What are NFTs?
An increasingly popular and relatively new digital asset class in the world of cryptocurrency and blockchain technologies, NFTs are one-of-a-kind, completely unique digital tokens — offering a brand new way to interact with and own digital assets.
Let’s unpack that a little bit: the word ‘fungibility’ refers to the ability of an asset or item to be exchanged for other assets of the same type. For example, oil is a fungible commodity, in that oil of different origins and qualities are largely interchangeable, this is the same for regular money and cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), and thousands of others.
NFTs differ in that they are one of a kind, as opposed to a currency and can be bought and sold like any other item of property, though they have no tangible form. These tokens can come in the form of digital pieces of art, or instead be a certificate representing legal ownership of physical property like real estate.
Because these tokens can be programmed to function in many ways, they could represent birth and marriage certificates, a contract, a character or item in a video game, royalty rights, and lots more. Although the use-cases for NFTs are still in the early stages, the technology is evolving so fast that in a year, the NFT space will look completely different.
So let’s take a look at some of the amazing projects and ideas that have come to life on the NFT market.
Video Games: Axie Infinity
Axie Infinity is a blockchain-based video game in which players purchase, battle, trade, and breed NFT creatures called “Axies”.
Each one has its own skill set, attributes, and accessories that give them some intrinsic value; you can also breed, battle, and take them on adventures. Each Axie comes with a full record of its ownership history, breed count, family ties, and so on.
The game allows you to also buy, sell and trade other NFTs in the form of in-game land, accessories, and other items. Some of the highest selling Axies have been worth millions, and so the ‘play-to-earn’ community has latched on to this potential market.
What makes this so special? Well, if you look at the bigger picture, this concept can be applied to almost any other video game in existence, imagine if this technology was integrated into the biggest MMORPG or battle royale titles in the world, items gained from quests and loot boxes could be completely unique, 100% yours, have and have real-world value in that they can be resold cryptocurrency and/or real-world cash.
Music: Kings Of Leon
In the digital era, music streaming platforms and similar services have given listeners unprecedented access to the global music library. Conversely, musicians and artists are now able to reach a far wide audience, and yet that doesn’t always add up to greater commercial success or deeper connections with fans.
With NFTs, the Kings of Leon are hoping to make a positive change to this new norm. They have become the first band in the world to release a version of their new album “When you See Yourself” in the form of an NFT. In fact, they’ll be dropping three types of tokens as part of a series called “NFT Yourself” through YellowHeart.
The first is the NFT version of the album itself, which includes enhanced media, exclusive digital art, as well as album download, and limited-edition vinyl. The sale of album-NFTs will take place for two weeks, after which no more will be made, at which point the NFT becomes a tradable collectible.
The second type is a standard NFT with audiovisual art, and the third NFT release is described as a series of “golden tickets”. These tokens will represent actual concert tickets, making them the first NFT concert tickets, which guarantees owners four front-row seats at any Kings of Leon event during each tour, for life. Owners also receive VIP treatment, get to hang out with the band before a show, as well as free merch and other benefits.
Why? It is widely believed that subscription-based streaming services are devaluing music, and with the possibilities enabled by the smart contracts written into each token, it is possible to open up the secondary market for artists and musicians. In theory, every time an NFT is resold, a percentage of that profit can be automatically sent to the creators, a charity, or whomever they so desire.
Real Estate — Property Rights
As you may have gathered by now, NFTs are a new format for property ownership and so it makes sense that one of the many nuances to emerge from this technology is that of real estate.
A great recent example of this is the move from VORO Real Estate, who has become the first to rent an entire house in the Hamptons, New York, with an NFT. Just as the Kings of Leon NFT allowed for access to exclusive rewards and events, this property rental NFT gives the owners access to a VIP Hamptons apartment, dinner at top restaurants, car services, a vineyard trip, and much more.
Whilst NFTs representing physical property are still in development and experimentation phases, it is possible to indulge in virtual land NFT ownership. Platforms such as Decentraland make it possible to purchase the virtualized versions of major global hot spots such as Time Square and the Eiffel Tower, which are available for trade using blockchain technologies.
NFT Marketplaces and CoinBurp
Looking ahead, it seems as though the possibilities for digital ownership are becoming almost endless. In the coming years, NFTs could go on to represent everything from legally binding contracts and documents to proof-of-ownership and intellectual property rights.
Whilst this segment of the cryptocurrency industry is relatively new, experimentation in this field is skyrocketing, and soon it may be easy for anyone, anywhere, to issue their own NFTs to the world.
One such example of this is Hashmasks, a gigantic digital art project where each ‘Hashmask’ is created by several different artists with varying qualities such as eye color, items, and patterns amongst other attributes. What makes this project so unique, is that these NFTs are built on the premise of fair distribution, and as such, buyers won’t know which Hashmask they have purchased for the first two weeks of the given sale. Using some fairly complex methods, they ensure that each NFT is distributed fairly in an extremely high-demand market.
In the coming months, CoinBurp will be unleashing its very own fiat on and off-ramps for purchasing and trading NFTs, marking one of the significant additions to the CoinBurp platform you know and love. For a full in-depth look at CoinBurp’s exciting roadmap for 2021/2022 read here.
Cryptocurrencies are generally not regulated and investors do not have access to recourse or compensation schemes such as, for example, in the UK, the Financial Ombudsman Service or the Financial Services Compensation Scheme. Investing in cryptocurrencies can be high risk and investors should carefully evaluate their appetite for risk and their understanding of trading cryptocurrencies prior to entering into a transaction.