NFTs, the abbreviation for Non Fungible Tokens, are a hot topic in the blockchain world right now as use cases start to explode, big names enter the market, and prices skyrocket. But what the heck are they, and why should you be paying attention?
First up a quick lesson in fungibility! In the blockchain world, you have fungible and non-fungible tokens. Fungible tokens are all exactly the same. They are divisible and are interchangeable one to one, such as bitcoin (the same is true of cash). In contrast, non-fungible tokens contain unique identifying information recorded in their smart contracts. This information makes each NFT different, and as such, they cannot be directly replaced by another token. They cannot be swapped like for like, as no two are alike. This, in turn, creates digital scarcity.
So what exactly can you do with this digital scarcity?
One of the earliest ventures using NFTs, as far back as 2017, was a collectables game called CryptoKitties, whereby thousands of unique digital kitties were issued and quickly gained a cult status. It was so popular it almost brought the Ethereum blockchain to a standstill.
Fast forward three years, and NFTs now find themselves on the verge of mass-market adoption with the introduction of real-world franchises entering the space. NBA Top Shot is one such franchise that lets basketball fans build collections of their favourite players' greatest moments (the official video clips), and because they own them, they can trade them on the open market.
To date, the LeBron James Dunk moment has achieved a sale price of over $70,000! Watch out for many more sports, music and entertainment collectables being reimagined as NFTs over 2021.
Use cases have also grown way beyond collectables, including gaming, digital art, ownership of virtual assets, proof of ownership of real-world assets, proof of identity and the rise of NFT exchanges. With technology still very much in its infancy, this list is only going to grow.
What can Gambling learn from Gaming?
It is interesting to note Gambling's absence from this list. I believe inspiration can and should be drawn most immediately from the vibrant experimentation taking place with NFTs in the blockchain gaming space. The use of which currently focuses on the creation and ownership of game assets, including characters, virtual land, weapons and skins.
Two of the biggest and most ambitious gaming projects on the Ethereum blockchain are Axie Infinity and the Sandbox. The former is a variant on a pokemon based game and involves breeding, owning and battling Axies (monsters), each with different attributes, and also tradable on the open market.
Sandbox takes the ambition further with three layers of NFTs, including land that gamers and enterprises can own in their gaming metaverse, in-game items that gamers achieve through gameplay and finally, items that gamers can create themselves and package up as NFTs to use across different games. And because they are all owned, they are all tradable.
Add on top of this the use of cryptocurrencies as a means of payment and as in-game currencies, play to earn mechanisms whereby gamers can create income from their gaming activities and the promise of decentralised governance whereby players can ultimately own and govern the games themselves, and you have a heady cocktail of innovation. A lot is happening, and mass-market adoption is coming sooner rather than later. The gambling world would be wise to start getting its heads around NFTs and start implementing use cases of its own.
Note: all the images are of their respective owners, cover Image from https://www.larvalabs.com/cryptopunks