If you pay attention to the market, you know Bitcoin is currently experiencing a resurgence in popularity. But have you heard about ether, the second-largest cryptocurrency that’s also approaching an all-time high? ether runs on Ethereum, a decentralized, blockchain-enabled network not dissimilar to the Bitcoin network – but Ethereum has a secret edge over the competition. Enter, non-fungible tokens.
The building block(chain)s
Before we consider fungibility, let’s take a moment to understand the infrastructure underpinning cryptocurrency: blockchain. Virtual-world-builder Decentraland defines blockchain as “...distributed databases, allowing us to store information in a way that is secure and publicly accessible. Because they are distributed, there is no need for a middleman, making cryptocurrencies like Bitcoin possible.”
But Bitcoin is a fungible token. “You can send someone one Bitcoin and they can send one back, it would still be one Bitcoin,” explains Decrypt. “The value might change depending on the time between exchanging Bitcoin, but it's essentially the same. You can also send or receive any part of a Bitcoin, measured in Satoshi, as fungible tokens are divisible.”
What distinguishes non-fungible tokens from fungible tokens is that NFTs are not only indivisible, they also use Ethereum-powered smart contracts to store identifying information. Unlike fungible tokens which can be infinitely replicated, NFTs are unique, authentic, and exclusive. For more on blockchain, Ethereum, and NFTs, check out this thorough examination by Decrpyt.
Early NFT adopters
NFTs might be a relatively new contender, but they are already making waves across many popular industries.
If you’re already familiar with NFTs, chances are you’ve heard of CyrptoKitties. Originally launched in 2017 to much hype, CryptoKitties uses Ethereum blockchain to create a decentralized ecosystem where users can buy, breed, and sell digital cats. Each CryptoKitty is 100% unique, and this inherent scarcity attaches real value to an otherwise intangible thing. Expect crypto-collectibles to drift further into the mainstream as new companies emerge (like Terra Virtua, which aims to create the first “mass-market” for digital collectibles), and established brands (like Formula One) recognize the potential to monetize exclusive digital assets.
NFTs are also a game-changer for the gaming industry. If users own their digital assets outright, skins or weapons purchased in one game can be transferred to an entirely different game. Avatars, too, have the potential to become consistent across games. “This brings with it the added benefit of a persistent identity,” reflects Decentraland, “not only does it simplify your login info, but other players could recognize you as the same person between different games.” If this ownership and interoperability weren’t appealing enough, NFTs can also enable gamers to sell the content they buy or create in virtual worlds like The Sandbox – and what could be better for user acquisition than monetized gameplay?
The future of NFTs
Digital collectibles, games, and art might be the most popular examples of NFTs in action, but it’s safe to say other industries will soon be following suit. Decrypt suggests we’ll eventually be seeing NFTs used as tokens of real-world assets, like property ownership and even personal identification. “Further application of non-fungible tokens could be certification such as for qualifications, software licensing, warranties, and even birth and death certificates. The smart contract of a non-fungible token immutably proves the identity of the recipient or owner and could be stored in a digital wallet for ease of access and representation. One day, our digital wallets could contain proof of every certificate, license, and asset we own.”
With a non-fungible future on the horizon, it’s a good time to start thinking about the ways NFTs can influence your business. Game developers in The Sandbox space should certainly consider blockchain-enabled gameplay, but even those in action, RPG, MOBA, and battle royale can benefit from the exclusive experiences NFTs invite. While those in the business of marketing apps would be wise to prepare for a new kind of user acquisition journey.
Whatever the specifics, the sense of scarcity and exclusivity endowed by NFTs is sure to have some benefit to your business. Creative minds will explore this opportunity early and help chart this non-fungible frontier in our digital landscape.