Nonfungible tokens are not a new phenomenon in the crypto space, as the emergence of blockchain technology has provided a useful base layer to create a sprawling economy for digital collectibles.
Amid the growing appetite for digital art, in-game utility tokens and other forms of crypto collectibles, the NFT metaverse is experiencing a surge toward broad-based commercialization. Within the ecosystem lie numerous intersections among various industries such as arts and crafts, gaming, and virtual real estate.
The 2020 decentralized finance hype has also helped to add more fuel to the NFT fire. Governance tokens and liquidity mining protocols appear to be encouraging greater interactions with NFT marketplaces, which is a net positive for NFT market liquidity.
Provably rare NFTs as in-game assets
Earlier in the year, gaming analytics service Newzoo estimated that the industry will exceed $150 billion in revenue by the end of 2020, with this figure topping $200 billion within the next three years. Across multiple platforms — including PC, mobile and console — game developers have seen an increase in patronage following months of lockdowns due to the COVID-19 pandemic.
The intersection of the gaming and blockchain industry arguably offers one of the more attractive propositions for NFT utility. Even the most casual gaming enthusiast is familiar with in-game tokens, like FIFA Points and FUT coins, or exchanging items for money in a person-to-person marketplace like in PlayerUnknown’s Battlegrounds.
Outside of the game, these assets usually have little value. However, with blockchain, it’s becoming increasingly possible to tokenize these in-game assets. Also, the novel tech provides a useful base layer for creating a marketplace to trade these in-game NFTs.
With NFTs as in-game coins, real-life ownership of these digital assets becomes possible, changing the balance of power from gaming companies to the players themselves. Real ownership offers the possibility of commercializing popular niches such as online trading card games.
Thus, gamers can be assured of earning real money for their time spent exploring these diverse gaming worlds. NFT marketplaces allow users to trade valuable in-game assets for money or even popular cryptocurrencies such as Bitcoin (BTC) and Ether (ETH).
Blockchain as a common base layer might also create the possibility for cross-platform interaction in the gaming space. Users will be able to move assets such as rare trading cards or unique armor and skins across different titles, as long as the games — especially if they are made by the same developer — share the same blockchain implementation.
Gaming platforms such as Enjin are already working toward cross-platform blockchain gaming. Back in April, the company announced a Ready Player One-style cross-game event dubbed “Cyborg’s Quest” involving eight different Ethereum-based titles with a $50,000 prize pot attached to the competition.
Additionally, the world of competitive gaming is already a huge industry. Earlier this year, market experts predicted that global esports revenue will surpass the $1 billion mark before the end of 2020.
Starving artist? Mint and sell token art
According to data from Nonfungible.com, the total lifetime NFT sales volume on the Ethereum network has exceeded $130 million. The art sector has only contributed about $8 million to this figure.
However, as previously reported by Cointelegraph, several indicators are pointing to NFTs being a major breakthrough for crypto art. Blockchain is already finding useful applications in establishing provenance for valuable works of art. The immutable nature of decentralized ledger technology offers a framework to monitor and trace the ownership of artwork to ensure the authenticity of the item in question.
Blockchain is also finding adoption in the online art sales market. Earlier in October, auction house Christie’s sold a digital portrait of Bitcoin’s code for over $130,000. The news marked a landmark in the NFT art adventure as the first time a renowned auction house conducted the sale of a nonfungible token. Commenting on blockchain art, Artur Sychov, founder and CEO of virtual reality platform Somnium Space, identified the art industry as being primed for blockchain disruption, telling Cointelegraph:
“Art is one of the biggest and fastest-growing applications for NFTs. The intersection of proof of ownership and scarcity makes it a perfect match made in heaven. Same with physical goods. Buying a digital copy and receiving a physical equivalent is becoming a big business and part of an ecosystem.”
In a conversation with Cointelegraph, artificial-intelligence artist Pindar Van Arman described NFT adoption as a veritable source of intellectual property protection for art makers. According to Arman: “Without it [NFT], limitless reproductions of their work can be made.”
As digital artists explore ways to mint NFTs, the concepts of haecceity and indexicality come more into play. The former describes the property of an item’s uniqueness, while the latter examines the association between objects.
Some critics of NFT art say it cannot have provable scarcity because it’s possible to download a JPEG of the art piece, rendering the crypto-art-file format redundant. There is also the belief that crypto art can only attain value status upon the emergence of a social consensus with “baked-in” principles of ownership registers.
Within such a framework, artists can not only earn healthy commission percentages for their works but also receive royalties from secondary sales. Like gamers, art makers can earn passive income from the NFT marketplace. Dirk Lueth, co-founder of the NFT property trading platform Upland, told Cointelegraph that digital memorabilia and crypto collectibles are only the tip of the iceberg for nonfungible tokens:
“There is the whole world of digital media. Once the technology is a little more advanced and blockchain allows you also to manage access rights to a movie, song, etc., then the whole world of NFTs is going to see unprecedented growth.”
Virtual commerce in the NFT metaverse
Whether through gaming or selling digital art, the NFT metaverse appears on course to deliver the groundwork for a fully realized virtual space. Back in September, Cointelegraph reported that investors were rushing to acquire blockchain-based land.
Amid the technological strides in VR and blockchain, developers of digital worlds are building immersive virtual ecosystems that allow for several forms of virtual interaction. Thus, for those not possessing great dexterity with games or the gift to create impressive works of art, land ownership in simulated environments offers another path to NFT acquisition.
Related: Breaking virtual ground: Blockchain-secured land entices real estate investors
Projects such as Upland are building digital worlds on top of real-world acreage. Building on the idea of online trading card games, gamers on such platforms can purchase landmark properties that look exactly like their real-world counterparts.
Indeed, the virtual real-estate landscape is beginning to encompass every aspect of the emerging NFT market. When fully realized, artists can display their works in virtual museums and art galleries owned by digital landowners and building owners.
According to Lueth, the expanding digital landscape will help to create value for NFT goods and services: “As people start spending more time in these parallel worlds it is not a question of if, but when other industries will discover that NFTs will be able to offer complete new business opportunities.”
The fallout of the COVID-19 pandemic has also caused a reexamination of human interaction across several spheres of life. Social distancing protocols in many countries have seen activities like work and school move to the virtual realm. Sychov believes humans will eventually move toward a primarily virtual means of interaction:
“The future of human communication is going to be mostly digital inside Virtual Reality. And in order for humans to exist in virtual worlds, they need a decentralized independent economy and ownership protocols which blockchain and NFTs solve very well. So, in short — yes NFTs will play an integral role in exchanging goods and services.”