NFT - More Than What You Think It Is
Debunking the JPEG perception
NFT or Non-Fungible Token has taken the news by storm in the past one to two years.
At a glance, it does seem absurd that the monkey photos (Bored Ape Yacht Club #232) sold for as high as $2.85 million & Jack Dorsey, Twitter’s founder’s first tweet sold for as much as $2.9 million.
The news has one-sidedly portrayed how some people easily became a millionaire overnight by selling their NFT, with one case, an Indonesian student sold his compilation of selfies for about $1 million, adding to the perception that NFT seems like a quick cash-generating scam.
While what we have seen mostly from the news is the hype on the collectibles, NFT usage is far underrated. With the crypto space working on building decentralized space for the community, NFT serves as the key to that.
But, before that, what is NFT?
NFT is short for Non-Fungible Token. Non-Fungible indicates that it is unique & irreplaceable.
Unlike a company share, you can buy back another share that is exactly similar. With NFT, nothing is duplicated & this is exactly why NFT seems to be unique because there is only one edition of it, like how your fingerprint or DNA works.
Usage of NFT
The NFT market was valued at $17.6 billion last year according to the annual NFT Market Report.
1. Collectibles
NFT started as hype when collectibles became a thing within the crypto space. The initial idea spurs from the passion for collecting some of these JPEG items similar to how Pokemon enthusiasts would collect Pokemon cards.
Timeline of NFTs
Some of the famous collectibles are Bored Ape Yacht Club, CryptoPunk, Azuki, NBA Top Shot, CryptoKitties, and Doodles. These collectibles continue to make headlines for their eye-popping valuation.
2. Gaming
Blockchain gaming or the NFT gaming sector has shown tremendous growth during the pandemic, spearheaded by Axie Infinity. Although it makes up over $4 billion in 2021, NFT Gaming to date would account for only 2.18% of the total Gaming market in 2021 & it is forecasted to be $25 billion by 2026, accounting for nearly 10% of the Gaming market.
NFT has allowed the players to buy, grow and sell to earn from in-game items unlike in the traditional game where the in-game items cannot be traded or converted back to cash.
3. Metaverse
The term metaverse (virtual world) is not strange to most of us, given the hype created by companies buying lands in the metaverse. The two prominent metaverses are The Sandbox and Decentraland.
With more development coming, we will be seeing more transactions within the metaverse like how Wade Watts (a character from Ready Player One) is able to buy his suit from the metaverse & get it delivered to him in real life.
To make that happen, NFT is the key & will play an important role within the metaverse.
4. Ticketing/Membership
While Collectibles take up a huge chunk of the NFT value in the market, we have seen the adoption of NFT as a form of membership on top of having it as collectibles. How this works is that once you have purchased an NFT, you will be granted access to a community.
An Example: Gym Class Membership
The value of NFT-Membership is that the membership itself (NFT) is a value that can be exchanged for some amount of the crypto token, depending on the market value or the value you would like to sell it for.
Real-life utilization of NFT as a membership happens on a few platforms, one of them being the Invisible College.
Real-Life Case Study 1: Invisible College
By purchasing & holding at least one Decentralien NFT, you will be given all access to the courses, programming, and community at Invisible College - a college created by students for students.
Real-Life Case Study 2: DJ Steve Aoki Launches Ethereum NFT Membership Club
DJ Steve Aoki launches into the NFT space with A0K1VERSE, an Ethereum NFT-driven membership community. Collectors that hold the A0K1 Passport NFT can gain exclusive access to live and virtual concerts and other events, a private Discord server with access to Aoki himself, future metaverse events, and other perks.
NFT Ticketing
The NFT ticketing can even be applicable to concert ticketing, where the NFT can serve as a ticket, VIP pass, ticket for meet & greet depending on the category that the NFT falls under. While this has not been done yet, it shows the potential of how NFT can be utilized.
NFT Pass 1: normal ticket
NFT Pass 2: VIP ticket
NFT Pass 3: VIP ticket + meet & greet
What’s interesting is that these NFTs can be kept as collectibles or sold for some amount of crypto tokens, giving back the value to the NFT holder & the creator of the NFT (the artist) and at the same time eliminating any fake tickets in circulation, which usually happen with physical tickets.
5. As Supports of Creation (Artwork, Contents, Music, Video)
We have heard how blockchain has allowed us to track the ownership of certain items. But what changes is the utilization of NFT where a creation (i.e. art, book, article, video) can be turned into NFT & community can take part in supporting that creation.
While predominantly NFTs are in the form of JPEG, we have seen some emerging new forms of NFTs.
Followers who buy an NFT of the Mirror.xyz article or DTube video own part of it like how equity or share works. By supporting authors on Mirror.xyz to publish their books, the followers invest a pool of money & the return will then be shared proportionately according to the initial amount invested.
Song Album as NFT
Similarly, buyers can buy a share or a part of the album on the NFT marketplace and when the album is released via traditional channels, NFT holders get to have a share in the profit of the album. This was done by Kings of Leon with the album ‘When You See Yourself’, which was sold as multiple NFTS.
Each “golden ticket” aka the NFT also unlocks an actual concert ticket and is guaranteed four front-row seats to any Kings of Leon concert during each tour for life. The token owner also gets a VIP experience that includes a personal driver, a concierge at the show to take care of their needs, a hangout with the band before the show, and exclusive lounge access.
Hybrid usage of NFT as artwork & ticketing by Kings of Leon show huge potential with how NFT can be utilized moving forward.
6. Digital Identity
NFT used as a form of digital identity for a page or an individual.
Example: Domain
Services like Ethereum Name Service (ENS) and Unstoppable Domains present crypto addresses as NFTs. What this means is that you can use your domain for transactional purpose or to keep it as a value-generating item as some domains may garner higher value than others.
Anyone can buy a domain like www.example.eth & use it as:
(1) website domain,
(2) for transactional purposes &
(3) value-generating NFT.
Instead of sending some funds to a crypto wallet, anyone can send them directly to www.example.eth, where it will be tied to a wallet.
Recently, ENS has announced that Domain Name System (DNS) or domains like www.example.com are eligible to be used for transactional purposes. So, instead of purchasing ENS, you can link your current DNS to a crypto wallet.
Example: VeChain eNFT vaccination certificate
San Marino, a country near Italy with a population of 33,000, has leverage on NFT for its Covid vaccination passport. Developed using VeChain’s blockchain technology, the vaccination passport contains a record of past infections, test results, and a digital vaccination certificate, which can be accessed using the two QR codes on the certificate.
Other Examples
Other forms of utility or NFT as a digital identity have not been developed but the potentials are:
(1) Virtual passport that stores information about traveler including visa & current residency,
(2) License or certification,
(3) Land ownership
Given that any information on the blockchain cannot be amended, this information in the form of Utility NFT will serve its importance in providing legitimate & transparent information.
Debunking NFT Myths
We have addressed how NFT can be useful with some real-life case studies. However, there are myths surrounding the NFT that may have undermined its utilization.
Myth 1: All NFTs are Bad for the Environment
Most of the NFTs minted previously (or in other words, processed) are on blockchain & a big chunk of it happens on Ethereum. Ethereum, with its current proof-of-work consensus, uses a huge amount of electricity, thus causing NFT to be deemed as bad for the environment.
However, with Ethereum moving away from the proof-of-work (POW) to proof-of-stake (POS) this year, 2022, we will expect to see some positive changes.
We also see many creators start seeking an alternative to Ethereum for minting purposes which gives a lower gas fee & is better for the environment.
Myth 2: All NFTs are worthless & easily replicable - Right-Click & Copy/Save
While most NFTs are in JPEG format & it seems as if it is easily copied by using the “Save As” tool. However, like most the things we see today, piracy happens and sometimes it is untraceable. What is great with NFT + blockchain is that you can essentially trackback the transaction to link back to the owner, to see if what you are purchasing is an authentic item.
One great example is Nike, which has filed for patents for sneakers named CryptoKick. It is through Nike’s platform that these CryptoKick sneakers ownership can be trackable & the authenticity of the sneakers can be verified. There can be copies of pirated CryptoKick but none of those will have this unique function of ownership tracker & authenticity verification.
NFT contains built-in authentication that serves as proof of ownership. Like Nike CryptoKick owner, the rest of the collectors value having the NFT as “bragging rights”.
Myth 3: Buying an NFT = Owning the rights to the underlying asset
Similarly as with any current purchases, buying a limited edition watch does not entitle you to the right to the underlying asset. The same goes for NFT. Buying an NFT does not entitle you as the owner, rather you are merely the NFT holder.
What’s great within the NFT ecosystem is that the owners have 100% visibility over the sales of their NFT. Once there is a transaction, the owner gets a certain percentage of commission immediately from the transaction.
The way the ownership transaction works on the blockchain has been the ideal, envisioned manner for most of the creators (for music, video, film, and artwork) to continuously benefit from their creations, especially given that most of the creators are sidelined or even abused of their own rights.
Be A NFT Hodler? (Hodl indicates an individual who will hold something for long term)
If you are intrigued to join the NFT hodler group, here are some of the ways you can get hold of NFTs of your liking.
If you are keen to support Malaysian NFT creators, here’s how you can do it.
What’s Next for NFT?
What I have addressed earlier is merely a scratch on the surface. The potential of NFT is huge.
One of the evolutions of NFT is iNFT, the product of Ai + NFT. Alethea AI has been developing & enhancing NFTs to become “more intelligent”, allowing NFTs to take a bigger role in the metaverse world. Imagine having your NFTs come to live & talk to you. That’s what Alethea AI does.
What is your take on NFT? How do you see NFT plays a role in your life?
TLDR
NFT is not just a JPEG, it holds more usage than just as a collectible. As we see more development within the crypto space, we will see more of the mentioned use cases of NFTs & perhaps higher adoption or acceptance of NFTs.
Disclaimer: I am not affiliated with or sponsored by any of the projects mentioned in this article at the time of writing.
Finally someone write something about NFT that I could understand. Thanks and good job
Jonathan
Instagram
@financialblackbelt
Great writeup very concise. BTW another SC approved Digital Asset Exchange is MX Global Sdn Bhd