News > What are NFTs? Why should I pay attention?
Non-fungible tokens, or NFTs, are a type of cryptographically generated token that represent ownership and value. Though it has emerged in the mainstream from its application within the blockchain space, in particular, becoming a highly trending topic in recent months, its popular use case long predates the technology. Many of us at some point collected Pokémon cards, or sports cards, or coins and other such items, not least through a passion of that thing, specifically, but also perhaps with a view that — if they could withstand the test of time — would eventually be worth something more “one day”.
As mentioned, the most widely recognised application of NFTs is in the form of digital collectibles, but we are only just touching the surface of what is possible; 95% of use cases are still yet to be discovered, after all!
The aim of this article will be to provide an insight to NFTs for those who have recently ventured into the space, particularly considering how these types of digital assets will play a pivotal role in the future of IGGalaxy. Moreover, information in this article should serve as a good foundation of knowledge for any further research you do, or follow-up content pieces to this one.
A short introduction to non-fungible tokens.
The two most common examples of NFTs are ERC721 and ERC1155 standards that exist on the Ethereum network. Let’s briefly explore each of these.
Ethereum NFT standards by comparison.
Fungible assets, like cryptocurrencies or fiat (cash), are both interchangeable and indistinguishable from those of the same type.
Take Bitcoin as an example: there is no difference between the Bitcoin I have in a wallet, and the Bitcoin I acquire on an exchange; both have the same value. They can also be split into smaller denominations.
NFTs, in comparison to fungible assets, like Bitcoin, are unique; although, as explored in the comparison above, have varying degrees of uniqueness. On the one hand, if we imagine each FIFA Ultimate Team player card as a — ERC1155 — NFTs, then we would be able to verify the total number of player cards available, which in turn, would dictate the rarity and value of that specific card; the fewer the cards, the more rare, the higher the price.
Conversely, NFTs that use the ERC721 standard, like CryptoKitties, would fall at the other end of the “NFT spectrum” as each Kitty possesses traits that make it distinct from the next. In this, and similarly in the case of NFT artwork, it is this uniqueness that drives its overall value.
Up until recently, you could not split NFTs into smaller denominations, and so they could only be sold in their entirety. Now, innovation within the blockchain space, most notably with the rise of decentralised finance (abbreviated as DeFi), NFTs can be “sharded” — effectively broken into many pieces — as a way of increasing liquidity.
Video games certainly have the largest number of possible use cases for NFTs, as virtual economies have been prevalent across numerous gaming titles. This makes gaming the ideal avenue for the adoption of NFTs.
That said, we are now also seeing an increasing number of high-profile brands leveraging NFT-based consumer goods and services. Fashion retailers Nike and Louis Vuitton who are beginning to create virtual fashion products, NBA, F1 and PSG, alongside BBC, Warner Music, and Paramount creating online collectables and games, and technology companies such as AMD, IBM and Samsung establishing new services and utilities, are just some examples of where NFTs are being adopted.
Here, we’ll focus on the two most prevalent use cases, though, in gaming and artwork.
NFTs in gaming
The transfer of skins and weapons that help to drive in-game economies, alongside in-game achievements that ensure a seamless and incorruptible transfer of records, as well as proof of ownership for a particular gaming item.
Furthermore, our peers on Polygon, Decentraland, provide another unique example of ownership represented by NFTs. Decentraland offers a virtual world where you can purchase plots of land or ‘digital real-estate’ to then profit from virtual businesses that wish to build or even advertise on their ‘plot’.
Imagine you are Leonardo da Vinci and you’ve just painted the Mona Lisa: the last thing you would want is somebody selling a counterfeit version of your work under the guise of yourself. This is where we can begin to see the true value of NFT artwork, which is authenticated by blockchain.
The application of NFTs in artwork essentially mitigate the risk of work being counterfeited, whilst also providing a digital trail for future sales of that art piece. This naturally leads us on to royalties. NFT artwork has in fact disrupted the rule of “first sale”, in that the underlying smart contract technology can ensure that artists receive their royalties even in future sales.
NFTs bring an innovative dimension to digital interactions, as well as some other advantages listed in the graphic below.
The advantages of NFTs.
The potential for NFTs are astronomical, to say the least. Its application in gaming and wider industries will radically transform the way in which an enterprise is able to provide products and services to their customers. It will transform the way brands and creators can create and share experiences with their respective communities.
For perspective, CryptoArt, an analytics platform that focus on crypto art, highlighted that the volume of NFT artwork reached $8.2 million in December 2020 alone, a significant increase from $2.6 million the month before. A more recent example has seen an NFT artist, who goes by the name Beeple, receive $6.6 million for a single piece of NFT artwork, making it the most expensive piece ever to be sold at an auction!
Beeple artwork sold for a record-breaking $6.6 million!
As the NFT space evolves, so too will the understanding of its application, by which point, it will be an unstoppable force disrupting a vast array of economies. And one of these will be the esports and competitive gaming landscape.
This is where we will see the greatest of opportunities in the coming months, particularly as Intergalactic Gaming and Terra Virtua set forth the blueprint for not only bringing the concepts of NFTs to competitive gaming at all levels, but also by interconnecting the wider stakeholders within the ecosystem.
If you’re keen to know more about the prospect of NFTs within esports, then you should read more about the partnership between Intergalactic Gaming and Terra Virtua, which will then be explored further as appropriate.
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