What Can You Do With Non-Fungible Tokens (NFTs) Today?

Summary

Non-fungible tokens (NFTs) — also known as “nifties” — are unique, indivisible, and provably scarce digital assets that are useful in gaming, art, and ensuring the provenance of luxury goods. Since the success of CryptoKitties in late 2017, the application of NFTs has grown rapidly, proving the functionality of blockchain in sectors far beyond finance and cryptocurrency.

Non-fungible tokens (NFTs) are unique, indivisible digital assets created on blockchains. Each NFT’s uniqueness can be proven by its unique label created by making use of specialized cryptographic code, and no token can be interchanged for another. In this way, NFTs are different from fungible assets like bitcoin or fiat currencies like the U.S. dollar. One bitcoin is always the same as any other bitcoin in circulation, and as such, units of bitcoin can be interchanged.

Most NFTs are built using the ERC-721 token standard, an Ethereum-compatible identifier that was created by the developers of CryptoKitties. Since CryptoKitties first achieved widespread notoriety with non-fungible token technology in 2017, the industry for NFTs has grown significantly. Now, it is commonplace to find NFTs in gaming, collectibles, and art. NFTs are even used to ensure the provenance (historical record of ownership) of luxury goods. Non-fungible tokens can also be bought, sold, and traded on digital marketplaces like OpenSea and Nifty Gateway.

Here’s an overview of where you can use NFTs today, and what you can do with them:

The CryptoKitties Universe

After the success of CryptoKitties, a number of copycats surfaced. Today, there are puppies, monsters, and even crypto celebrity NFTs that you can collect.

CryptoKitties itself evolved beyond just a digital collectible platform. CryptoKitties users can interact with third-party applications to customize and play with their digital cats.

• KittyHats — A service that offers outfits and other accessories to personalize your CryptoKitties.

• KotoWars — A battle game similar to Magic: The Gathering, whereby CryptoKitties are given a certain attack and defense score and can battle other players.

• Kittyhelper.co — This platform helps CryptoKitties holders understand how genetics, statistics, pricing, and other game mechanisms work together. Certain parameters indicate a higher chance of sharing rare CryptoKitties, which is a way to make extra money by renting them out to other users.
• NBA Top Shot — CryptoKitties worked with the National Basketball Association (NBA) to create a collection of NFTs that display animated highlights from basketball history, such as buzzer-beating three pointers and gravity-defying dunks

Games

One of the leading use cases for NFTs today is gaming. Following blockchain-first game developers to market, legacy game developers like Ubisoft are now experimenting with the technology.

As of December 2020, the top NFT-based games include:

• Sorare — With 100 soccer clubs officially licensed, Sorare lets you purchase NFTs that represent professional soccer players that can be used to play fantasy games against other collectors.

• Decentraland — Decentraland is a virtual reality universe similar to The Sims or Second Life. Inhabitants of Decentraland buy, sell, and exchange ERC-721 tokens called LAND and use an ERC-20 token called MANA to purchase other in-universe items. Inside Decentraland, there are art shows, games, and specialized events users can participate in.

• Gods Unchained — Gods Unchained is a turn-based collectible card game. NFT cards depict various characters, creatures, events, and powers, which can be used to play one-on-one against an opponent.

• My Crypto Heroes — A multiplayer role-playing game, My Crypto Heroes issues NFTs of characters and other in-game items. Players level up their characters through battles and quests.

Digital Art

NFTs provide several benefits for digital artists and collectors. Before NFTs, the inability to verify the authenticity of digital art made the industry challenging to monetize. Now, blockchain technology can track unique digital art in the form of NFTs and can also verify its provenance, authenticity, and scarcity.

Some of the most popular NFT art marketplaces are SuperRare, Nifty Gateway, Know Origin, and MakersPlace. The mainstream art world has also taken notice. Prestigious art auction house Christie’s New York recently sold its first piece of NFT art — a circular panel inscribed with 300,000 digits of Bitcoin code that reacts to its geographical location and time of day — for $131,250 U.S. dollars

Other Applications

Owning the perfect domain name can mean increased traffic to your website and, in turn, increased profits. Domains are scarce, and purchasing the right one is often costly and time-consuming. Linking a domain to an NFT creates an immutable history of its journey for tracking purposes. It also makes it easier to buy, sell, and trade a domain — without any middlemen. Additionally, NFT domains can easily plug into other NFT systems. For example, Ethereum Name Service (ENS) and Unstoppable Domains are two providers of domains linked to NFTs.

Counterfeiting is a problem often faced by the producers of consumer goods. The global impact of counterfeit goods is expected to reach $4.2 trillion by 2022. Customers want to know that the exclusive hoodie, purse, or rare diamond they have purchased is authentic. Real world objects linked to NFTs offer a way to track the lifecycle and journey of the item and verify its authenticity. Louis Vuitton is experimenting with NFTs to solve this problem, along with other brands within the LVMH conglomerate and diamond specialist De Beers.

As the NFT industry grows, developers are looking to make improvements on the ERC-721 token standard and offer entrepreneurs more flexibility. ERC-1155, for instance, is a standard that allows for a single smart contract to manage multiple token types — including fungible tokens, non-fungible tokens, and tokens that fall in between both classifications.

NFTs have expanded blockchain use cases in business sectors far beyond finance, while appealing to a diverse audience of gamers, artists, luxury consumers, and digital cat enthusiasts alike. The NFT space is just starting to reach its initial adoption phase, and non-fungible tokens have the potential to vastly alter our relationship with the digital world by introducing object-based verifiable digital scarcity.

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