NFT Use Cases
What is an NFT and what is the hype about?
In short, NFT stands for non-fungible token. An NFT is an ownership record for a digital asset. More specifically, an NFT is a unique digital item secured by blockchains that has unique metadata (it cannot be copied or substituted), and that is stored in a digital wallet. Think of NFTs as a certificate of authenticity and immutable proof of ownership. Due to their uniqueness and irreplaceability, they are quite different from traditional cryptocurrency tokens which are like-for-like (or, fungible) with one another. NFT projects can gain or lose value independent of the currency, just like a popular trading card or piece of art.
As interest in crypto and awareness around NFT art grows, NFT projects are evolving towards projects with more and more utility with longterm uses in the metaverse and in the real world.
Beeple, the first artist to inspire auction house Christie's to facilitate NFT sales, was one of the catalysts that helped speed public interest along. With his "Everydays - The First 5000 Days" coming to a close for $69 million, creators were more and more inspired to start their own NFT projects. By now, you've probably heard of many popular NFT collections including Cryptopunks, Cryptokitties, Megapont, Bored Ape Yacht Club, and countless others. Even popular fashion brands and sports teams are exploring NFTs, with some examples including Tiffany's, Adidas and the NBA.
At first predominantly popular on the Ethereum blockchain (ETH) and NFT marketplaces such as OpenSea, Decentraland, Nifty Gateway, and Rarible, these digital assets have become ubiquitous in Web3, spreading to other blockchains like Solana, Tezos, and Bitcoin via Stacks, with its leading NFT marketplace Gamma.io, and allowing start-ups to come a long way in a short time and build incredible new apps, including NFT marketplaces, DeFi apps, dApps and more.
There are many practical applications and use-cases for NFTs including giving the owner access to exclusive merchandise, digital art and other digital collectibles, tickets to events, video games, as well as physical assets and real estate. Note that the type of NFT you are looking to buy can influence your choice of marketplace. Importantly, given that NFTs are simply an ownership record, it's rarely the NFT itself that holds value, but rather its work of art, the communities it unlocks, or the rewards that can be earned through owning it. Let's take a look at some of the most popular NFT use cases.
What are the most common NFT use cases?
In the past year, the most popular use case for NFTs has been to represent digital artworks and other collectibles like songs, avatars, video clips, photography, and more. While creators are often pushed into contracts that don't serve their best interests by their galleries, producers and auction houses, blockchain technology is a unique opportunity for them. Creators can sell their digital art and get royalties for every sale on the secondary market thus creating another revenue stream, put their work up for auction, and connect with their communities.
When it comes to music, NFTs have the potential to change the industry significantly. Artists can leverage NFTs to tokenize their songs and albums, sell their merchandise, and provide royalties to creators, artists and producers.
NFTs and the gaming industry are a perfect match. NFT-based play-to-earn games have gained enormous attraction over the last year. An example is Axie Infinity, a gaming-oriented NFT marketplace where the assets of the online gaming platform can be minted, swapped, or bought and sold, but there are many other upcoming blockchain games.
In-game items such as avatars, skins, and weapons can be created on the blockchain to provide game-altering or cosmetic benefits to the players. One of the largest game developers, Ubisoft, launched its NFT project on one of their flagship games, Ghost Recon Wildlands on the Tezos blockchain which enables gamers to buy cosmetic NFTs that they could use on their account and sell them for real money.
NFTs can provide utility both in the metaverse and in the real world, with access to special features or even real estate. The metaverse virtual real estate market is predicted to grow by more than 31%CAGR by 2028, and expected to impact almost every industry.
In the metaverse, virtual lands are bought and sold through NFTs, which are sent to the buyer's wallet, proving ownership of the land. The largest metaverse land purchase was made in the Sandbox, one of the virtual worlds, for $4.3 million.
Fashion and sports
Fashion brands have started experimenting with NFTs that can be used as collectible pieces. As an example, Gucci sold a digital-only bag on Roblox (a metaverse space) for $4,115, while Dolce & Gabbana creatively combined the physical and virtual world when it auctioned its 9-piece NFT for $5.65 Million. As brands and creators look to reinforce loyalty, community behavior can be rewarded with NFTs, which are more liquid and valuable than traditional discount codes. Offering NFTs as a form of reward is already becoming common in the sports world, where athletes offer NFTs to their fans as a way of engagement. NBA Top Shot, for example, specialises in NBA collectibles which can be sold, bought and traded on the platform.
As an example, Koinearth is a startup that creates enterprise NFTs that enable the tracking of physical goods and documents across the supply chain. Metadata of products can be stored on the blockchain, preventing data elimination or unauthorized manipulation, while enabling tracking of the goods from their origin to their destination.
Tickets to popular events tend to get sold out fast, and almost 40% of ticketing traffic now comes from ticket bots. The sold out tickets are resold at higher prices on secondary markets, robbing organizers and artists as well as buyers who get scammed with fake tickets.
The public nature of the blockchain technology allows for the use of smart contracts, traceability, and transparency. NFTs can grant the NFT owners access to a specific concert and prove the authenticity and ownership of that concert ticket.
To learn more about the possibilities regarding ticket sales, you can also read our article about semi-fungible-tokens.
The security brought by the blockchain's encryption and the endless possibilities when it comes to the use of NFTs are applicable to real-world scenarios, too. Sigle.io was the first startup to use NFTs as a means of fundraising, with NFT holders enjoying extra utility on the site.
NFTs could provide a digital identity for people without physical documentation, proving who they are and where they live. This could also be expanded to business ownership or physical real estate, to modernize the workflow and transactions, allowing the reduction of paperwork and potentially speeding up the process of buying a home or creating a company.
NFTs built on Bitcoin
Stacks was the first blockchain technology to make Bitcoin NFTs possible. It functions as the smart contract layer for Bitcoin, through the Clarity programming language, enabling projects that can natively use BTC, unlocking immense value and helping the growth of crypto adoption.
Gamma is the largest NFT marketplace in the Stacks ecosystem. It is an open marketplace for Bitcoin NFTs and a hub for the world's Web3 social identity. The Gamma NFT marketplace is a home for collectors, creators and investors, where they can explore, collect, showcase, and sell NFTs. At Gamma, we empower digital artists and creators: they can deploy fully tested, creator-owned, no-code smart contracts in minutes through our creator-first launchpad.
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