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Will 2021 be the 'Year of the NFT'?

Read this article in 46 Minutes

IC0 in 2017, smart contracts in 2018, stablecoin in 2019, DEFI in 2020, will NFT pick up the torch?

The original title: "according to Will be the Year of 2021 Non - Fungible Tokens (NFTs)"

Originally written by Ruben Merre

Compile: 0x13, beat BlockBeats

It's no secret that people like to collect things. What kind of things an individual likes to collect often depends on his or her unique interests, or whether the collection has some emotional resonance with them.

Thinking back to your childhood, you probably collected Pokemon cards, stamps, video games, books, posters, marbles, and even bugs. As an adult, you may collect the same things as you did as a child, or you may collect very different things: trendy bags, shoes, dark tech gadgets, antiques and art.

What would happen if your physical collection could expand into the digital world?

For example, UFC fans can collect and own highlights of their favorite boxer, Conor McGregor. Nike fans can not only get physical shoes, but wear them in the virtual world and show them off to other players. You can raise a cool pet dragon in your virtual home; "Star Trek" fans will have the exclusive memory of William Shatner; Artists can slip virtual digital art galleries into their pockets and show them off in front of friends or family.

So how do you get your hands on your favorite celebrity memorabilia and other treasures? In fact, they are ready to go from your imagination to reality, and the rise of NFT will make your dreams come true.

Over the past few months, NFT has been discussed around the world, and people believe that NFT will have a place in the crypto world in 2021. The history of the crypto world is short, but it has already set off several waves: IC0 in 2017, smart contract platform in 2018, stablecoin in 2019, and DeFi in 2020.

Defi has been the star attraction for most of 2020, but NFT has been steadily gaining traction in recent months. "There's really a lot of hype around NFT, and in some ways it's an extension of the interest in DEFI," says Ilya Abugov, a project manager at Dappradar.

What is NFT?

An NFT is a tokenized version of a non-homogeneous asset such as art, real estate or collectibles. Non-homogeneous assets have unique properties and personal characteristics that make them unique and valuable.

The crypto world has been dominated by homogenous tokens for the past decade since the birth of cryptocurrencies. Homogeneity is a complicated concept, but it is not difficult to understand.

Simply put, it refers to the interchangeability of assets, two goods are "homogenized" if they can be exchanged freely without their owners disputing them.

For example, if two people exchange a one-dollar bill and there is no difference between the two bills and the value they represent, they are said to be "homogenized." The two notes become non-interchangeable only if either side is concerned about the serial number of the note and where it was created.

On the other hand, NFT can stand for anything unique in the world. Remember the Conor McGregor highlights above? Maybe a certain action in the episode will never happen again, and that's what makes the highlight episode worth it. By tokenizing that wonderful KO and writing its unique attributes into a smart contract, fans can own and trade their favorite highlights.

NFT can be used to represent a variety of assets, such as virtual collectibles, in-game assets, virtual assets, digital art, real estate, etc. However, since each token is unique, they cannot be traded as easily as homogenized tokens. For example, you wouldn't trade in a rare, old, and valuable classic car for a regular car. Decrypt has a succinct explanation: "Just like two people are not interchangeable, everyone is different."

Another reason NFT is different from homogenized tokens is that NFT is indivisible: you can't trade a small part of it the way you trade bitcoin. For example, you can't cut out a small portion of a concert ticket and give it to your friends. None of you will ever get through the ticket barrier using only a small portion of the ticket.

The Rise of NFT: Why is NFT in the spotlight now?

NFT isn't exactly a new concept. The first NFT-like token, Bitcoin 2.x, was created in 2012.

In terms of market capitalization, the NFT industry grew by 17% in 2019 and 50% by the end of 2020. The jump in market value is intriguing because it says NFT has created a total value of more than $200 million from nothing in less than two years.

According to NFT data analytics site Nonfungible.com, the number of NFT sales has increased significantly since September 2020 and has remained above the level of the first few months of 2020. In the first week of September 2020, NFT sales approached $1 million, with blockchain-based fantasy football card game Sorare generating over $211,000 in sales. And the momentum shows no signs of slowing down, with $2 million worth of NFTs being traded in the first week of December 2020. According to Coingecko, NFT's market capitalization has exceeded its 2020 forecast, reaching more than $550 million.

An overview of total US dollars traded through the NFT program for the period December 8, 2019 - December 8, 2020

One of the first NFT projects to really explode and get a lot of attention was CryptoKitties, launched in November 2017. CryptoKitties is a game built on the Ethereum blockchain that allows users to collect, breed and exchange virtual pet cats. The game, which famously brought down the Ethereum network back in 2017 by sparking a flood of activity, exemplified a blockchain use case for entertainment and leisure rather than currency. These virtual cats are clearly attractive enough to sell for tens of millions of dollars, with rare cats worth hundreds of dollars or more each.

Dragon, the most expensive CryptoKitty to date, his price is as high as 600ETH (about $170,000 at that time).

Dapper Labs is the production company behind Cryptokitties, and their goal is simple: to make blockchain accessible to a billion people. Co-founder Mik Naayem explained that they decided to target entertainment and gaming because it was a "simpler way to introduce people to decentralization, and gamers are the perfect target market because they already understand virtual currencies and virtual worlds."

He continued: "When we created CryptoKitties, what we were trying to do was test whether we could get people who had never used blockchain to use it... and understand why it was different and what it was worth."

They succeeded, CryptoKitties taught new users about blockchain and introduced the concept of NFT to hundreds of thousands of people.

After the CryptoKitties boom at the end of 2017, the NFT market stalled in 2018 and 2019. NonFungible's annual report of the 2019 "stability" of NFT ecosystem, because it after IC0 enthusiasm into the "integration and stable stage. The report notes that most NFT projects have had poor retention over the past two years, with the vast majority of projects in 2019 being used for three months or less. Only about 10 per cent of newly created NFT assets were in circulation throughout 2019, a similar rate to 2018.

NFT transactions tripled to a high of $159 million in 2018 and dropped to $152 million in 2019

Although the pace of NFT growth has slowed after the initial boom in 2017, the NFT space continues to make new progress. In particular, in recent months, a number of events and projects have generated a lot of attention, and sales of NFT projects have reached record levels.

A piece of art inspired by the Bitcoin code recently sold for more than $130,000; A blockchain-based star card for Paris Saint-Germain striker Kylian Mbappe has been sold for $66,850. While Cryptokitty Dragon still holds the record for the most expensive non-generic token sale ever, the unique digital sports Car NFT "F1 Delta Time Apex Race Car 1-1-1" and a piece of land called "The Secret of Satoshi's Tea Garden" on the virtual reality platform Decanaland both sold at high prices in 2019.

Notably, a growing number of celebrities are also entering the NFT arena, with Paris Hilton auctioning off an image of her pet cat Munchkin for 40ETH ($17,000 at the time) to raise money for charity.

With the recent uproar at NFT, companies and brands have taken an interest in the industry and gotten involved. Currently, some of the world's best-known brands are developing blockchain-based games, collectibles, and virtual worlds. They include the National Basketball Association (NBA), National Football League (NFL), Ultimate Fighting Championship (UFC), Formula One, Louis Vuitton, Samsung and Nike, to name a few. The involvement of these big brands is an important step in the mainstream of NFT, as new users can learn about NFT concepts through channels they are passionate about and already familiar with.

How does NFT work?

The unique information in NFT is stored in smart contracts and recorded on the blockchain. Currently, most NFTs use the Ethereum protocol as well as the ERC-721 standard. The main feature of the ERC-721 token is that when a token is created, it only exists one, which means it is unique. Users can create their own ERC-721 token by writing a piece of code in a smart contract that follows a basic template and then adds unique details about the token. These unique details can include the name of the owner, rich metadata, or links to secure files.

Witek Radomski, co-founder and CTO of Enjin, developed the ERC-1155 standard. The ERC-1155 standard allows a smart contract to manage an unlimited number of tokens. Unlike the ERC-721 token standard, which only creates NFTs and forces developers to deploy a new smart contract for each new token, the ERC-1155 token standard allows developers to deploy a single smart contract and then mint new tokens (interchangeable and non-interchangeable) an unlimited number of times in a matter of seconds. The ERC-1155 contract has now powered more than 40 games, as contracts made for a single game have the flexibility to include a wide variety of items, from weapons and armor to health potions and superpowers. However, ERC-1155 is not just for games, it can be used in a variety of industries.

In addition to Ethereum, there are many other blockchains that support NFT, including Tron, EOS, NEO, and the Flow blockchain developed by Dapper Labs. Unlike Bitcoin and other homogeneous tokens that can be traded on standard cryptocurrency exchanges, NFT is traded on open markets that connect buyers and sellers on the LAND markets such as OpenSea or Decentraland.

NFT Features: What makes them attractive

The three desirable features of NFT are: provable authenticity, ownership provision, and transferability.

1. Authenticity

The standardization of the NFT and the detailed nature of the smart contract make each NFT unique and verifiable. Users know that only one NFT of each type exists, so they can't be copied or copied, and you won't buy pirated NFTs. The transparency of blockchain technology also means verifiable and provable authenticity.

Piracy is a big problem in many industries, especially in art and luxury goods. "Blockchain technology powers NFT," Cointelegraph wrote in a previous post. "It can crack down on piracy so that buyers don't have to worry about buying fakes." And luxury brand group LVMH, owner of the Louis Vuitton brand, is riding the NFT wave and preparing to launch a blockchain to prove the authenticity of their luxury goods. Louis Vuitton plans to turn every product into a NFT, so it can verify authenticity, and allow users to track a product's entire life cycle from crocodile farms to stores, and then see each buyer and seller before it.

2. Ownership

Blockchain technology is enabling people to actually start owning things of their own. It is worth noting here that NFT, due to its smart contracts and related rights, can only be traded and transferred by the owner of the asset. This means that even the publisher of the NFT cannot copy or transfer the NFT without the permission of its owner.

From character skins in "Fortnite" to gold in "World of Warcraft", gamers have been trading virtual currency and assets for years. But in these traditional games, you can't really own anything in the virtual world, because its economy exists entirely in a closed market. You can get a license for an app for $60, play it for a month, beat the game, then shut it down and see nothing else. In other words, you can't trade fiat money with in-game currency or items, and you can't take it with you to another game, because you never really own it.

But in the world of blockchain games, you own all the in-game assets (in the form of NFT) in your wallet, and you can use them to trade, fight, fight or race across multiple games. You own and control all of these assets, whether they be magic swords, skins, or currency.

Conference in 2020, the future of the game and the future of the NFT thematic discussion, Jesse Dr Reich (), chief executive of Splinterlands expounds how to have an asset is a one-way valve: "when you start to really have your sword, your armor, your character, and about some of their custom when you go to the other games to play, spend hundreds or thousands of dollars but I do not have the idea of these things is no longer attractive." Dapper Lab's Naayem agrees, arguing that once users experience uniqueness, scarcity, and ownership in a virtual world, spending money is no longer an option in a normal game.

3. Transferability

Since NFTs are decentralised, there will be no need for a central issuer and they will be easier to transfer. It allows users to dive deep into unauthorized peer-to-peer interactions, transactions, and specialist marketplaces, and the process is quick and easy without third-party interference.

Following the example of the above game, NFT solves the problem of exclusivity in traditional games because assets can be easily transferred between different blockchain games. Since the assets you build or buy in a game are owned by you and not the game company, they can be transferred between worlds and can be carried from one game to another.

Why is NFT so exciting?

NFT is creating opportunities for content creators of all types -- visual arts, game designers, musicians, etc. -- and enabling them to generate new revenue. Part of what makes them so exciting is that they can represent a variety of assets: virtual collectibles, game items, digital art, event tickets, real estate, ID cards, certificates, and more. William E. Quigley, co-founder of Wax, gamely stated, "NFT will join movies, music, and video games as a unique form of entertainment. Every consumer product that is not food will become NFT."

Because it is easy to transfer and prove ownership, NFT undoubtedly offers a wide range of possibilities for both real world and virtual assets.

The current crypto market revolves around bitcoin and cryptocurrency trading and digging. But in order to encourage their mass adoption, it needs to move away from these areas.

NFTs are driving this process because of their ability to capture the hearts and minds of users and bring them into the blockchain space in a way that homogenized tokens have not yet been able to do.

Taking Cryptokitties as an example, Dapper Labs' Naayem revealed that "about 40 percent of our audience has never owned a cryptocurrency before." Introducing new users into the crypto world through entertainment and leisure channels makes it easier for beginners to access and understand the value that blockchain technology and decentralization can bring to them. Dapp Radar project manager Ilya Abugov tell Cointelegraph: "art and collectibles is the most easy to understand the individual cases, so this may be a period of time the hype centralized place. If we see an exciting games, and more artists to join to the ecosystem, the mainstream of this trend is likely to get more traction. However, from the asset tokens to a file, there are more cases by NFT unlocked."

The current NFT use case

The current use cases for NFT are concentrated in categories such as collectibles, art, games and virtual worlds. But other categories of assets such as sports, fashion and the real world are also growing steadily. An interesting tweet from virtual land investor DCLBlogger lists about 25 industries that the NFT ecosystem is upending. (Read:See, NFT is already widely used in these areas")

1. Collections

Collotibles is one of NFT's most popular apps in terms of sales, with 23.6% of sales over the past month coming from collectibles. Launked in June 2017, CryptoPunks were one of the first collectibles on Ethereum, and have sold for thousands of dollars. They were actually developed before ERC-721 was introduced, so a wrapper had to be introduced so that they could be traded on an exchange like OpenSea. Since its launch in November 2017, Cryptokitties remains one of the most famous collectibles use cases, with total historical sales of virtual cats reaching over $38 million.

The category continues to thrive as NFT technology is used to create tokenized versions of star athletes and celebrities for fans to collect. Sorare, a fantasy football game, allows players to collect "limited-edition digital collectibles" of their favourite players from 100 football clubs.

Members of the NFL and NBA have expressed interest in working with NFT technology as early as the February 2020 NFT NYC. Since then, in partnership with the NBA, CryptoKitties creator Dapper Labs has launched a tok-driven NBA Topshot. In a conversation with Cointelegraph, Cathy Tedman, head of partnerships and marketing at Dapper Labs, said, "The goal of this product is to give fans ownership of what happens on the court." By tapping into a passionate fan base, NFT Collectibles has demonstrated their potential and power to bring these communities into blockchain. NFT is also dragging more traditional collectibles into blockchain technology, such as trading cards, coins and stamps (such as Crypto stamps).

Terra Virtua, a digital collectibles ecosystem, is at the forefront of the NFT collectibles movement. The platform aims to provide users with a "deep sensory experience" by bringing digital collectibles into a multi-platform VR and AR world.

Terra Virtua has launched a series of role-based 3D animated creatures called "Vflects", as well as 2D and 3D licensed collectibles from The Godfather, Top Gun, Sunset Boulevard, and Lost in Space. They provide an interactive marketplace for a unique range of licensed digital collections, while also launching an ecosystem through their art gallery app and Terra Virtua Fancave to create a cross-platform showcase tour. The Art Gallery app allows owners to store, display, interact and show off their unique digital artwork collection. Terra Virtua Fancave is a personalized and customizable VR environment where users can display their collectibles. "Terra Virtua's primary mission is to bring NFT to the mass market," said Gary Bracey (CEO of Terra Virtua). "The core team's video game experience has made us very focused on the user experience and user interface, and by making the process frictionless and engaging, we hope to bring the world of interactive digital collectibles to the mainstream." The sensory elements and cross-platform capabilities that Terra Virtua provides to users propel NFT beyond its current label as a product into a truly engaging interactive experience.

2, games,

As mentioned earlier, gamers are a perfect target market for NFT because they are already familiar with virtual worlds and the concept of currency. NFTs have thrived within the gaming industry because they allow items in games to be tokenized and easily traded peer-to-peer or transferred or traded in the marketplace. This is a complete departure from the traditional practice of banning the sale or transfer of in-game items such as rare weapons and skins. NFT also makes the game experience more concrete and valuable, as players have real ownership of their digital assets. They also create a new economy, as it is now possible for players to make money by building and developing their in-game assets.

A booklet from Galaxy Interactive explains that as virtual goods gain the same status as physical goods, "the value we create inside the virtual world will be indistinguishable from the value we have historically created outside the virtual world." The integration of NFT into the game world is also encouraging the development of an engaging and interactive community, as players begin to build a solid community through peer-to-peer transactions.

Top 10 Blockchain Games for the past week, according to Nonfungible.com

There are three popular blockchain games out there: "Axie Infinity," "Gods Unchained," and "My Crypto Heroes."

Axie Infinity is a digital pet community centered on collecting, training, cultivating, and fighting fantasy creatures named Axie. Built on the Ethereum blockchain, the game is the first game on the blockchain to feature animated characters and rich immersive gameplay.

Gods Unchained is a digital collectible card game in which cards are distributed as NFT cards that can be owned and traded as if they were physical cards.

My Crypto Heroes is a Japanese multiplayer role-playing combat game that releases Heroes and in-game items as tokens on the Ethereum blockchain, allowing players to level up their Heroes through quests and tournaments.

For a game to be successful, it has to be fun and enjoyable, but another key aspect of the massive adoption of NFT games is "Play2earn".

Players can play the game to earn something in exchange, which is very attractive to many people, especially players in developing countries, who used to play Axie Infinity, for example, to earn as much as their salary.

Cryptopick is another example of users being rewarded for playing a game. Players can learn about cryptocurrency by playing the game without taking any financial risks, and more importantly, earn their first cryptocurrency (ETH) and NFT. Having their first cryptocurrency and NFT means they will learn about owning wallets, conducting transactions, etc., making gaming an attractive way for many to get involved in the crypto space.

Players can buy some prizes with the tokens they earn on the Cryptopick platform

3, art,

One of the biggest challenges for digital artists is protecting their work from copyright infringement, and NFTs are a solution because they provide proof of ownership, authenticity, and address piracy. An article from CoinDesk points out that many artists have turned to NFT and online showrooms as museums and galleries have been forced to close due to the new crown epidemic.

The first NFT record came in July, when 'Picasso' s Bull 'was bought for more than $55,000. Subsequently, the highest prices are broken many times. For example, the price of "Right Place & Right Time" is over $100,000, and the price of "images of a Mind" is over $130,000.

"These projects can improve and simplify their income by connecting artists directly with consumers through blockchain-based payment and exchange solutions," Cointelegraph noted.

Use cases for platforms and markets for digital art include SuperRare, MakersPlace, and Rarible. These platforms and marketplaces operate similarly to each other, allowing users to easily create original digital art and sell it on their marketplaces.

Rarible is a particularly interesting example because it combines some of the more interesting DEFI trends of 2020 by combining digital collectibles with mobile potholes. They do this by issuing their governance token, RARI. This adoption strategy is one of the reasons for renewed interest in NFT in the final months of 2020. When users sell and trade their NFT on the platform, they are rewarded and incentivised by Rarible's governance token, RARI. Thus, Rarible is a community governance marketplace that aims to be a fully decentralized autonomous organization (DAO), and the RARI Token is the first step in that direction.

In addition to Rarible, many other platforms and NFT markets have also started issuing and distributing governance tokens. The Sandbox(Sand), Somnium Space(Cubes), Decanaland (Mana), and a complete list can be found on Coinecko.

4. Virtual worlds

Another use case for NFT is virtual worlds. Decentralized virtual reality platforms such as Decentraland, The Sandbox, and Cryptovoxels allow users to create, own, and tokenize parcels of virtual land and other NFT projects in games.

Land on Decentraland is permanently owned by the community and gives players complete control over their creations and virtual assets. Given how familiar Gen Z is with virtual worlds and how their concept of valuable assets differs from older generations, assets in virtual worlds give them choices and flexibility that are in line with their values.

"So maybe our next generation won't have a roof over their heads, but they will have a lot of digital assets."

5. Real-world assets and documents

NFT can tokenize real world assets such as real estate, stocks, or documents such as certificates, licenses, medical records, birth certificates, and death certificates. However, this type of development is still in its early stages and there are few use cases. But as the crypto world and NFT continue to grow and grow, who's to say you won't someday (perhaps soon) own a vineyard in another country thousands of miles away? Your digital wallet may soon contain proof of every certificate, license and asset you own, it is understood.

What are the prospects for NFT?

The possibilities and potential of NFT are endless, and recent record sales have also helped drive the development of NFT technology. One of the current barriers to its large-scale adoption is the lack of widespread education about blockchain technology and the crypto world.

"If you teach people, let them taste it and experience it, then they won't be intimidated by it." "Says John G Fields, founder of Grow Your Base.

Part of this education is security education, as new users entering the blockchain space need to understand how to protect their wallets and private keys so that their precious digital assets are not vulnerable to hackers.

Because of their rarity and scarcity, many digital assets, collectibles, and investments are so valuable that losing them will undoubtedly hurt. Developers and creators of digital assets also need to ensure that solid Copyrights and licenses are written into smart contracts to protect their value.

Currently, most crypto wallets are fairly complex, making it difficult for new users and mainstream beginners to get started. But wallets are being developed and released that aim to improve the situation.

Another aspect of educating the public needs to consider that NFT and blockchain technology are still very geeky, stiff and tech-biased, and that further simplification is needed to make it easy to use and understandable to people who know nothing about blockchain.

Jesse Reich, Ph.D., CEO of Splinterlands, at The Future of Gaming & AMP; Mentioned in the Non - Fungible Tokens group, the trouble is that the "chain blocks for new users is invisible, but it is for advanced users can touch it."

While projects like CryptoKitties have been successful in bringing new users to the blockchain, and the development and rise of NFT use cases in recent months has given a boost to blockchain adoption, there is still a long way to go.

At the moment, much of the excitement at NFT is focused on niche areas such as games, art and collectibles, but a steady stream of new projects is slowly but surely extending NFT into other aspects of our material lives.

As more and more big brands (like Nike's patent on shoes as part of the NFTS, called Cryptokicks, which allows users to "reproduce" different shoes to create a custom pair of sneakers) enter the fry, we'll see how NFT evolves into something that can be transferred between different worlds (virtual and physical). As Yat Siu (CEO of Animoca Brands) puts it: "If all of a sudden millions of people end up owning Nike virtual shoes, how many game companies are actually going to say, 'Let's wear these Nikes in our virtual games?'"

As awareness of the potential and value that NFT can offer has grown, more and more big brands, big investors and venture capital firms have taken notice and become involved. Morgan Creek Digital co-founders Anthony Pompliano and Jason Williams are reportedly making a "big bet" that the digital art NFT will surpass the physical art market.

Independent blockchain game developers are also starting to attract the attention of VCs because of their very long product lifecyals and their ability to offer mutable token models, which makes them ideal investments.

The new governance token in the NFT space is also generating interest, and as with DEFI, one wonders what exciting new ways NFT and DEFI will find to blend.

The road ahead for NFTs is not without challenges, however, as they could face regulatory hurdles. In any case, the crypto space is still very young and needs to grow as more projects are born, and even if those projects fail, they will still make an indelible contribution to the whole field.