The Top 4 Ways Nfts Will Change the World
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Although NFT technology has been around since 2017, when projects like CryptoKitties and CryptoPunks first appeared, the trend took off in 2021. The NFT craze skyrocketed after Beeple (aka Mike Winkelmann) sold his painting ‘Everydays: The First 5000 Days’ for $69 million at Christie’s, and the NFT market has been growing ever since.
The NFT market has grown more than 20 times in the last year. The current estimated value ($3 billion) is expected to increase by 680% to $13.6 billion by 2027. So far, several NFT projects, including the Bored Ape Yacht Club, have exceeded the $2 billion mark in total transaction value.
Despite its success, many people are still unfamiliar with NFT technology and how it operates. When the term “NFT” is mentioned, most people immediately think of cartoon avatars. However, this innovation has far-reaching potential.
This article will explain how NFTs can be used to change the world for the better.
What is an NFT?
To start things off, we first need to clarify what NFTs actually are.
NFTs are bodies of digital data that are tokenized on a blockchain ledger. Each NFT has unique metadata and identification code that distinguishes it from the rest of the NFTs, making it non-fungible.
Non-fungible means that no NFT is replaceable. It is the complete opposite of fungible blockchain tokens, such as Bitcoin and Ether. For example, any Bitcoin token can be interchanged for another Bitcoin token.
Similarly, if you own 1 ETH, no matter which Ether token you have, the value will be the same. However, NFTs cannot be exchanged at equivalency, and that’s why they are not usable for commercial transactions. However, this is also what makes NFTs valuable.
The oldest and the most popular token standard for non-fungible digital assets is ERC-721, which is used for NFTs on the Ethereum blockchain. However, as the industry continues to grow and NFT technology becomes more common, newer token standards, such as ERC-1155 and BEP-721, are being created.
As far as the types of NFTs go, any medium of digital data, including simple JPEG images, videos, audio files, documents, and web addresses, can be turned into an NFT.
How can NFTs Change the World?
Following are the four ways NFTs are going to revolutionize the way things work in different fields.
Art and Entertainment
The impact of NFT technology is probably the most obvious in the entertainment and art sector. With verifiable ownership on the blockchain, NFTs have suddenly opened up a massive number of possibilities for artists today.
Forgeries and replicas are nothing new to the art industry. Unfortunately, the number of fakes in the market is higher than most of us think. According to fine art experts, more than 50% of art pieces in circulation are actually fake. Similarly, the statistics for art thefts are also staggering. About 50,000 items of artwork are stolen every year!
This practice is even more common in the digital art world. All a person has to do is screenshot or right-click on the image and save it on their device. Then they can post it anywhere, claiming it to be their own artwork, and the original artist would have little to no means to prove it false.
However, with the integration of NFT ownership, anyone anywhere can easily prove the validity of the ownership claims and authenticity of the artwork in no time. Thanks to the transparent and public nature of the blockchain, this data is accessible to anyone around the world. Moreover, NFTs, once created, can neither be destroyed nor modified. This adds another layer of security.
NFT and blockchain technology also democratizes the art space. In the traditional industry, artists and creators depend on art galleries and production houses to get an audience and market their work. The NFT market, which flourishes beyond regional borders and boundaries, provides artists with a global audience on their desktop screens.
As a result, during this NFT craze, we have seen many great indie artists receive the massive attention they deserve, which would have been impossible otherwise.
Moreover, the ability to add royalties to artwork NFTs gives artists greater opportunities for revenue. Even if an artist doesn’t secure a good deal of their artwork, they don’t have to worry about losing potential profit. Through the royalty program, they can earn a certain percentage of the transaction value every time their NFT artwork is resold.
Though much of the current artwork NFT market is dominated by JPEGs and video format media, other art types are also starting to appear. NFT music streaming platforms, like Audius, are gaining more attention every day. Similarly, the number of 3D artwork NFTs at OpenSea – the biggest NFT marketplace – is also increasing.
The first time NFTs caught mainstream attention was due to an Ethereum-based video game named CryptoKitties. The basic gameplay model was much like Pokemon, where players would collect, breed, grow, and trade cute cartoons-like cats.
However, one feature that made a huge difference was that these cats were ERC-721 tokens, i.e., NFTs on the Ethereum blockchain. Hence, these cats held value, and players could buy or sell them for real money. In this way, the NFT technology ignited a revolution in the gaming industry, more specifically, the play-to-earn games.
Blockchain-based games have come a long way since then. Now you can easily find a game using the NFT technology in almost every genre, whether it’s an arcade or RPG game with complex gameplay. There are active and continuously growing NFT marketplaces where players buy, sell, and trade in-game items, such as skins, weapons, characters, gems, etc.
Recently, during the Covid lockdown, the globally successful NFT game Axie Infinity made headlines when several Philippine citizens quit their day job to play it full-time. It allowed players to earn a better income through selling NFTs and cryptocurrencies, which they earned while playing the game.
Witnessing the potential of NFTs in video games, several big names in the game development industry have started dipping their toes and experimenting with the technology. Some of these include Epic Games, Ubisoft, and Nintendo. Even GameStop is working on developing an NFT marketplace.
The potential of blockchains, cryptocurrencies, and NFTs are not limited only to selling and trading digital assets. These technologies have greater use cases in building a fair, transparent, decentralized financial system. That’s why NFTs have been involved in so many charities and fund-raising over the last couple of years.
Some non-profit organizations are involved in corruption and fund embezzlement while hiding under the veil of charity and fund-raising. Misstating figures and presenting false accounts are all part of this dirty business. However, with the incorporation of NFTs, donors can easily track the movement of funds on the blockchain network. Not only do NFTs make charities more transparent, but they also open up new avenues to raise funds for a good cause.
Several NFT projects have been launched with the sole purpose of raising money for charities. One prominent example is Ukraine’s The NFT-Museum. This ongoing NFT sale aims to raise money to help Ukrainian citizens affected by the Russian invasion. It is a collection of NFT artworks that narrates the timeline-based history of the war since it started, where each day is represented by one NFT. The project has raised over $1.25 million so far.
Contracts and Temporary Ownerships
We have already discussed how NFTs can make digital ownership and contracts more robust and efficient. However, they can also be used for contracts and ownership of real-world assets. Nevertheless, the procedure will be trickier due to the complex nature of such documents. Moreover, you will need to use Oracle protocols, like Chainlink, to on-ramp real-world data on the blockchain ledgers.
Take the example of a sports contract with an athlete. Let’s say a soccer player needs to score 20 goals in a one-year period to earn a bonus of $1 million. The managers can use an Oracle protocol and smart contracts to input the data and conditions on the blockchain. When the milestone is achieved, the contract will be executed automatically, transferring the funds to the player’s wallet/account.
This is just one example of how NFTs and other blockchain innovations can be used to improve and automate contract procedures. They can be used in a similar manner in the case of house rent, car insurance, installment loans, etc.
Though NFT adoption is rapidly expanding in multiple fields, the technology is still in a very early stage. The world of finance and e-commerce is still lacking when it comes to education regarding these innovations. However, with time, as businesses move from the actual world to the virtual realm of the internet, NFTs will become a core aspect of several industries.
So far, most corporations are just experimenting with the technology to get a clearer idea about its potential and the future possibilities that will come with it. Much of the current NFT market is driven by pure speculation, and prices always fluctuate. That’s why financial experts consider it a risky investment option.
The editorial content of OriginStamp AG does not constitute a recommendation for investment or purchase advice. In principle, an investment can also lead to a total loss. Therefore, please seek advice before making an investment decision.