Hype of the Week: NFT’s are Heating Up
In 2020, the number of innovative and ambitious projects stemming from decentralized finance (DeFi) is mind-boggling, with an industry market cap just under $13 billion. However, another project making waves throughout the industry is the Non-Fungible Token’s (NFT’s) sector. With a staggering $3.5 million of sales made just last week, there is no surprise that predictions see the NFT market cap increasing from $113 million to $315 million by the end of 2020. NFT’s are definitely heating up!
An Overview of NFT’s
Non-fungible tokens (NFT’s) function as proof of ownership and authenticity and are digital representations of assets that are characterized by non-fungibility. Non-fungibility refers to digital or virtual assets that are unique and cannot simply be replicated or interchanged, are rare, and indivisible. Assets that possess such uniqueness can be digital works of art, tickets for an event, in-game items, real-world assets such as ownership records of real-estate, and even our identities.
Conversely, fungible assets are things such as fiat money and are interchangeable and replaceable. Here, it does not matter if you use the $1 bill in your wallet, the bill in your parent’s wallet, or that of a friend, the value of the $1 bill remains the same. Furthermore, the $1 bill is neither inherently unique, rare, or indivisible, breaking the rules required for non-fungibility.
In general, NFT’s run via the Ethereum network and are primarily subject to the ERC -721 and ERC -1155 algorithm standards. These standards allow the trade and issuance of non-fungible assets to take place. Additionally, NFT’s can also be used via decentralized applications (Dapps), which facilitate the construction and ownership of digital non-fungibles. By adding NTF’s to the blockchain and DeFi arsenal, the transfer, trade, and ownership of such assets would become more secure and trust within the management of such assets could increase.
NFT Market Shapers
At present, the NFT market consists of projects operating in the fields of art, gaming, collectibles, metaverse, utility, crypto, and digital assets. Here we will investigate some of the key NFT marketplaces within each category.
Created by Alex Salnikov and Alexei Falin in early 2020, Rarible is a blockchain supported NFT platform with a focus on digital art and collectibles. On Rarible, artists can create and monetize their work, and buyers can purchase and trade various collectibles on Rarible’s marketplace. Additionally, and the key to the Rarible project is the RARI token, an ERC-20 governance token RARI. According to Rarible, the RARI is the “first governance token in the NFT space”. A crucial component is Rarible is to achieve it’s a vision of becoming a fully autonomous platform based on a community governance model. Earlier this month, on the 8th of September, RARI saw a 100% increase in value as CoinFund invested an undisclosed amount into the project.
Founded in 2017 in Vancouver Canada, Cryptokitties is one of the very first blockchain-based games and examples of a digital collective NTF. Within Cryptokitties, users can collect and or purchase, raise and sell digital cats. According to the Cryptokitties team, “each CryptoKitty is one-of-a-kind and 100% owned by you. It cannot be replicated, taken away, or destroyed.” In terms of tokens, CryptoKitties uses an ERC-721 token, to provide a “practical use case for digital scarcity and digital collectibles. Additionally, the company behind CryptoKitties, Dapper Labs, announced that they will partner with Blockparty, a rare digital collectibles marketplace onto their blockchain. Such developments may see CryptoKitties’s users increase in due course.
OpenSea was established in November 2017 and is the “first and largest marketplace for user-owned digital goods”. On OpenSea, collectibles, digital art, in-game items, and domain names can be purchased and sold. Additionally, OpenSea also facilitates the customization of packages containing various digital assets that can be purchased or sold in one single transaction. This is made possible through smart contracts and the use of Ethereums ERC-721 and ERC-1115 standards. Lastly, there are rumors that OpenSea may airdrop their own token in a style reminiscent of Uniswap, as Rarible’s popularity soars.
The Sanbox was founded in 2011 and is a virtual world game tied to the Ethereum blockchain where users are able to construct, own and monetize their gaming experience. The company is best known for its mobile games Sandbox (2011) and the second installment of the game The Sandbox Evolution ( 2016). Their aim is to “ disrupt existing game makers like Minecraft and Roblox by providing creators with true ownership of their creations as non-fungible tokens…”
The Sandbox uses three types of tokens: SAND, LAND, and Assets, which are ERC-20, ERC-721, and ERC-1115 standardized respectively. As of this week, SAND is now can be used for Liquidity mining, is listed on UpBit and WazirX.
Having provided an overview of NFT’s and introduced some of the key players within the space, it is apparent that NFT’s are revolutionary. When considering the hours spent in games or creating works of art, the effort and time allocated may be enormous. Particularly, as people spent more time on their phones or creating art on the go, the ability to secure the ownership of such non-fungibles assets and to monetize them will become increasingly desirable. The NFT space is definitely one to watch and the innovating coming from such projects may be as important to the creation of a decentralized and autonomous world as anything produced in DeFi.
Author: Stephan Eduard Pàl Roth