In this article, we will dive deeper into the world of Non-Fungible Token (NFT) by reflecting on their work and how they contribute value in different use cases.
There has been a lot of hype around blockchain and crypto assets in recent times. Most important of all, people, businesses, and governments have to prepare for the digital economy in every possible way. Therefore, if you have been exploring the world of blockchain, you must have come across the mention of tokens. Many blogs and articles in the blockchain space have covered details about differences between coins and tokens.
Now, the time is rife to discuss about a considerably advanced and new form of tokens, such as Non-Fungible Token. Many experts have pointed out towards the potential of NFTs in shaping up the future of blockchain. As a result, they have been gaining profound attention from users as well as enthusiasts from all circles.
Enroll Now: Enterprise Blockchains Fundamentals Course
Background of Non-Fungible Tokens
Before we start discussing about the use cases of non-fungible token (NFT), it is important to develop a fundamental impression of their background. Anything that is ‘fungible’ clearly implies that it could be replaced by something similar. Therefore, a fungible token is any type of token that you can replace with something similar. So, NFTs are unique and could not be interchangeable in any circumstances.
Tokens are a key element in the world of blockchain and cryptocurrency. They are accessible in various forms and are utilized for various reasons. Non-fungible token is one of the variants of tokens that have unique features and applications. Since majority of cryptocurrencies aim to serve as a common medium of exchange, it is important to focus on fungibility.
For instance, people could exchange a US dollar with another US dollar as well as with a British Pound. If you lend someone a dollar, then you don’t need the exact dollar with the same serial number in return. On the other hand, if you lend a unique artwork to someone, then you expect the same exact artwork in return, and this is described as non-fungibility.
Fungibility is undoubtedly a crucial feature in all the notable cryptocurrencies such as Ethereum and Bitcoin. However, NFT has evolved as a new token variant with certain unique features and some interesting applications. At the same time, non-fungible tokens are a comparatively new concept and difficult to understand. Therefore, people can encounter formidable doubts regarding the concept of non-fungible tokens, their features, applications, and their future.
Understanding What is NFT
So, what does NFT mean? It is basically a special type of token generated through cryptographic hashing methods and leverages blockchain technology for linking with a unique digital asset that could not be replicated. A non-fungible token is different from notable cryptocurrencies such as Monero, Ether, and Bitcoin in terms of fungibility. NFTs feature unique characteristics and cannot be exchanged or replaced with identical tokens.
Smart contracts inside the NFTs help in storing the unique and exclusive data that differentiate NFTs from other tokens. NFTs are also known for indivisibility. It is not possible to send non-fungible tokens in smaller denominations like in the case of Bitcoins. So, you could not send a portion of a particular NFT to another person.
Therefore, non-fungible tokens have a unique role in the blockchain landscape on the grounds of their uniqueness. Most important of all, NFTs have a larger significance in context of the radical shift towards the next era of blockchain digital transformation. As enterprises slowly open up to the idea of blockchain and integrating blockchain tech in their operations, NFTs can serve as revolutionizing entities.
Now, it would be reasonable to dive into the non-fungible token use cases. It is interesting to note that NFTs can serve well in various purposes. You can use them for digital and real-world entities to convert them into tokens on blockchain. Before diving into a deeper understanding of NFT use cases, it is important to understand one of the significant aspects of their operations. Developers should comply with specific token standards pertaining to blockchain for launching a successful token application. For example, there are many ERC standards that Ethereum offers for developers. Let us take a look at the different token standards on blockchain that serve an important role in the working of NFTs.
It is important to note that cryptocurrency tokens built on Ethereum utilize the ERC-20 token standard. ERC-20 standard represents a collection of rules and regulations that specific objects must follow for ensuring interoperability and compatibility with exchanges or wallets operating in the Ethereum ecosystem. The Ethereum network had over 300,000 tokens based on the ERC-20 token standard in October 2020, and the number continued to increase substantially.
In comparison with the ERC-20 token standard, the ERC-721 reflects on a single distinct asset without interchangeability. It provides representation for assets, including certifications or asset tokenization that could not be divisible. All tokens based on ERC-721 standard hold information in their personalized smart contracts.
The personalized smart contracts hold the information about ownership and details regarding identity of a particular asset. Despite the lack of a fixed rule for creating tokens, ERC-721 presents better standards of transparency regarding ownership, security, and immutability. Basically, tokens designed with ERC-721 standards are ‘non-fungible’ in their operations.
ERC-1155 is another important token standard that establishes the foundation of NFT use cases. Undoubtedly ERC-721 is suitable for creating new assets that you can transfer between wallets. However, an assortment of ERC-721 based tokens is generally insufficient and slow.
For instance, if an individual is trading multiple artifacts such as weapons and skins for a specific character in a game, then a collection of ERC-721 tokens could be insufficient. In such cases, the ERC-1155 standard can be quite helpful. Generally denoted as the ‘multi-token standard of the next-generation,’ ERC-1155 can bring revolutionary implications for the creating NFTs. Interestingly, ERC-1155 provides support for fungible and non-fungible token applications.
Use Cases of Non-Fungible Token
Over the course of time, there have been many speculations about the blockchain applications of non-fungible token. However, the truth about NFTs is that they can showcase the proof of actual ownership of specific assets on blockchain. NFTs can hold, deny or restrict the rights of individuals on specific assets, thereby ensuring exclusivity for the owner. So, NFTs have a long road ahead in their future, and their applications would increase in the future.
However, NFTs are also considered beneficial in a wide variety of enterprise blockchain use cases in the present times. Their abilities for easier verification of originality and scarcity of information on digital platforms are not something that you should take lightly. With that being said, let us take an in-depth look at the different non-fungible token use cases as follows,
The recent news of digital artist, Beeple, selling an NFT of his artwork at a whopping $69 million at Christie’s auction, created ripples throughout the blockchain world. The record-breaking NFT sale came after a series of increasingly valuable auctions. Beeple sold his first series of NFTs in October, with a pair priced at $66,666.66 each. Subsequently, he sold a series of his works for around $3.5 million in total. The 255-year old auction house, Christie, presents a legitimate value for Beeple’s art as well as NFT as a technology.
Programmable art is the most common non-fungible token use cases, bringing in the perfect mix of creativity and technology. Presently, you can find various limited edition artwork pieces in circulation. Interestingly, they allow the flexibility for programmability for modifications in different circumstances. The use of smart contracts & oracles can enable artists for developing images capable of responding to fluctuations in pricing of blockchain-based digital assets.
Watch on-demand webinar on digital asset convergence now!
Subsequently, the use cases of non-fungible token could appeal to the domain of legacy arts through tokenization of real-world assets and different works of art. With the combined power of blockchain and IoT, people could just scan a code on the tag attached to an artwork and register their ownership of the artwork on blockchain. Subsequently, users could view the entire history of the artwork, including the previous prices at which it was purchased and ownerships.
Blockchain has been able to meld seamlessly in the world of fashion with the assurance of advantages to all supply chain participants. Consumers could easily verify the ownership information of their items and accessories digitally, thereby reducing the risks of counterfeiting frauds. Users could just scan a simple QR code on the price tags with apparel and accessories that is in the form of an NFT.
Therefore, consumers could get a clear impression of details such as place where the asset was created. In addition, consumers could know details of the people who held ownership of the asset before the customer purchased the asset. The introduction of blockchain in the world of fashion has played a crucial role in reduction of carbon dioxide emissions. As a result, they can increase employee welfare alongside protecting customers. Therefore, NFT can create a new type of blockchain for supply chain in the fashion industry.
Licenses and Certifications
NFT use cases can also lend profound benefits for verifying licensing and certifications. Course completion certificates, such as any other degree or license, are generally offered to successful candidates in digital form or in paper-based form. Universities and employers require replicas of the course completion document as references before they offer a position to someone in a company or an institute.
Admins could save a lot of time by accessing such licenses with the functionalities of NFTs. Certificates and licenses in the form of NFTs take away the burden of record checking and verification. Subsequently, the approach also delivers an easier approach for storing evidence of course completion or licensing.
Collectibles are also one of the profound entries among use cases of non-fungible token. As a matter of fact, online collectibles such as Cryptokitties were one of the initial ways in which people learned about the use of NFTs. The popularity of Cryptokitties gained prominence in 2017 as they congested the Ethereum network.
They are basically unique digital kittens that users can breed for making for unique kittens. Each crypto kitty features specific traits such as fur pattern or eye color, making them more appealing than others. Users can purchase two different cats, a Sire, and a Dame, for breeding them by simply clicking on a button.
The resulting new kitten features its own identity and Genetic Algorithm or GA. The scarcity of genetic makeup determines the value of crypto kitties. In addition, the number of times of using a Sire for breeding other kittens also plays a crucial role in determining the value of crypto kitties.
Counterfeit tickets and merchandise are some of the critical issues plaguing the sports industry. Blockchain is serving as the perfect alternatives for resolving such issues without any complications. The immutable nature of blockchain technology helps in preventing the issue of counterfeit collectibles and tickets.
The example of tokenized sports game tickets issued on blockchain shows how NFT use cases can benefit the sports industry. Every ticket is similar, and all of them feature data that is unique to registered owners of the ticket on blockchain. Sport NFTs are also turning into a trend, with many tokenization of successful athletes on the blockchain. The value of the tokens representing successful athletes depends on their performance.
Ethereum Name Service and Unstoppable Domains
Ethereum Name Service and Unstoppable Domains present crypto addresses as NFTs. Some of the notable examples of non-fungible token applications refer to myname.crypto or myname.eth. The crypto address of a user is similar to the Twitter or Instagram handle, with each name being unique.
In the case of a fairly common name, hundreds of people may try to procure the same handle name. Although Twitter and Instagram ban users from selling their username handle, Unstoppable domains and ENS can help in buying and selling crypto addresses flexibly. Generally, the popular names have a higher value than the ones which are not in demand.
Therefore, it is clearly evident that the applications of non-fungible token are gaining profound significance across various industries. NFTs have achieved considerably increasing popularity since the introduction of a test version of crypto kitties in 2017. The gaming industry is one of the most active sectors with a maximum number of active NFT use cases.
At the same time, other industries are also adopting NFTs slowly by ensuring integration of blockchain and tokenization of assets. Industries can now implement blockchain with NFT tokens which is a huge plus point for the rising popularity of this token. The growing use of blockchain will also fuel the adoption of NFTs in the future as a secondary measure for storing personal data on blockchain or selecting a crypto address. So, NFTs can definitely spell a future where people can use blockchain and cryptocurrency in daily tasks without realizing their involvement.