This article explores NFT opportunities and is the fifth in our series of articles introducing NFTs from a technical point of view.
By Qin Wang (Swinburne University of Technology & CSIRO Data61 ) and Rujia Li (Southern University of Science and Technology & University of Birmingham)
NFTs enable online events
Traditional online events rely on centralized companies providing trust and technology. Although blockchain is taking over several types of activities like raising money (either by STO/ICO/etc.), its applications are still constrained to a small range of events. NFTs greatly extend the scope of blockchain applications with the help of their additional properties (uniqueness, ownership, liquidity).
Take a ticketing event as an example. When buying tickets on a traditional channel, consumers must trust the third party. There is a risk of buying invalid tickets by a third party who has been selling the same ticket multiple times. An NFT-based ticket represents a ticket issued by the blockchain to demonstrate entitlement to access to any event. An NFT-based ticket is unique and scarce, meaning that the ticket holder cannot resell the ticket after it is sold. Consumers can buy and sell the crypto ticket from the smart contract rather than rely on third parties.
NFTs protect digital collectibles
Digital collectibles span over various types, ranging from trading cards, digital images, videos, virtual real estate, domain names, crypto stamps, and other real/intellectual properties. NFTs have the ability to protect these collectibles. Let us take the field of arts as an example:
Traditional artists have few channels to display their works and the prices of their works cannot reflect the true value due to the absence of attention by the public. Even worse, their published works on social networks have been charged with intermediary fees by platforms and advertisements. NFTs transform their work into digital formats with integrated identities. Artists do not have to transfer ownership and contents of their NFT works to agents. This provides them impetus with considerable profits.
Furthermore, artists, in many cases, cannot receive royalties from future sales of their works. In contrast, NFTs can be programmed so that the artist gets a predetermined royalty fee each time their digital artwork exchanges in the markets (e.g., SuperRare, MakersPlace, Rare Art Lab, VIV3). This is an efficient way to manage and protect digital masterpieces. In addition, several platforms (e.g. Mintbase and Mintable) have even established tools to support ordinary people to create their own NFT works easily.
Typical instances include Mad Dog Jones’ REPLICATOR (selling at 4.1 million USD), Grimes’ work (selling in total at around 6 million USD), and other works from crypto-artists like Beeple/Trevor Jones.
NFTs inspire Metaverse
Metaverse is a collective virtual shared space that allows all types of digital activities. Generally, it covers techniques like augmented reality and the internet to establish the virtual world. The concept stems from the last decades and has made great progress during the rapid development of blockchain.
Blockchain provides an ideal decentralised environment for the virtual online world. Participants under this blockchain-fueled alternative realities can have many types of intriguing use cases like enjoying games, displaying self-made artworks, trading assets and virtual properties (arts, land parcels, names, video shots, wearables), etc.
In addition, users also have opportunities to get profits from the virtual economy. They can lease the buildings (such as offices) to others to earn the bond or raise rare pets and sell them to get the rewards.
Several outstanding projects are Decentraland, Cryptovoxels, Somnium Space, MegaCryptoPolis, and Sandbox.
NFTs boost GameFi
NFTs have great potential in the gaming industry as traditional games rely on virtual assets in their isolated systems. On the one hand, users cannot sell or buy their equipment to or from other users who play similar games by other brands. On the other hand, their virtual assets may become zero-value if the company closes down their services. NFTs, however, tokenize their digital assets inside games, making them transferrable and tradeable in different games and to other players via NFT specialised blockchain marketplaces. This promotes the concept of GameFi, which integrates virtual assets in games with financial markets.
Specifically, NFTs earn money in games in two ways:
Firstly, NFTs provide ownership records of items in the games. In particular, game developers who are NFT publishers of the features (e.g. weapons and skins) can earn royalties each time their items get (re-) sold on the open market, and the players can obtain personal exclusivity game items. This will create a mutually beneficial business model where both players and developers profit from the second-hand NFT markets.
Secondly, NFTs bring a fascinating feature into the games, the so-called “breeding” mechanism. Users can personally raise pets and spend much time breeding new offspring. They can also purchase the limited/rare edition virtual pets and sell them at a high price. The extra reward can attract more and more investors to join the games. The already existing and outstanding crypto games are CrytpoKitties, Cryptocats, CryptoPunks, Meebits, Axie Infinity, Gods Unchanged, and TradeStars.
Qin Wang is a researcher focusing on blockchain technology, covering sub-fields of consensus protocols, security, and blockchain economies. More information refers to his homepage https://qinwang.tech/.
Rujia Li is a blockchain researcher with interests on privacy-preserving smart contracts and FinTech. More information can be found at https://rujia.uk/.
Read More: NFT Challenges