NFT’s are taking the world by storm. Artists and celebrities are flocking to them. Let’s discover how this amazing technology will change the world.
NFT’s ( Non Fungible Tokens ) are simply put: digital collectables. Yes, to the older generations it’s a bit difficult to wrap our heads around this concept, however as some time in our childhood we have all collected something and we loved doing it. Combine this inherent human trait with blockchain technology and you have a winning combination. No wonder the big media, celebrities and artists are flocking to this hot new trend. But there is a lot more to NFT’s than people think. Let’s take a moment to explore many aspects of NFT’s that you might have overlooked.
What are NFT’s
Not so long ago during the hyperinflation in Venezuela, there was a strange trend taking place. Online gamers who loved to play a game called Runescape discovered that the in-game currency was actually pretty damn valuable and could be even exchanged for Bitcoin in several online marketplaces. This has created a whole underground industry whereby eager gamers earned Runescape gold, exchanged it for Bitcoin and could literally provide a supplementary income for their families. At the time, the Bolivar was worth less than Runescape gold.
Little that these gamers knew how important the relationship between blockchain and gaming will become. When it comes to NFT’s, most people just see this tech as “digital collectables” and nothing more, however there’s a plethora of applications to this amazing and booming innovation than even the avid futurists fail to grasp. You see it’s not only a matter of owning a digital collectible. It’s a matter of having undeniable proof that you indeed own this item and the freedom of selling this proof for actual crypto currency to anyone in the world.
How do you explain something Non fungible to your grandma at the dinner table? Very simple. Take a dollar bill. It’s 100% fungible. From the moment you receive ( or spend ) this bill, it’s the same as any other dollar bill, no matter where it came from. If for some reason Frank Sinatra or Elvis Presley signed this dollar bill back in the days, this banknote immediately becomes collectable. Someone who owns this banknote can create a digital proof of ownership over this sacred artifact and sell it to anyone in the world ( even one piece at a time ). The transfer of value that will take place in the next few years will be massive!
Without a doubt these days all forms of rare, interesting and collectable items are becoming tokenized. Artists, celebrities, musicians and plain old simple guys and girls are dipping their toes into this technology and simply exploiting one or 2 aspects of it ( usually in order to make a quick buck and to profit from the upcoming cryptocurrency cycle ). However the applications of NFT’s are much much wider than anyone can now imagine. Aside from blockchain and cryptocurrency, NFT’s will change our lives forever. And it’s all happening under our noses. Let’s see what the fuss is about and how this technology works.
How do NFT’s work
No matter the hype of the Binance Smart Chain, the second layer scaling solutions and even Cardano’s endless machine gun barrage of academic research that lacks a working physical product, pretty much all the action regarding NFT’s is happening for the largest part on the Ethereum network.
An NFT is a smart contract ( program ) that mathematically and cryptographically proves the ownership over a certain physical or ethereal item that cannot be copied, inflated or counterfeited. This means that aside from pretty much all coins ( ERC20 tokens ) that live on the Ethereum blockchain, the NFT’s are completely different beasts. Take the first and most common NFT’s called; Crypto Kitties. At the height of their glory days back in 2017 they managed to clog up the whole Ethereum network! These fun, collectable and programmable pictures of cats were truly unique, since their “Catributes” were different to every cat that has ever existed before it.. Every single one is different! In order to pull off this mathematical wizardry, Ethereum utilises different programming standard called ERC721 and ERC1155 )
Tokens built on the ERC721 standard are your good old tokens that are different from anything else in existence. The case of crypto kitties would probably be the best example. Every cat is completely different from another one and this is exactly what makes them so damn desirable and collectable. Again this standard can also be used for items such as collectable sports cards, music and even art.
Tokens built on the ERC1155 are completely different beasts all together. This standard combines the best of both standards: ERC20 and ERC721 into a very practical package. Meaning these tokens have the combination of fungibility and non fungibility. If a gamer has the ability to find special and limited in-game items ( that are non fungible ), he/she can then also sell these unique items for the native in-game currency ( that is as fungible as Bitcoin, Ethereum or US Dollar ). Having one token standard that combines fungible and non-fungible characteristics is a life saver for programmers worldwide and it has led towards many new and unexpected implementations. To say that this will completely change our lives would be an understatement. Let’s dig into some examples of fun and unusual ways how NFT’s are being used today.
Examples of NFT’s
Crypto Kitties is how it got started, but as we all know, the human ingenuity truly has no boundaries. You can literally tokenize ANYTHING these days. And people do! Let’s check out a few examples.
Unisocks are 314 Unique NFT tokens that are pegged to pairs of socks. These tokens are fun, highly tradable and being extensively used on decentralised exchanges. With a 24 hour volume of a whopping 800 000 usd, the sock tokens are selling like hot cakes. People love the idea and they love to speculate on the price of these unusual NFT’s. As of today one sock token is proudly sitting at a respectable 161 usd. Oh yeah and you can also take full physical delivery of your socks if you want to. 161 usd for socks, even Gucci or Georgio Armani can’t pull this off! Yet…
The ever so entrepreneurial Swiss Fine Wine Capital AG, is now proudly offering investment grade wine collections as tokenized assets in the form of NFT’s. There are of course many other platforms that offer similar services these days. Again if you wish, you can always take physical delivery of your wine at any time.
One of the most common use cases for NFT’s in the gaming industry is of course the in-game collectable rare items such as weapons, artifacts, plots of land and even buildings. This digital real estate is quickly becoming an extremely hot commodity, to the point of creating overnight riches for the people who dabble in the right item at the right time.
Your Finnish programmer friend Mikka ( that you usually see in the daylight with a red bull and a dangling cigarette ) might just be a secret online real estate tycoon with millions of dollars in cryptocurrency. You just never know!
Last but not least, there are off course those eccentric and creative people who pride themselves at their music, art, poetry and other unique expressions that can nowadays be tokenized and auctioned off to the loyal fans and collectors alike. We are just entering this madness and by the looks of it, the 2017 cryptocurrency mania, will look very tame in comparison to the chaos that the NFT’s will unleash. Let’s see how the future might look like for this tech…
Future of NFT’s
Julie runs a small business selling rare and exotic coffee to her overseas customers. Her coffee is so popular, that literally full pellets of the stuff leave from her cramped warehouse on a daily basis. The supermarket chains that she works with unfortunately pay her invoices 60 days after the shipment of coffee has been received. This creates tons of friction and inefficiencies for Julie, since her money is frozen for more than 60 days until she finally receives her payment. Only after that, can she make her bank ( that provided her a business loan ) a happy camper. Since Julie wasn’t born yesterday, she quickly tokenizes her invoices and uses them as collateral for receiving a loan from a decentralised platform. This loan can be immediately put to good use and serve a vital purpose to the growth of her company. No parasitic 60 day rules can harm her cash flow again. The company grows, new people get hired and the coffee keeps the heads of the NFT programmers nice and sharp.
Frank is a lead guitarist of the Death Metal band called Wretched Stench. He and his motley crew of 5 band members are sick and tired of dancing to the tunes of dictatorial record labels. This is why these long haired tattooed gents decide to tokenize their music and sell it directly to their fans. The hidden track of their newest album is released in only 500 pieces and can be purchased on the blockchain. The proud headbaning fans of Wretched Stench can show off their limited edition NFT ownership over a historically unique piece of music, while the band members can rely on a steady stream of income, bypassing the totalitarian control of any record label.
Anna is a 6th generation master distiller in a famous rum distillery on the island of Trinidad and Tobago. Unfortunately since the military coup, her tiny island is now under occupation by a rogue rebel leader. Naturally after a certain time this leader has completely hyperinflated the currency and fled to Switzerland. Since Anna doesn’t want her precious rum distillery to be ruined completely, she decides to tokenize the oldest rum casks ( over 50 years old ) and sells them on the world wide market. She sells all the casks in 1 day and earns more cryptocurrency than she could have ever imagined. Using her profits she even manages to help rebuild a school and a part of a hospital. Not a bad deal at all!
Aside from a few examples, we still don’t know where the NFT’s will take us. People are extremely creative and will surely come up with new and exciting ideas as time goes by. The narratives are shifting fast. Old and entrenched middlemen are quickly realising that they are becoming obsolete. From record labels, art dealers to even bankers. Everything will change. One thing is certain. It’s inexcusable to let this technological development slip right under our noses. So how do we invest in NFT’s?
How to invest in NFT’s.
NFT’s and tokenized rare items are very subjective by their very nature. Yes the beauty ( and functionality in this case ) is truly in the eye of the beholder. This is why investing in NFT’s will prove so damn difficult for most of us.
If you’re thinking about finding a needle in a haystack, try finding a rough diamond in an olympic sized cesspool. This is truly a gargantuan task to say the least. Some battle hardened professionals will find many gems and become exceptionally wealthy, while the large majority of people will own useless and redundant tokenized assets and art. Only time will tell.
In the good old times of gold prospecting, the small and humble shop owners who supplied shovels and pickaxes to the adventurers have become the real winners. The digital gold rush is just getting started. People will want to have easy access to minting NFT’s. They will want to have platforms for displaying and trading these new exotic assets. They will also want to insure them and borrow money against them.
If you are a slick and savvy connoisseur of new trends, you’ll definitely do very well in your choice of NFT’s. For everyone else there, we can look into platforms that support and facilitate the NFT industry, so that you can own a piece of the shovel and pickaxe shop catering to the new and bustling prospecting industry. Either Way having exposure to NTF’s and dabbling in this technology is vital for anyone who’s serious about blockchain tech and in march of 2021, we’re just getting started.