While most of the crypto market news cycle this year has been dominated by the rising value of Bitcoin and other digital currencies, another type of digital asset has been developing in the background and could present a brand new frontier in the growing market for crypto and blockchain products.
Nonfungible tokens (NFT) are different from other digital assets such as Bitcoin in that they are digital tokens with unique characteristics, with metadata inside them acting as a permanent and unalterable record of what the token represents.
In short, NFTs act as the digital version of a certificate of authenticity that is often issued with real-world assets such as rare paintings.
This is in contrast to digital currencies such as Bitcoin, which, as the ‘coin’ suffix suggests, act as a medium of exchange much like pounds and dollars and can be split into smaller denominations if required much like physical currencies.
It is this uniqueness and authenticity that NFTs offer that makes them attractive to markets where these characteristics are sought after, as they can also serve a function as ‘digital collectables’.
One potential area where NFTs could find a home is the video game industry, where digital collectables such as in-game character outfits or items can often command high prices from players even though they only exist in electronic form.
“Huge potential” for NFTs, says blockchain venture firm CEO
The advent of NFTs has been one of the areas attracting considerable attention in the crypto and blockchain market across 2020, with many firms in the space eyeing the new token form as a new segment to be tapped.
In an interview with online events group Eventchain in late November, Eddy Travia, chief executive and co-founder of blockchain, crypto and decentralised finance (DeFi) venture firm Coinsilium Group Limited (LON:COIN) said that there is “huge potential” for NFTs in the industry, particularly in the art space.
“[Using NFTs] makes it easier to buy and sell art…it also gives a great platform for artists to sell works to collectors”, Travia said, adding that he expects NFTs to see “more mainstream adoption” with more mainstream artists and big brands taking an interest.
The CEO continued, saying that the COVID-19 pandemic may also boost the appeal of NFTs, as the rise of social distancing and remote engagement means that artists “have to interact digitally with their fans and communities”.
“There are many channels and large events that cannot happen right now, everyone relies on technology…this gives more cases for blockchains and I think NFTs will offer another solution for people to communicate”, he said.