Non-fungible tokens or NFTs have taken the world by storm. They are the newest digital-asset trend which has boomed in the year 2021 and Bollywood actors like Amitabh Bachchan and Salman Khan have also capitalised on this latest movement by launching their own NFT collections.
They might seem complex, especially because of the technical jargon involved in explaining them, but in layman's terms, they are a unique and non-interchangeable unit of data stored on the blockchain, which is a type of digital ledger, and the owner of the NFT gets a proof of ownership certificate from the digital ledger. Not so complex now, is it?
NFTs are usually associated with non-physical art but in reality, there are several different types of NFTs and are explained in this guide.
As already stated, this is the most popular category of NFTs out there. These are mainly digital artworks that come with a public certificate of authenticity and ownership issued by the digital ledger on which they are stored. The most expensive NFT sold is the digital artwork 'The First 5000 Days' by artist Beeple for a whopping $69.3 million in March 2021 in a Christie's auction.
Collectibles are the first type of NFTs to be ever launched. They are the same as physical collectibles, like Pokemon cards or vintage mint condition toys but in digital form. Curio Cards were the first major NFT collectibles ever launched after which several other collectibles like Bored Ape Yacht Club, Cryptopunks, Cat Colony, Meebits, etc. have taken off. They are a collector's delight and Bored Ape Yacht Club has turned out to be the most valuable digital collectibles out there. 3. Sports Memorabilia
Sports Memorabilia is one of the hottest NFT categories and the most famous NFT of this segment is the NBA Top Shot. This type of NFT usually includes a video clip of memorable sports moments. One of the most famous NFTS in this category is The LeBron James Dunk, Throwdowns (Series) which is a clip of Lakers player LeBron James dunking the ball. It sold for over $380,000 and is one of the most expensive Sports Memorabilia NFTs ever.
4. Video-Game Assets
These are NFT-based video games that players get involved in to win rewards like cryptocurrency, digital assets, or other NFTs. The very first NFT video-game asset was the game Axie Infinity after which games like CryptoKitties, Gods Unchained, Sorare, etc became very popular amongst video game players.
5. Virtual Land
This includes land in video games as well as in the Metaverse. It might seem like an extremely redundant asset with no real-world applications but it has great potential. The virtual piece of land can be used to place advertisements inside video games, create virtual assets, etc.
A few years ago, no one could imagine that memes could have any financial value attached to them, but amidst the NFT wave, memes have also become a valuable digital asset. The original Doge meme sold for $4 million in June 2021. Memes like Disaster Girl, Bad Luck Brian, Success Kid, NyanCat, etc have also been valued significantly and have been sold for a fortune making the meme creators wealthy and the meme market lucrative. The meme of disaster girl sold for over $470,000.
7. Domain Names
These are crypto domains minted on a blockchain, for example on Binance Smart Chain or Ethereum. They have over 500 domain extensions, the most sought-after of which is '.eth'. Crypto domains do not depend on any centralised authority and hence are a coveted asset. Moreover, they can also be used to link crypto-wallets which is not a feature in non-NFT domain names. The biggest shortcoming of Cryptodomains is the fact that a majority of browsers do not support them as of now.
This is one of the newest phenomena in NFT mania. Artists pre-release their albums on NFT marketplaces before releasing them on traditional streaming platforms and buyers can buy a part of the album, like say a share in it, and then when the album is released via traditional channels, the buyers get to have a share in the profits of the album. This business model is not yet an established way of trading in Musical NFTs but a considerable number of transactions follow this pattern. For example, Kings of Leon's album 'When You See Yourself' was sold as multiple NFTs in a similar manner in March 2021.
The onset of NFTs has introduced various innovations in the way day-to-day transactions take place and ticketing has not been left behind. Tickets for events can be minted now on blockchain platforms and then can be auctioned off by the organisers. NFT tickets can also be sold at a fixed price. This would significantly reduce forgeries and add a sense of memorabilia because these tickets can also be stored and resold as collectibles.
10. Real World Assets
Up till this point, you might be wondering that NFTs are only associated with digital and virtual assets. But NFTs have applications related to real world assets as well. A Real World asset NFT (rwANFt) is a token that signifies virtual ownership of a physical object. Just like digital NFTs, the token attached to a rwANFT proves ownership as well as establishes legal contracts of warranty, insurance, enforceability, etc. rwANFTs have an extra layer of security since the tokens cannot be forged and the digital ledger provides transparency to prevent frauds. 11. NFT Fashion
Sounds bonkers, right? Virtual fashion, how could that even be a thing? Well, brace yourself because it is very real and has significant market capitalisation. Virtual fashion includes clothing and accessories made for digital avatars and video game characters. Louis Vuitton and Burberry have come out with a line of NFT fashion including kimonos and sneakers for digital avatars.
NFTs have started gaining significant real-world traction because of their non-fungibility and the added assurance of transparency from the digital ledger. One of the real-world applications of NFTs is in providing identification certificates to individuals. Self-Sovereign Identity and Bridge Protocols are some of the examples of real-world utilisation of NFTs in individual Id-ing.
13. Miscellaneous Online Items
This category includes anything and everything which has not been covered in the former categories. This includes tweets, blogs, Instagram posts, etc. In other words, anything that has been minted on a digital ledger and has non-fungibility falls under this category. For example, Jack Dorsey's first tweet was sold for $2.9 million.
In conclusion, NFTs are broadly associated with digital as well as virtual assets but, with the recent leaps in technology, newer real-world applications of NFTs have also been created to make transactions more transparent and secure.
Also read: BollyCoin to launch 'Dabangg' NFT collection