ethereum Name Service, ENS) and Unstoppable Domains, which allow you to transfer coins by a unique domain name. And platforms like Rasible, Mintbase, and Mintable allow anyone to create their own NFT.