I. Introduction

NFTs (Non-Fungible Tokens) come in all shapes and sizes on different blockchains. Each one is unique and some may involve different levels of embedded options. Check out our previous article if you’re still asking: ‘What is an NFT?’

The Worldwide Asset eXchange™ (WAX) is an online platform that allows users to buy, trade, and mint WAX NFTs globally using web-based dApps and ‘micro-services’ such as the Atomic Hub, which you can also read about in this article.

Let’s now take a wider look at NFTs, their current use cases, and what they could be used for in the future.

i. What is an NFT?

NFTs are a new form of digital asset that typically represent objects like art, collectibles, or items being used inside online video games. They reside in a ‘wallet’ with an indelible record of their ownership stored on a digital ledger called a blockchain, much like (fungible) crypto coins like $BTC (Bitcoin) and $ETH (Ethereum). However, do not confuse the two! They are very different.

ii. Where Do NFTs Come From?

The first NFT technology was invented by Kevin McCoy and Anil Dash in 2014. Their NFT ‘Quantum’ was made on the namecoin blockchain and recently sold at Sotheby’s for $1.4m. Following this, in 2017, Ethereum published the ERC-721 standard which enjoyed wide popular uptake in the production of NFTs among early adopters. The year NFTs really took off was in 2021 when a new generation of video gamers and digital collectors started trading their NFTs globally on the WAX platform.

iii. Where Are NFTs Kept?

All NFTs exist on blockchains that store all the data that defines and distinguishes one NFT from another. WAX, which is built using the EOSIO blockchain framework, is recognized as one of the premier platforms for NFTs, alongside others such as the Ethereum blockchain. Ownership of NFTs is stored in a crypto wallet from which they can be sent directly to other users or transferred to and sold on a marketplace.

iv. What Formats Can NFTs Come In?

The format of the NFT depends on the platform, but these are all on-chain and digital. Though they may refer to any sort of file type that can be then viewed, played, or deployed on any digital device, screen or trading system, the NFT itself is a separate digital asset.

That’s not to say that NFTs cannot be connected to a physical object in the real world. Increasingly, this basic characteristic of all NFTs – that they are unique and non-fungible – is drawing interest from many other business sectors.

There are many ways to classify the various types of NFTs. Let’s take a look at some of them.

II. What Types of NFTs Are There?

i. Artworks

The most widely known NFT use case is art, with headline-grabbing sales such as Pak’s ‘The Merge’ selling for $91.8 million, or the $69m Collage by digital pioneer Beeple which sold at Christie’s auction house in 2021. The unique nature of NFTs makes them a natural fit for this industry, which has always traded in exclusivity and rarity.

In the pre-NFT web 2.0 digital landscape, zero-value digital files were all endlessly reproducible and the world of fine art struggled to take hold, but it is now finding its place on blockchains in a symbiosis of the digital and physical.

ii. Collectibles

As with art, traditional sports trading cards have now been widely re-interpreted in NFT form, such as with the NBA Top Shot series. New types of collectible NFTs have quickly found a home due to their special capacity to capture rarity in numbered digital series. These also often overlap with art and online video gaming, such as the Bored Ape Yacht Club.

iii. Games

Beyond the world of collectibles, the Play-to-Earn market is built upon NFT micro-economies which allow players to return real value in the form of game-specific NFTs and / or tokens. For example, Alien Worlds is a self-contained game universe (a ‘metaverse’) that allows WAX players to ‘mine’ planets and complete missions to be rewarded with NFTs or the native currency ‘trillium’, which they can then trade with other users or participate in governance via planetary DAOs (Decentralized Autonomous Organizations). 

Other games allow players to buy NFTs which have a specific function or value in the game (e.g. ‘skins’).

iv. Metaverse

A ‘metaverse’ is an online digital counterpart to real life which allows users to participate in a virtual society and economy. The concept has existed almost since the dawn of the internet, with ‘Second Life’ often being considered the first metaverse.

There is an increasing overlap between metaverses and video games. The freedom and openness of a metaverse contrast with the rigidity of the rules-based competitions and linear stories typically found in video games. This gap has been rapidly closing with groundbreaking new approaches, particularly in the MMO (massively-multiplayer online) space.

NFTs are starting to take hold in metaverses like ‘Decentraland‘, a virtual world where players can own and develop virtual real estate, create and trade a huge variety of digital assets, and interact with one another in this ever-evolving universe. 

The fundamental characteristics of NFTs make them ideal for this kind of application as a means of storing value beyond the vicissitudes of the global market or government sanctions.

v. DeFi

There is a huge potential application in Decentralized Finance (DeFi) for NFTs. For example, JustLiquidity have created staking pools built around NFTs, requiring users to hold particular NFTs to access a given pool. 

In the world of joint ownership of any form of property or real estate, NFTs provide the means to accurately store the ‘deeds’ of ownership on a transparent blockchain, where smart contracts ensure correct remuneration according to the precise equity held in the event of a sale. The same goes for other luxury goods bought as investments: bottles of wine, rare watches, classic cars – the list is endless.

vi. Other

 

NBA player Spencer Dinwiddie famously tokenized his $34 million contract with the Brooklyn Nets franchise, turning it into an investment opportunity.

Rock band Kings of Leon were the first artists to release an album as an NFT, offering special perks such as limited edition vinyl and concert tickets through tokenization. Consider the difference between a concert ticket bought online via Ticketmaster and an NFT bought directly from the band. NFTs are an ideal way to increase access to events and live streams while increasing direct revenue for the creators, not the touts.

NFTs are used to raise money for new projects by issuing certificates, vouchers, and awards for ‘Angel’ investors who provide funding at an early stage.

Current web 2.0 crowdfunding websites such as GoFundme take 3.2% of all money raised and then retain control over the details of all who donated, whereas handling this process using blockchain technology allows for negligible costs and total transparency. In a case like this, an SSI (Self-Sovereign Identity) solution could also allow funders to solve the identity problem and bring project creators into closer contact with their fans and supporters.

NFTs can also have socio-political use cases. Political activists such as the anti-Putin art collective Pussy Riot have raised money for Ukrainian civilian groups via NFTs. 

In Lusanga, the Congolese Plantation Workers Art League have used NFTs to digitally re-appropriate a 1931carved statue of the spirit of a Belgian officer which was bought by the founder of the global megacorporation Unilever. 

Currently, the group known by the acronym CATPC (based in Africa) are being sued by the US museum (based in Virginia) that currently owns this statue and claims copyright over the image.

ii.  vIRL

One of the most interesting recent innovations in NFTs comes from WAX itself – the vIRL® standard which links real-world physical artifacts and digital NFTs. vIRL® NFTs allow you to own a physical product without the need to actually have it in your possession. It represents the ‘right’ to that product and can be held until you decide to ‘redeem’ or trade it. If you choose to redeem it, the physical product is dispatched to you and the NFT will typically be ‘composted’. For investor-collectors, this is a far more secure and green solution and creates a whole new paradigm for the ownership and trading of physical goods.

III. Where Can I Find NFTs on WAX?

You can find NFTs easily in WAX by logging into your wallet and looking under ‘Your NFT Inventory’. But there are many other ways of finding, browsing, and trading NFTs. Try reading this previous article which explains how to list and trade your NFTs using the AtomicHub.

IV. Where are NFTs Going in the Future?

There are a multitude of developing and potential use cases for NFTs.

NFTs could soon become part of all commerce, with any physical object of value tied to an NFT counterpart which helps everyone track and store data on that object (including the ‘deeds’ of who owns it). This could facilitate easier trading of physical objects, and even bypass emails, contracts, and paper-based business processes via trading metaverses based on virtual, ‘trustless’ counterparts of all physical goods.

NFTs could also be used (along with their constituent smart contracts) as collateral to secure loans. Once the loan is repaid the collateral is automatically returned, and if the loan is defaulted on then ownership of the NFT gets automatically transferred to the lender with no need for debt collectors or bounty hunters!

The global supply chain’s tracking of containers and managing of hundreds of documents (ranging from phytosanitary certificates to customs declarations) are also raising serious corporate interest in blockchain and NFTs as a means to reduce fraud and promote trustless trade. A recent study found over 200 documents and stages to export cut flowers from Kenya to the Netherlands. One can imagine that the cost of any imported goods could be reduced if there was less red tape, less fraud, and more efficiency.

V. Summary

This article has taken a look at a wide range of use cases for NFTs. Hopefully, you will now see that they are not merely dumb digital files, but are in fact new tools in the digitization of property and trade where individuals hold the keys. With WAX at the forefront of these changes, we will be looking at the new vIRL® NFT innovation in a future article.