Non-fungible token

A non-fungible token (NFT) is a special type of cryptographic token which represents something unique; non-fungible tokens are thus not mutually interchangeable.[1] This is in contrast to cryptocurrencies like bitcoin, and many network or utility tokens that are fungible in nature.[2]

NFT Icon

Applications

Non-fungible tokens are used to create verifiable digital scarcity, as well as digital ownership, and the possibility of asset interoperability across multiple platforms.[3] NFTs are used in several specific applications that require unique digital items like crypto art (rare art), crypto-collectibles and crypto-gaming.

The first use case of gaming related NFTs have been crypto-collectible trading card games. Projects like Age of Chains and Rare Pepes have been using the Counterparty protocol to issue Bitcoin based blockchain trading cards as NFTs as early as 2016.

Art was an early use case for blockchain. NFTs prove authenticity and ownership of digital art.[4] The launch of CryptoPunks In June 2017 paved the way for "rare" art on the Ethereum Blockchain.[5] DADA.art built from the CryptoPunks model and launched the first marketplace for rare digital art in Oct 2017.[6]

Later, popular blockchain games like CryptoKitties made use of non-fungible tokens on the Ethereum blockchain.[7] NFTs are used to represent in-game assets, and are controlled by the user, instead of the game developer.[8] This lets the assets be traded on third-party marketplaces without permission from the game developer. Marketplaces for rare art include Nifty Gateway, Super Rare, Known Origin and MakersPlace.

Standards

Specific token standards have been created to support the use of a blockchain in gaming. These include the ERC-721 standard of CryptoKitties, and the more recent ERC-1155 standard.

ERC-721 Standard

ERC721 was the first standard for representing non-fungible digital assets. ERC721 is an inheritable Solidity smart contract standard, meaning that developers can easily create new ERC721-compliant contracts by importing it from the OpenZeppelin library.

ERC-1155 Standard

ERC1155, brings the idea of semi-fungibility to the NFT world as well as it provides a superset of ERC721 functionality, meaning that an ERC721 asset could be built using ERC1155.

Growth and mainstream appeal

Non-fungible tokens first became popular when CryptoKitties went viral[9][10] and subsequently raised a $12.5 million investment.[11] RareBits, a Non-Fungible Token marketplace and exchange, raised a $6 million investment.[12] Gamedex, a collectible cards game platform made possible by NFTs, raised a $800,000 seed round.[13] Decentraland, a blockchain-based virtual world, raised $26 million in an initial coin offering,[14] and had a $20 million internal economy as of September 2018.[15] Nike holds a patent for its blockchain-based NFT-sneakers called ‘CryptoKicks’.[16]

References
  1. Merriam Webster Definition
  2. Schroeder, Stan. "Crypto trading card game 'Gods Unchained' looks pretty sweet in first gameplay trailer". Mashable. Retrieved 2018-11-18.
  3. "Enjin is Creating a Real-Life Ready Player One, and It's Powered by Blockchain". VentureBeat. 2019-04-16. Retrieved 2019-08-14.
  4. "The Art World Needs Blockchain – Irish Tech News". irishtechnews.ie. Retrieved 2018-05-02.
  5. "how cryptopunks creators charmed the art world and paved the way for blockchain art". Breaker. 2019-01-19.
  6. "the blockchain art market is here". Artnome. 2017-12-17.
  7. Wong, Joon Ian. "The Ethereum world is now obsessed with breeding cartoon cats". Quartz. Retrieved 2018-05-02.
  8. "CryptoKitties shows everything can — and will — be tokenized". VentureBeat. 2017-12-04. Retrieved 2018-05-02.
  9. Wong, Joon Ian. "CryptoKitties is jamming up the ethereum network". Quartz. Retrieved 2018-05-10.
  10. "CryptoKitties Mania Overwhelms Ethereum Network's Processing". Bloomberg.com. 2017-12-04. Retrieved 2018-05-10.
  11. "CryptoKitties raises $12M from Andreessen Horowitz and Union Square Ventures – TechCrunch". techcrunch.com. Retrieved 2018-05-07.
  12. "Crypto-collectibles and Kitties marketplace Rare Bits raises $6M – TechCrunch". techcrunch.com. Retrieved 2018-05-07.
  13. "Blockchain startup Gamedex raises $0.8 million seed round to build platform for digital collectible card games like Pokemon – TechStartups". techstartups.com. Retrieved 2018-05-07.
  14. Russo, Camilla (2018-06-12). "Making a Killing in Virtual Real Estate". Bloomberg. Retrieved 2018-09-05.
  15. Hankin, Aaron (2018-09-04). "People are making more than 500% buying property that doesn't actually exist". MarketWatch. Retrieved 2018-09-05.
  16. Beedham, Matthew (2019-12-10). "Nike now holds patent for blockchain-based sneakers called 'CryptoKicks'". Hard Fork | The Next Web. Retrieved 2020-12-23.
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