Through this article, I want to try to be as concise as possible to help you better grasp what NFTs are , and to help you better understand the great potential of NFTs .

What is a non-fungible token

A non-fungible token is a medium in itself. It represents proof of ownership of any asset. So its proof is not a piece of paper to prove that you own your car, or your house, its proof is stored on the blockchain, which brings key advantages.

• High transparency: You can think of the blockchain as a public ledger that records all transactions since its inception. You can check when you bought it and at what price here, it's pretty straightforward.

• Transferability: With just a few clicks, the ownership of an asset can be transferred from one part of the world to another.

• Security: Blockchain is the most secure online database out there. Its inherent nature makes it extremely difficult to hack.

• Creator Economy: Creators own the content they create, and as long as someone sells their creation, they benefit from royalties. They can also easily reach their followers. In contrast, current social media platforms extract most of the value from creators by capturing all ad revenue while preventing creators from reaching their followers (e.g., not sharing followers’ email addresses).

an explosive market

Secondary sales rose from under $100 million to $5 billion in less than a year (Source: Messari.io)

Data from Messari shows that the secondary market for NFTs, including December, reached a size of $15 billion . Cryptoslate estimates that the current market cap of NFTs is $37.65 billion .

These data are enough to show that the NFT market is booming. What’s more interesting is that these numbers only include a few real-world applications of NFTs.

Classification framework for NFTs

9 NFT Types (Source: Author - Inspired by Chris Dixon)

1. Art : Digital art, as demonstrated by Refik Anadol, and generative blockchain art such as Chromie Squiggles. You can find countless related projects, some of which let the blockchain determine what an artwork should look like (see Chromie Squiggles). Other projects use artificial intelligence techniques to create mesmerizing effects, and Refik Anadol is a true master of this.

Quantum Memory by Refik Anadol (Source: https://refikanadol.com/)

2. PFPs (Profile Pictures) and Avatars: This category is represented by Cryptopunks, which represent people’s online identities. They range from simple pixelated 2D images to high quality 3D avatars (CloneX).

Some of these projects experimented with intellectual property. The popular CrypToadz project by famous NFT creator Gremplin uses CC0, the public domain name. This framework means that no rights are reserved and anyone can use these images without owning them. To many, releasing an NFT under CC0 seems like a silly idea: if anyone can freely use an NFT, why should collectors buy it? Well, CC0 is the best way to take advantage of network effects (see Metcalfe's Law) . In fact, the more people create a copy of a project and share it, the more popular it will be and the bigger its network/community will be. As the network grows, its value grows exponentially, ultimately affecting the value of the project.

Other programs like Boring Ape Yacht Club, Hashmasks, RTFKT's CloneX also provide passive income. Owners of NFTs will occasionally receive airdrops (either in the form of NFTs, or in the form of fungible tokens) that they can sell for profit. For example, Hashmask owners receive $NCT tokens, which they can sell, or use to change the name of their Hashmask.

RTFKT's CloneX project (source: https://clonex.rtfkt.com/)

1. Access: Access is usually granted through POAP (Proof of Attendance Protocol). Specifically, you will receive an NFT with a QR code that will allow you to enter the event site. After the event, you can keep this NFT and it will show that you have participated in the event. Marketing agencies/companies/brands can issue special offers to customers to prove that they attended different events, or purchased special assets.

2. Music: Songs can also be stored as NFTs. There are many ways to do this: for example, the artist can retain commercial rights, which they can transfer to clients, or the song is only available for streaming. With NFTs, artists can benefit from countless options.

French artist Jacques takes a creative approach by dissecting one of his songs second by second. Every second is sold as an NFT, which allows him to raise enough money to pay for an entire album, effectively freeing himself from any music label. In short, by selling the rights to a song, he managed to fund his entire album.

1. Redeemable: This type of NFT represents an underlying asset (like a watch or painting). By burning (burning) NFTs, you can obtain the associated physical assets. Courtyard.io is paving the way in this area. In fact, Courtyard's service enables buyers to easily sell their NFTs without having to ship a watch or painting to the other side of the world. If a particular buyer wants to own the real watch or painting, they can ship the physical thing to their location by destroying the NFT.

Damian Hirst and Currency (Source: https://news.fr-24.com/)

Damian Hirst has been experimenting with the concept of convertibility through his project "Currency". Collectors face a dilemma: they must choose between owning physical art or NFTs, and collectors cannot own both.

1. Identity: Also known as Decentralized Identity (DID) or Sovereign Identity. Such services (such as XSL Labs) allow users to store their certificates on the blockchain and share only a portion of them when the service requires them. For example, if a platform requires a person's age and country of residence, the decentralized identity service will confirm that Ms. X is over 18 years old and that she lives in Germany. The decentralized identity service will not share more than required information, such as Ms. X's exact age or her exact address.

2. Web2 Database: You can turn elements of a database into NFTs. This helps consumers transfer data from one service to another in an easy way. This can also guarantee future common standards, which are much needed in the database.

3. Game Objects: This is a very popular category that extends from in-game skins and weapons to metaverse platform lands. Sandbox and Decentraland are among the most appreciated metaverse games. Players can rent their in-game assets to other players when they are not playing the game. For example, if I managed to upgrade my weapon because of dozens of hours of Call of Duty, someone might want to rent it from me to improve their stats.

This introduces the concept of "Earning While Playing" (P2E), where players earn financial benefits by playing and contributing to games.

The gaming world has yet to understand this. Players believe that NFTs will extract more value from them, and they are about to give value back to the community.

1. Physical Assets: This is by far the largest and most undervalued application of NFTs. In the future, a large portion of our physical assets will be tokenized. Our cars, houses, chairs, and computers will all have a corresponding NFT, and the imagination space brought by this is infinite.

The most popular P2E game is Axie Infinity (Source: Journal du Coin)

The future looks bright and diverse

In the future, NFT technology will be applied to assets such as houses, cars, brand names, etc. All of these assets will be tokenized (i.e. their proof of ownership will be recorded on the blockchain).

Now, imagine how many combinations of these can be combined with a homogeneous token such as stablecoins, bitcoin or ethereum. You can reward people for positive behavior or support for the community (like airdrops and lockdrops). Some of the leading web3 projects reward people for using their services early on, such as ENS and LooksRare. In the future, artists will be able to reward their first collectors and NGOs will reward their first donors.

Even better than the example above, a smart government will reward citizens for responsible behavior rather than punish them for not following the rules (see China's social credit system) .

Due to the fragmented nature, people will also have the opportunity to easily pool their resources to buy assets. For example, a community will be able to come together to buy properties, schools, and even golf courses (like linkdao). The community will stand up against the larger actors to defend their value, and thanks to the blockchain, they will have the means to do this in a straightforward manner.

Singers will reward fans for participating in different events, they will send fans special invitations, send fans tokens (like $Beyonce tokens), and even give them special assets in-game. Deadmau5 and Richie Hawtin's Pixelynx project is building a music metaverse that leverages these diverse capabilities.

If there is one thing I want you to remember from this article, it is that NFTs combined with homogeneous tokens (like Bitcoin, Ethereum, USDC., etc.) will open up tons of possibilities for all of us, and we Now only the tip of the iceberg has been uncovered.

I know this may all sound somewhat unimaginable (or at least groundbreaking). Yes, the metaverse and NFTs are about to impact the way we live, play and communicate. I don't think there will be any way to stop this technology from being adopted by our society. I do think there is a way for people to use it better. It depends on how we define the values ​​we want to promote.