Adding creativity to crypto gives it a sense of humanity—something that might be missing from the digital currency community for many. For not everyone is into collecting coins just for the sake of investment.
NFTs (non-fungible tokens) allows lovers of crypto to own tangible assets in the form of digital and physical rare art, gaming accessories and abilities, and even unique memorabilia backed by ERC tokens.
The technology behind NFTs makes the applications endless as well as secure, ensuring products and services are authentic and inevitable rare.
So, how can NFTs be the future of cryptocurrency for 2021? Allow me to speculate how NFTs can be used in this new decade by going through their history and potential.
History of NFTs
The timeline of NFTs started in concept way back in 2012 with the invention of Colored Coins.
These coins used satoshi (small amounts of Bitcoin) to represent assets like company shares, access tokens, memberships, and even items like property and collectibles.
However, Colored Coins relied on a consensus of value, which made them vulnerable and essentially worthless if the community distributing them fell apart.
Luckily, the concept of placing assets on the blockchain didn’t disappear. Rather, it remerged in 2014 as an open-source internet protocol on a peer-to-peer financial platform using the Bitcoin blockchain. This was called Counterparty.
On Counterparty, users could create asset-backed items, which led to NFT-like trading cards and memes associated with Bitcoin.
It wasn’t until March of 2017 that the popular Counterparty-initiated Pepe memes found their way onto the emerging Ethereum network as the Peperium project with its ticker RARE.
Cryptopunks followed the Peperium sensation as two developers created 10,000 unique digital characters, gave them away to anyone with an ETH wallet, and watched as they were bought and sold on the secondary market.
While Cryptopunks in essence acted like an NFT, the technology—ERC721 tokens—weren’t invented yet so they couldn’t fully function as they do today.
The end of 2017 may well be remembered as the first major crypto bullrun. But, it is also known for the launch of an NFT craze in the form of Cryptokitties.
These “digital beanie babies” as some media reported showed the world how powerful NFTs could be as they became a mainstream hit. But what the public might not have noticed is that for the first time these NFTs were backed by ERC-721 tokens, making their ownership and movement traceable, ensuring their authenticity and uniqueness.
Since the craze of 2017, NFTs have taken a turn from gimmicky kittens to high-quality art, high-tech gaming, and even higher prices. Buying, making, and tracking these items have evolved as well.
Market places like Nifty Gateway have made creating and auctioning NFTs, or as they call them Nifties, easier than ever. One artist’s collection sold for over half a million dollars in a quick 5-minute bidding war—with secondary sales surpassing $1 million.
The price may seem ridiculous but it reflects stability.
That is because once an NFT is sold and owned it can never be lost, stolen, or frankly disappear as it lives on the blockchain as a unique ERC-271 token. This allows collectors to acquire value as the art appreciates. And in some cases, earn a profit by selling variations of the NFT like this recent programable digital art piece of Ethereum’s founder.
The way NFTs can function as an ERC-721 token on the blockchain gives it innumerable applications. Not only can they come in any form, they can also interact with other decentralized technologies.
In the next phase of NFTs, we are going to see new ways that they can be used as real-world assets. Since they are in a sense the most verifiable commodity in history as they use the safest and most reliable, unbiased authenticator to date: blockchain, NFTs can be seen as more valuable than currency itself.
For this reason, NFTs are now being used as collateral in another innovative field of DeFi (decentralized finance).
With over $20 billion in locked assets, DeFi has been the biggest trend in crypto for 2020. The newly launched protocol NFTfi aims to combine the success of both enterprises by allowing NFTs to be staked on a smart contract. If the loan defaults then the NFT is released to the lender.
The Future of NFTs
As CBDCs (central bank digital currency) become common headlines, Bitcoin price records continue to surprise us, and upgrades like Ethereum 2.0 keep us on our toes, it is clear that we’ve entered a new digital era.
This is why NFTs might break its barriers of art and gaming and once again enter the mainstream.
Imagine combining the history of NFTs where people pay thousands of dollars for a digital cat with the dream of buying a home using a loan from that same digital cat.
Thinking even further, imagine that all commodities are NFTs. Every product you buy is a verified asset on the blockchain.
This means that everything could be a tokenized crypto, used as collateral, loaned, borrowed, bought, sold, and maybe even shared. When assets are protected like NFTs the possibilities of a trusted decentralized economy online and off become a reality.