Currently worth $100 million, the nonfungible tokens industry is changing how the ownership and authenticity of digital assets are perceived. Leading entities in the gaming and blockchain world are already experimenting with NFTs in all sorts of ways. However, the primary goal is to prove the authenticity and ownership of digital items, which had proven difficult until the advent of blockchain technology.
Through blockchain technology, digital assets can have unique identifiable attributes that make them rare and irreplaceable. On NFT marketplaces such as OpenSea, a multitude of projects are at work producing all sorts of creative and transferable NFT items.
While the past decade has seen a lot of excitement around fungible digital assets like Bitcoin (BTC) and Ether (ETH), nonfungible tokens are just getting started, and already, there is a lot of progress to write home about.
A quick NFT primer
While a fungible token like Bitcoin is indistinguishable from and replaceable with other tokens of its kind, a nonfungible token is distinguishable from other tokens and cannot be replaced or substituted.
A bank note in a wallet, for instance, can easily be lent out and replaced with another one. The person that takes the loan does not necessarily have to give back the same bank note. That banknote is, therefore, a fungible item replaceable by another of its kind in a one-to-one ratio.
However, when buying a unique piece of art or a plane ticket, it is impossible to get the same value if the item is exchanged for another — assuming those items are unique. Therefore, a plane ticket that gives you the right to a seat in standard class on a flight to location A is not the same as a ticket that lets you board a private jet to location B.
Blockchain makes it possible to own NFTs in the digital world, similar to how anyone would own a baseball card in the physical world. These digital assets can be stored on the blockchain and be transferred from one owner to another without the risk of unlawful capture and duplication. Tyler Perkins, vice president of marketing at Immutable — a blockchain-based game development company — told Cointelegraph:
“The use cases for NFT are incredibly powerful. Whether it be providing non-custodial ownership of video game items and domain names, creating digital scarce art, or tracing commodities — they lend themselves well to various high-value use cases in a digitally native world.”
However, it would be hard to discover NFTs without a marketplace. Perkins mentioned that “Marketplaces serve an important role in the discovery and growth of NFTs,” adding: “The ability to trade a digitally scarce, unique asset is one of the primary selling points of the technology, so naturally, marketplaces support that.” With that said, below is a rundown of some popular NFT marketplaces.
OpenSea is touted as the world’s largest marketplace for NFTs. With transaction volumes that exceed many of its peers, OpenSea offers a variety of virtual items ranging from digital collectibles to domain names, digital art, card games and so forth.
Simply put, the platform operates as a one-stop shop for all nonfungible tokens. Users can also customize their NFTs and sell them to a target audience on the marketplace. Currently, OpenSea hosts more than 1.2 million NFTs and features tools that enable developers to create and integrate NFTs into games with minimum effort.
According to the company’s CEO, Devin Finzer, the future of the NFT industry will see a lot more activity in the purely digital gaming world before the tokenization of real-world assets picks up speed.
On June 8, PlayDapp was launched as a customer-to-customer NFT marketplace that allows users across the globe to freely trade blockchain in-game items. Currently, users on the platform can trade in-game items from CryptoDozer and DozerBird, which are the only blockchain games supported on the marketplace. Plans are underway to launch titles such as Along with the Gods: Knights of the Dawn.
Apart from being a platform for gamers looking to trade NFTs, PlayDapp also offers support for developers. According to Choi Sungwone, the platform’s general manager of strategy, the company plans to deliver tools that “allow game items in the RPG genre to be traded through NFT through PlayDapp MarketPLAce.”
PlayDapp is focusing on creating in-game items that can be traded among users and is supported by the involvement of industry experts such as Koh Kwang-wook, who is the former chief technology officer of Item Bay, the world’s first online game item website.
Also, about a year ago, SuperTree, the company backing the PlayDapp marketplace, joined Samsung’s C-Lab program, which is a startup incubation program supporting the development of promising startups.
Game, the company that owns Game Credits, wants to be the in-game currency of the esports industry. At its core, the Game Credits platform uses its GameCredits (GAME) token for multiple purposes. First, the token serves as an in-game currency that can be used to buy and sell NFTs on the marketplace.
GAME tokenholders can also stake tokens to fund the development of quality games on the platform. The token is used to pay for transactions on the NFT marketplace and also to pay for fees associated with the creation of NFTs by developers.
Apart from being a marketplace for in-game items, Game Credits also offers solutions for the ownership and creation of digital assets by providing developers with ready-made tools that enable quick integration of NFTs into gaming platforms.
With Game Credits, developers can earn from the NFTs they create, even without any knowledge of blockchain programming. Jason Cassidy, CEO of Game Credits, told Cointelegraph that NFT exchanges are an essential part of the ecosystem: “NFT’s represent the other half of crypto — the parts of our world that are unique and hold value to us for completely different reasons."
Founded in 2015, Decentraland is a decentralized, user-owned virtual world that features an NFT marketplace where users can buy plots of land, develop them and sell them later. The platform also allows users to create original artwork and scenes using simple building tools. Apart from buying and selling virtual land, Decentraland’s NFT marketplace also offers wearable avatars, among other NFT items built on the Ethereum blockchain.
Every virtual item on the platform is represented with a token recorded on a blockchain-backed ledger. For example, virtual land is represented by a token called LAND, and those who own such tokens can build up other tokens that represent other items such as a house, hotel or school on top of the virtual land.
Although the platform is still undergoing development, Decentraland, at its core, is looking to create a new way to interact with NFTs by creating an immersive experience tied to a native economic network.
The Enjin marketplace was one of the first NFT marketplaces to go online. Enjin, a blockchain asset issuance platform, allows developers to use its Enjin Coin (ENJ) to develop NFTs. Enjin Coin is built on Ethereum with a refined NFT standard that includes the Enjin suite, allowing for the creation and monetization of digital games.
So far, Enjin has partnered with other players in the industry to create tools such as the EnjinCraft plugin, which is an open-source plugin that enables the use of tokenized NFTs in Minecraft. Therefore, players can link Enjin wallets to purchase in-game weapons and avatars or trade them with other items within Minecraft.
Having secured partnerships with Ubisoft, Microsoft and Samsung — to mention only a few — the Enjin team has gained popularity in the Ethereum world and plans to grow its platform while continuing to enable the secure ownership and trade of NFTs.
According to Dapp Radar, Rarible is one of the leading marketplaces for NFTs, with weekly volumes that exceed $1 million. Yet, the Russia-based platform was founded just in 2020.
Rarible is a community-owned platform that offers a variety of digital assets, ranging from digital artwork and domain names to different kinds of collectibles. Apart from its capacity to allow gamers to trade NFTs, users on the platform can use the Rarible Governance Token (RARI) to create customized NFTs. This feature allows artists to create music albums, movies and even books whose ownership is secured on the blockchain.
The Rarible token is also used as a governance token, thus further shifting the Rarible marketplace into a decentralized autonomous organization.
Rarible recently partnered with CoinFund, a New York-based blockchain investment firm, through which Rarible is expected to receive funding for the further development of its NFT marketplace.
The way forward
At the moment, there is a consensus in the crypto community regarding the value of fungible digital assets such as Bitcoin and Ether, which is determined by market forces. However, nonfungible assets are valued for totally different reasons and are increasingly becoming the other half of the blockchain discussion.
With reports indicating a growth of over 2.5 billion users, Cassidy believes that future growth is predicated on the usability of NFT exchanges: “Hot NFT sectors like art need these marketplaces to allow price discovery to take form as their value is purely subjective in nature. The exchanges offer this foundation for awareness of a new asset class as well as direct access for investment into it.”
The future looks bright for the NFT landscape as organizations such as the Blockchain Game Alliance attempt to bring together NFT-focused minds to further develop the industry. However, there are still a few challenges on the way. For instance, Cassidy noted that the lack of liquidity makes it risky to invest in certain NFTs, as the market is still in its early stages with a limited number of buyers. Also, because the value of the assets is considered subjective, an investor may have to wait for a while to get the price they want.
In addition, because most of the NFTs are built on Ethereum, Cassidy added that “The more Ethereum struggles to scale the more challenges the NFT industry will have as the ERC-721 and ERC-1155 standards currently represent the bulk of all NFT’s in existence today.”
Perkins also noted scalability as the main issue hindering further growth of the industry. However, he opined that scalability might not be an issue for long given the efforts from multiple projects to develop scalable layer-two solutions that hope to improve the handling of off-chain transactions by decentralized applications. As such, layer-two solutions will reduce the cost of moving NFTs from one user to another while also increasing the overall efficiency of Ethereum-based platforms.