Several years ago, trading cards were the rave of the moment in the collectibles world. From sports cards to Pokémon cards, these collectibles were worth thousands of dollars depending on their rarity. However, there were some problems; these cards were prone to damage and had to be properly protected from being stolen. Today, blockchain technology has found the perfect solution to these problems with NFTs.
What are NFTs?
Non-fungible tokens (NFTs), pronounced as nifty, is a unique token similar to cryptocurrencies in that they also are a store of value but much more than that. NFTs contain unique metadata, which makes them similar to a digital certificate for a virtual asset. They represent the virtual asset on the blockchain and prove your ownership of such asset.
NFTs have been used for several purposes so far, including but not limited to digital art, pictures, music, GIFs, videos, gaming items, tokenized real-world assets and lots more. Each NFT is unique in that its value is not shared by any other, and therefore it cannot be exchanged for another token – hence, the non-fungibility.
The History and Development of NFTs
While NFTs have seen their most significant rise in popularity and value in 2021, they are in no way a new phenomenon. Those in the core crypto community know better. The popular belief among this group of people is that the first NFT was Colored Coin created in 2012. It is also called Bitcoin 2.X.
In 2014, a peer-to-peer platform, Counterparty, was created on the Bitcoin blockchain. There were several projects and assets on Counterparty, including meme trading, trading cards, games, etc. Force of Will, one of the top trading card companies in North America, also launched its cards on Counterparty in 2016. The same year, Rare Pepes memes also launched on the platform, with these memes issued as assets.
By 2017, Rare Pepes were also available on Ethereum; the Cryptopunks NFT project was also created in the same year on Ethereum by Matt Hall and John Watkinson. The 10,000 characters were available for free for those who had an Ethereum wallet, and they were all claimed in a matter of days. Till today, these characters are still being resold on the secondary market.
While all these marked the early development of NFTs, it was the advent of Cryptokitties in October 2017 that pushed NFTs right into the mainstream. Dapper Labs developed this project, allowing people to buy, raise, breed, and sell cats on the blockchain, with each cat represented by an NFT. People made significant profits from trading these cats in its early days, with some of these cats trading for over $100,000. The fact that this period was also the Crypto bull period further made it even more popular. From then on, other NFT projects and platforms have been expanding the niche even further.
How NFTs work
NFTs work in a similar way to cryptocurrencies as they are both based on blockchain. However, since NFTs are unique, they are rarely sold infractions, and sale is mostly conducted in an auction-style where the highest bidder wins. While Ethereum is the most prominent platform for issuing NFTs, there are still other platforms such as Dapper Labs’ Flow, Binance Smart Chain, Polkadot, WAX, Tezos, etc.
In a digital world with several copies of the same item on the internet, NFTs create an artificial scarcity by giving the owner exclusive ownership of the original. Anyone familiar with collectibles knows that value is mostly tied to rarity.
How NFTs are replacing Collectibles
NFTs offer something that collectibles don’t; they are indestructible and cannot be stolen. These qualities have endeared them to many people in recent months, and several collectibles-themed projects have been developed with NFTs. One of the most popular is theNBA Top Shot, developed by Dapper Labs. This platform issues virtual basketball cards of various kinds.
Some of these cards even contain videos that are highlights or key moments of top games, and they have sold for hundreds of thousands. Since this platform was launched in October 2020, its value has grown significantly, and it is now worth over $280 million. Even professional teams such as Golden State Warriors and players like Mariah Duran and Patrick Mahomes have also released NFTs of items varying from championship rings to digital artwork.
Another excellent example of sport-themed NFT is Sorare, a fantasy football game where players can buy virtual cards of footballers to assemble their team. This game takes fantasy football to a whole new level and allows people to own digital collectibles of popular football players worldwide. Ethernity Chain also recently launched NFTs collectibles of Mohammed Ali and Pele, two of the greatest sportsmen.
Of course, not all NFTs are sport-themed. In fact, the most popular and expensive NFTs are digital art such as Beeple’s Everyday: The First 5000 Days, which sold for close to $70 million, and we have also seen various musicians and celebrities who create NFTs of their works for sale.
It is too early to tell how NFTs will turn out eventually. But one thing is clear, it has significant potential and will stand the test of time. But it is important to do due diligence when investing in NFTs because it is high risk.