One of the trending terms on the entire crypto market recently, known as the next DeFi, is “NFTs.” In fact, NFT is not new, there are many well-known NFT projects that even started from 2017-2018.
So, why is it hot now? Let’s find out!
I. What is NFT?
Firstly, to understand why NFT is important and how it will shape the future, we must understand the definition of NFT. So, what is NFT? How is it different from other tokens?
NFT stands for Non-Fungible-Token. The word “Fungible” and “Non-Fungible” may sound complicated, however, it will be easier to understand with some examples.
Bitcoin, or more simply - Gold, they are Fungible Assets. That is, 1 Bitcoin is 1 Bitcoin. 1 Gold is 1 Gold. If I borrow 1 Bitcoin from you, I can give you back 1 Bitcoin or 2 payments of 0.5 Bitcoin, or 10 payments of 0.1 Bitcoin. As long as in the end, you get your 1 Bitcoin back. Similarly, if I borrow $100 from you and when I pay you back, I can give you five payments of $20, so, it doesn’t matter if I return you exactly $100 or not, as long as $100 is returned.
However, with Non-Fungible assets, it is a different story. For instance, Van Gogh’s Starry Night painting is a Non-Fungible asset and it is valuable for its scarcity. If you “owe” me a Starry Night painting, you cannot pay me money or give me a similar painting, it must be the original painting painted by Van Gogh himself. Also, there are other examples of Non-Fungible assets to think of such as paintings, land, rare collectibles, etc. Likewise, NFTs are tokens or digital assets that are irreplaceable. If Bitcoin has 21 million coins with similar nature, each NFT is a unique asset even though they are developed on the same blockchain.
II. The nature of NFTs.
- Unique: Each NFT has a unique nature which makes them valuable and different from other NFTs.
- Scarce: One of the characteristics of NFTs is scarcity. You can think of a Yugioh card or Magic The Gathering, there are cards produced massively, and there are cards with limited numbers and that’s what makes them scarce.
- Indivisible: With fungible assets such as Bitcoin or ETH, you can split it into as many portions as you wish and trade it. However, with NFTs (non-fungible assets), they cannot be splitted, rather, NFTs can only be bought/sold/kept intact. You can’t sell half of a painting or half of an airline ticket, right?.
III. The Application of NFT
1. What can NFTs do?
Obviously, NFT has been existing for 2-3 years. A typical example for this is Crypto Kitties. Developed in 2017, Crypto Kitties is a blockchain game on Ethereum that allows players to purchase, collect, breed and sell virtual cats. Apart from that, there are many other applications of NFTs, ranging from gaming to digital assets.
So, what are applications of the NFT that have made it so trendy this year?
There are a few famous brands that can be listed such as
Firstly, we can look at the application of NFTs on ownership. Ownership in the digital era, sooner or later, will become a big problem. For example, you can own a domain, but that domain can be hacked anytime. If you build your domain based on Blockchain technology, your ownership is secured.
Next, NFTs can be easily traded without the fear of being banned. This is one of the key factors that make the transfer of assets based on NFTs more valuable in the future. For example, given that you have a painting and you want to bring it to America or sell it to someone in France, you will have a lot of trouble with the law and travel. With NFTs, one click is all you need to finish the job.
Finally, NFTs can help with anti-tampering, which is an important factor that leads to the doorway of Tokenization (bring everything on Blockchain). With the uniqueness of Blockchain, the item you trade can’t be forged if it is an NFT.
With the aforementioned values, we can say that NFTs’ characteristics are almost the same as digital assets. For example, a virtual cat in CryptoKitties used to cost up to $170,000.
(600 ETH, $170k at the time of selling. It’s enough to buy a house in HCMC or 9 Kawasaki Z1000 or 2 Mercedes c300)
2. The applications of NFTs
NFT can be useful in many fields, including:
- Art: Artists in this digital era are facing lots of problems regarding copyright protection. From painting, music to film and movie business, copyright infringement is indeed a big problem. With the application of NFT, a person can buy a painting, bring it on the digital world, associate it with Blockchain to prove his ownership of the painting. Moreover, the creator of the painting can even code so that for each time the work is transacted, they receive a portion of the fee.
- Gaming: Gaming is probably the area where NFT is applied the most. Normally, whenever you play games, regardless of how much money and effort you put in the games, your character and your items are still owned by the game publisher. With NFT, you can really own your character or your items in the game that you play. You can also easily trade them without having any problems.
- Virtual assets: In games such as Decentraland (MANA) or Sandbox (SAND), you can own “virtual” land on their platform. Called “virtual”, but they do have real value and application. For example, when you own a piece of land on SAND, you will be able to build a ton of games on it. Sounds interesting, right? Then, how about real assets?
- Real assets: This is a future application of Blockchain in general and NFTs in specific. In the future, we can bring our assets such as land onto Blockchain and encrypt the ownership in the form of NFTs.
- Information and Identity: One thing we may ignore is that Facebook, Google or advertising companies are making lots of money by selling users’ data, ranging from face recognition, education history to search history or users’ medical information. So now, what happens if you can record your data and sell it by yourself? Or, what happens if governments buy the travelling data or personal information of users in the form of NFTs so as to control us?
It may sound pretty scary and fictional, but if NFTs can really succeed and expand in the future, it could possibly turn our lives into an episode of Black Mirrors. However, that’s a story in the distant future. How about the future ahead? What makes NFTs so trendy these times?
It may be attributed to the growth of NFTs and NFTsFi.
The potential and the growth of NFTs
Honestly, to us, we think that NFTs is a new, promising technology, and there is a lot of room for development in the future. Currently, Market Cap of NFTs is too low, with the total capitalization of only $300 million for projects with real users, and it is even smaller than the total capitalization of Shitcoin Defi.
In 2017, the market cap of NFTs was just $30 million. By 2018, it had increased by 6 times. And by 2020, it has doubled.
At the moment, the main application of NFTs is just games that use Blockchain, like Crypto Kitties or Sandbox. However, it has a great deal of potential. Indeed, in 2020, lots of European football teams such as Arsenal, Juventus or Westham intended to work with Winklevoss brothers to release the collection cards of famous football players. This is the reason why we think the biggest potential of NFTs is the ability to access huge capital.
How was NFT created?
A number of different standards are assigned to the NFTs. The first standard is ERC-721 which was first applied by Crypto Kitties. In early December 2017, the virtual cat game Crypto Kitties appeared and slowed down Ethereum's entire trading system. The virtual cat game has attracted a lot of attention from investors or the crypto community since its release. The special thing here is that each of the cats represents a unique token and cannot be replaced by any other tokens - which we are reading NFT for. After the game was released, more and more people wanted to own these cats, and thanks to its scarcity nature, the value of Crypto Kitties was created. This marks the emergence of ERC721 and the concept of non-fungible tokens in the Ethereum system.
ERC-721 token standard is developed by Smart Contracts, in which it is possible to encode unique details to make the cats cute and different.
Without DeFi, we’re afraid that Crypto in 2020 will not exist since DeFi is the only trend that brings outside capital to the market. And, so is NFT. One may not need to know how to trade or know about Blockchain technology to play Crypto Kitties, or collect Barcelona football cards. And for that reason, NFT is becoming increasingly popular and could lead the trend over the next 1-2 months.
So, what do you need to do with this trend?
The first is knowledge! Make sure you join our groups and channels to discuss the potential of NFTs.
