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A non-fungible token (NFT) is a special type of cryptographic token which represents something unique; non-fungible tokens are thus not mutually interchangeable. This is in contrast to cryptocurrencies like bitcoin, and many network or utility tokens that are fungible in nature.

Applications

Non-fungible tokens are used to create verifiable digital scarcity, as well as digital ownership, and the possibility of asset interoperability across multiple platforms. NFTs are used in several specific applications that require unique digital items like crypto art, crypto-collectibles and crypto-gaming.

The first tradeable NFTs were deployed to the Ethereum blockchain on October 21st, 2015 with the Etheria.world project which was upgraded and state-transferred to its current form on October 31st, 2015. A live demonstration of tile purchasing, brick farming and structure building was performed by its creator at DEVCON1 on November 13th. Before gas prices became prohibitively expensive with ETH1 network congestion, owners created such structures as a defecating horse (with fencing), the Microsoft logo and a log cabin.

Art was an early use case for blockchain. NFTs prove authenticity and ownership of digital art. The launch of CryptoPunks In June 2017 paved the way for "rare" art on the Ethereum Blockchain. DADA.art built from the CryptoPunks model and launched the first marketplace for rare digital art in Oct 2017.

Later, popular blockchain games like CryptoKitties made use of non-fungible tokens on the Ethereum blockchain. NFTs are used to represent in-game assets, and are controlled by the user, instead of the game developer. This lets the assets be traded on third-party marketplaces without permission from the game developer.

Standards

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Specific token standards have been created to support the use of a blockchain in gaming. These include the ERC-721 standard of CryptoKitties, and the more recent ERC-1155 standard.

ERC-721 Standard

ERC721 was the first standard for representing non-fungible digital assets. ERC721 is an inheritable Solidity smart contract standard, meaning that developers can easily create new ERC721-compliant contracts by importing it from the OpenZeppelin library.

ERC-1155 Standard

ERC1155, brings the idea of semi-fungibility to the NFT world as well as it provides a superset of ERC721 functionality, meaning that an ERC721 asset could be built using ERC1155.

Growth and mainstream appeal

Non-fungible tokens first became popular when CryptoKitties went viral and subsequently raised a $12.5 million investment. RareBits, a Non-Fungible Token marketplace and exchange, raised a $6 million investment. Gamedex, a collectible cards game platform made possible by NFTs, raised a $800,000 seed round. Decentraland, a blockchain-based virtual world, raised $26 million in an initial coin offering, and had a $20 million internal economy as of September 2018. Nike holds a patent for its blockchain-based NFT-sneakers called ‘CryptoKicks’.

References

1. Merriam Webster Definition
2. Schroeder, Stan. "Crypto trading card game 'Gods Unchained' looks pretty sweet in first gameplay trailer". Mashable. Retrieved 2018-11-18.
3. "Enjin is Creating a Real-Life Ready Player One, and It's Powered by Blockchain". VentureBeat. 2019-04-16. Retrieved 2019-08-14.
4. etherscan.io. "Ethereum Transaction Hash (Txhash) Details | Etherscan". Ethereum (ETH) Blockchain Explorer. Retrieved 2021-02-21.
5. etherscan.io. "Ethereum Transaction Hash (Txhash) Details | Etherscan". Ethereum (ETH) Blockchain Explorer. Retrieved 2021-02-21.
6. "Tweet about Etheria live demo, Nov 13, 2015".{{cite web}}: CS1 maint: url-status (link)
7. "The pooping horse of Etheria".{{cite web}}: CS1 maint: url-status (link)
8. "The Microsoft Logo built on Etheria tile 5,3".{{cite web}}: CS1 maint: url-status (link)
9. "A log cabin in Etheria".{{cite web}}: CS1 maint: url-status (link)
10. "The Art World Needs Blockchain – Irish Tech News". irishtechnews.ie. Retrieved 2018-05-02.
11. "how cryptopunks creators charmed the art world and paved the way for blockchain art". Breaker. 2019-01-19.
12. "the blockchain art market is here". Artnome. 2017-12-17.
13. Wong, Joon Ian. "The Ethereum world is now obsessed with breeding cartoon cats". Quartz. Retrieved 2018-05-02.
14. "CryptoKitties shows everything can — and will — be tokenized". VentureBeat. 2017-12-04. Retrieved 2018-05-02.
15. Wong, Joon Ian. "CryptoKitties is jamming up the ethereum network". Quartz. Retrieved 2018-05-10.
16. "CryptoKitties Mania Overwhelms Ethereum Network's Processing". Bloomberg.com. 2017-12-04. Retrieved 2018-05-10.
17. "CryptoKitties raises $12M from Andreessen Horowitz and Union Square Ventures – TechCrunch". techcrunch.com. Retrieved 2018-05-07.
18. "Crypto-collectibles and Kitties marketplace Rare Bits raises $6M – TechCrunch". techcrunch.com. Retrieved 2018-05-07.
19. "Blockchain startup Gamedex raises $0.8 million seed round to build platform for digital collectible card games like Pokemon – TechStartups". techstartups.com. Retrieved 2018-05-07.
20. Russo, Camilla (2018-06-12). "Making a Killing in Virtual Real Estate". Bloomberg. Retrieved 2018-09-05.
21. Hankin, Aaron (2018-09-04). "People are making more than 500% buying property that doesn't actually exist". MarketWatch. Retrieved 2018-09-05.
22. Beedham, Matthew (2019-12-10). "Nike now holds patent for blockchain-based sneakers called 'CryptoKicks'". Hard Fork | The Next Web. Retrieved 2020-12-23.

External links

• ERC-721 Standard

• Blockchain games