After the DeFi boom, non-fungible tokens (NFTs) have taken the blockchain industry by storm. According to NonFungible.com, a daily NFT market tracker, the daily number of sales reached 33,900-plus in September 2021 and the third quarter of NFT sales reached $10.7 billion.
The NFT space gained traction as awareness of decentralised applications increased. Including cryptopunks and Amitabh Bachchan, NFTs have started a mainstream trend that has enabled new names to enter the market.
But is it enough to bring mainstream adoption? Or does the NFT industry need to evolve a few changes to facilitate that?
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NFTs were a seed planted with Coloured Coins shortly after Bitcoin was introduced, but the garden that can be witnessed today is attributable to the boom of blockchain technology that took place in 2017, starting from the creative and unique game, Cryptokitties, which presented a use-case of blockchain technology that seemed simple and appealed to the mainstream audience. This was the beginning of new innovations and a new focus on NFTs as a platform to create, invest, own and experiment with.
NFTs are unique digital tokens that cannot be copied, replicated, or duplicated, and are recorded in the blockchain. These can be further used to certify authenticity and ownership. NFTs are tokenised versions of real-world and digital assets and have been key promoters of innovative concepts like fractional ownership and ‘play-to-earn’ games.
The interest garnered around this disruptive technology has compelled mainstream enterprises and corporations to hop onto the latest trends in the blockchain sector. This makes NFTs a suitable option as their use-cases consist of utilizing pre-existing assets and leveraging their existing value.
Major Use-Cases of NFTs
Digital Art: Digital artwork has been one of the early adopters of this technology. Artists can sell whole or a fraction of their digital artwork as NFTs with pre-defined compensation conditions defined in the underlying smart contract. India has adequate success for this use case. For instance, more than 160 digital art pieces were sold within the first month of WazirX NFT marketplace launch.
Music: The first sound recording was back in 1877, yet, commercial artists are often not complete owners of their songs and distribution of revenues can be unfair. NFTs have eased out this problem by letting artists tokenise music tracks, artwork, pieces of text, apps, files, and even real-life objects—such as concert tickets or unique merchandise. Even Indian mainstream players like Sonu Nigam are participating in the space with the Indian music industry’s first-ever NFT series in partnership with JetSynthesys.
Collectables: NFTs have been thriving in the entertainment industry as well in the form of special collectables for the fans or exclusive perks. This use case has been thriving greatly in the NFT markets and has been a great driver of mainstream adoption. Recently, NBA partnered with Dapper Labs, the makers of Cryptokitties, to launch the NBA Top Shot, a collectible NFT that works similar to trading cards, which has now seen traction of more than $230 million in revenue. Similarly, India too saw Amitabh Bachchan’s NFT collection record the highest ever bid within the country of $420,000.
Real Estate: With land or property being tokenised, NFTs enable fractional ownership, which would contain authentic information regarding price, measurements, location, etc., and there would be no need of commission for third parties. Currently, progress is underway to make this a physical reality though this exists in virtual reality. The world’s first digital NFT house, called the mars house which was sold for $500,000, is one example of what an NFT, metaverse, and real estate amalgamation might look like. Another innovative example is Decentraland, a virtual blockchain-based land where people can buy and own parcels of the total land present.
Gaming: NFTs ticket to fame was the virtual game Cryptokitties that came into existence in 2017 and was one of the world’s earliest attempts to integrate blockchain beyond the realm of technology and industry. Today, the NFT industry has achieved great heights in the gaming industry with the onset of the P2E or ‘play-to-earn’ concept as well as experiments to develop ‘playable NFTs’, an ingenious concept to uniquely identify game characters and enable actual ownership of them by players.
Barriers To Mainstream Adoption
The mainstream adoption of NFTs is now a possible future and has already made a way for enormously unique and unprecedented developments in the technology world. But there are still a couple of barriers to cross.
At the early-growth stages of this industry, users had to pay in cryptocurrencies, which non-native crypto users were unfamiliar with. Further, the gas fees became expensive in cases of network congestion. Although today, this barrier has been safely overcome with new platforms emerging that offer low or no gas fees for transactions, instant cross-chain operability, and accessibility.
Most NFT minting platforms and applications are also improving their user experience to increase mass adoption in the decentralised sector, but they still need refining.
But a persistent barrier is the lack of versatility in content offerings. Artists, musicians, content creators, etc., can create their NFTs for sale but are restricted with regards to the media types supported on various platforms. NFT minting platforms support standard audio, video, images, and text media files but they cannot support complex mixed-media.
As blockchain technology is constantly shifting towards new and ingenious solutions, this barrier will soon be overcome as the space evolves.
Virtual World To Real-World Markets
With web3, there came a flurry of new innovations and solutions that were end-consumer centric. There was an increase in various platforms and protocols dedicated to making the experience of users less cumbersome and reasonable. New decentralised applications and platforms were created to reduce the cost of trading and minting NFTs, various new marketplaces came into existence that were more reasonable than dealing with the Ethereum blockchain.
The rise of decentralised finance was also one of the key catalysts. Non-native users were able to witness the liquidity of cryptocurrencies and crypto-assets. With DeFi gaining enormous traction, NFTs were able to expand from gaming and digital art to collectables and investments.
Currently, due to the increase in the space to facilitate user-friendly transactions, NFTs have moved beyond being a testing ground for digital art to penetrating the mainstream industries of gaming, entertainment, finance, and investments.
There are a few issues that require smoothening but there are various players in the market currently that are aiming to provide seamless user experiences. By way of gasless transactions, multi-chain transfers, interoperability, accessibility and scalable solutions, these platforms enable potential non-native crypto and blockchain users to enter into the space and navigate it successfully.