The Evolution of NFTs: What´s Next?
The expansion of the cryptocurrency market has seen the creation of new solutions and services across different blockchain networks. Non-Fungible Tokens (NFTs) had became one of the most hot topics so far in 2021.
There is space for innovation, and companies know that. Projects from all over the world have searched for different ways to release NFTs and adapt their businesses to the fast-growing blockchain industry.
If you have been in the cryptocurrency market for some years, you remember the craziness there was around Cryptokitties. The founder of Twitter, Jack Dorsey, sold its first tweet as an NFT for $ 2.9 million. This shows that there is a lot of space to grow considering the profitability of this industry.
Many popular NFTs have been released on Ethereum´s (ETH) network but this doesn´t mean that Ethereum is the only option. Not at all. Where is Bitcoin standing when it comes to NFTs? Is it possible to mint NFTs on Bitcoin´s blockchain? Without a doubt. Bitcoin is the most secure network and its community wants to be part of the NFT revolution. Nifty Labs has started the development of an RSK-powered marketplace for NFTs on the Bitcoin network.
In this post, we will discuss the expansion of NFTs, how they have changed the blockchain industry and how they could continue their expansion in the near future. At the same time, we will also analyze Bitcoin’s influence in the NFT market and how RSK is working with other companies to bring NFTs to anybody seamlessly.
NFTs & The Metaverse
Let’s begin with the basics. What are fungible and non-fungible tokens (NFTs)? Non fungible tokens are tokens that are unique and get their value from their authenticity and uniqueness. NFTs exist online but they can also represent real-world assets such as art, music, digital fashion and many other things. They are authentic, unique and provide the ownership of something scarce.
On the other hand, fungible tokens are tokens that do not have a unique feature among them. 1 BTC equals another BTC in terms of value just like one 10 USD bill has the same monetary value as any other 10 USD bill.
Now the NFT industry has surged by 2,100% in the first quarter of 2021. Though this trend seems to have stabilized during the second quarter of this year, NFTs are here to stay. Thanks to the potential offered by blockchain technology, it is possible to have a blockchain-based digital identity, purchase digital art and secure and store other types of assets. NFTs have a large potential to revolutionize the Metaverse as new use-cases for distributed ledger technology are blooming.
Understanding the Metaverse
Virtual realities or worlds (the Metaverse) are becoming increasingly attractive to both users, companies and investors. They are not only helping new economies to surge but also allowing blockchain companies to create new and innovative solutions.
We could think of the Metaverse as an extension of real life. Let’s take the example of Decentraland, the first fully decentralized virtual world that is controlled through smart contracts and assets even including Non-Fungible tokens. Users can create their avatars, applications, scenes, environments and trade a wide range of assets through their decentralized network. Users are not only able to buy and trade NFTs but also play games and interact with each other.
The expansion of the Metaverse is also closely related to the expansion of NFTs. A larger number of users interacting through different platforms and blockchain marketplaces makes it possible for users and developers to create, sell and purchase Non-Fungible Tokens.
How do NFTs Work?
With the fast expansion of NFTs, several users without deep knowledge of virtual currencies got interested in them. However, some of them do not yet understand how NFTs work. These are some key considerations to have in mind:
- Each NFT is created (minted) as a unique token.
- NFTs can run on top of the platform where they were created.
- They can be sold for cryptocurrencies in different marketplaces.
- You can prove ownership of the NFT.
Depending on the network where they operate, Non-Fungible Tokens will have different standards. The most popular one is the ERC-721 that runs on the Ethereum network and RSK is leading the way to power the NFT market using Bitcoin´s network security.
NFTs in Gaming
The gaming industry is one of the most benefited by the creation and expansion of NFTs. There is a lot of potential for game providers and creators to integrate NFTs into their gaming platforms. Some of the most attractive games around the world have also very vibrant in-game economies. By using NFTs, gamers could eventually prove ownership of exclusive and valuable items. Game providers are also analysing how they could apply NFTs for their platforms. For example, one of the possibilities could be to earn royalties every single time that an item is sold in a marketplace. Those companies that can capitalize on very liquid marketplaces could eventually create very profitable economies for both developers and in-game players.
In traditional centralized games, we have been used to problems related to item ownership. This happened mostly when game creators did not provide updates to the games they created or where users reported missing items due to problems with the servers. Through the application of NFTs for items released in-game, users can prove their ownership. This would not depend on centralized servers that could be affected by attacks or eventually lose the data. Items represented by NFTs would be properly secured by blockchain technology.
These items will outlive the games for which they were created. These NFTs could be used in the future as collectables rather than items per se. At the same time, these items can be sold for virtual currencies.
Finally, it is worth considering that some avatars could eventually be sold to the market after several years of working on them. For example, a person could start playing a game where avatars are represented as NFTs. This avatar could become one of the best players in the game and be sold to another user easily.
The possibilities are endless when combining blochchain technology and gaming so exponential increase on this vertical is expected in the short term future.
NFTs in Digital Art
Content creators are also among the most benefited with this new industry. Artists that do not have the possibility to reach a large audience can now sell their work on social media networks as NFTs.
Mike Winkelmann, a recognized digital artist that goes by the name of Beeply, sold a piece of art for $69.3 million in an online auction. This was not only one of the most expensive NFTs sold up to date but it is also a good example to understand how NFTs work. The piece sold was a JPG file called “Everydays – The First 5000 Days.”
OpenSea.io is one of the most popular platforms where users can currently sell digital art. This is one of the most liquid markets and it has a great gallery of art created by crypto and blockchain lovers. Other types of NFTs are also sold on this platform but most users focus on digital art.
Artists can select the price at which they want to sell their pieces and also run auctions. This opens unlimited opportunities for art collectors that want to get access to a new digital market. When the owner of a piece of art sells, the NFT is transferred to the buyer. Meanwhile, the funds paid by the person that purchased the art piece go to the creator. Royalties could also be applied for the creator of an NFT if the piece is sold more than once.
NFTs in Music
NFTs have also made headlines in the music industry when media reported that 3LAU, Steve Aoki Nashville, Kings of Leon and Grimes decided to launch and sell NFTs online. In these cases, NFTs acted as a certificate of ownership that creators sell to fans. Musicians can sell traditional albums, unique bonus tracks or tickets, etc. as NFTs. After a concert, it might be possible for artists to sell NFTs and reward users that attended the show. This is also very common on sports events.
Additionally, music streaming services could also sell NFTs and keep the majority of the profits from sales. Fans from all over the world would be pleased to get access to unique collectables that exist only in the blockchain, specially if they also represent physical goods.
NFTs as DeFi Collateral
The decentralized finance (DeFi) market has also felt the influence of NFTs and their growth. Using NFTs as collateral could be a good idea for borrowers to get access to the funds they need without giving up on their NFTs. How would this work?
Let’s say that you purchased an expensive NFT. You do not want to sell it, but you also want to borrow stablecoins through a popular DeFi protocol. The solution would be to use your NFT as collateral and get access to a loan, as you would normally do with cryptocurrencies. The main difference here is related to the collateral used to get the credit. Rather than using cryptocurrencies, you would be using an NFT. If the borrower does not repay the loan, his NFT would be sold and the funds would be sent to the lender.
NFTs in Bitcoin Thanks to RSK
Thanks to RSK, there have been significant advances in the NFT industry on top of Bitcoin. One example is Watafan and how they make it possible for influencers and recognized figures around the world to create their own NFTs. These NFTs can be sold as trading cards or collectables to commemorate different events of these influencers’ lives. The NFTs created by these influencers are protected through the security and transparency offered by RSK.
RSK & Coinsilium Group Limited are also working on building a unique “NFT on Bitcoin” marketplace powered by the RSK blockchain. This project is expected to be completed in the last quarter of this year. NFTs could be released on RSK´s blockchain and be fully protected by the Bitcoin network and its hashing power. Some of the NFTs that could be created on RSK´s blockchain include digital art, music, sports, gaming and many others. RSK is also working on a token bridge between RSK-based NFTs and other blockchain standards such as ERC-721 on Ethereum. Users on the platform would also be able to trade their NFTs for RSK-based tokens, including RBTC.
Identity Standards (ERC-725)
When it comes to NFTs on Ethereum, there are some other options that are being explored beyond ERC-721. ERC-725 for instance, is a proposed standard for developers that are working with blockchain-based identity projects. As explained by the ERC 725 alliance, this standard describes proxy smart contracts that can be controlled by multiple keys as well as by other smart contracts.
The ERC 725 standard is also associated with the ERC-735 standard that makes it possible to add and remove claims to ERC-725. These smart contracts can then be applied to people, groups, machines, individuals and many other things.
By using blockchain technology, users would be able to handle and manage their own identities rather than depending on centralized organizations. This is similar to how decentralized finance (DeFi) is making finances more decentralized. However, the ERC 725 focuses on self-sovereign identities. Individuals would have the possibility to use and control their identities rather than depending on governments and centralized institutions.
Blockchain self-sovereign identities will play an important role in the future as decentralized systems continue to expand alongside blockchain technology. RIF Identity is also leveraging RSK smart contracts to make it possible for users to get access to a comprehensive identity and reputation ecosystem.
RSK’s Approach to Digital Identities
We have introduced RIF Identity, an identity and reputation layer that provides users and nodes with unified APIs and libraries to get access to the most recognised self-sovereign identity (SSID) protocols currently available in the market.
This identity layer within the RIF ecosystem makes it possible for users to get control of their identities and get access to various decentralized economies and protocols. At the same time, the RIF ecosystem works as a reputational layer that enables users to create their self-sovereign reputation. RIF Identity has been expanding as a project that tackles many of the current challenges faced by users when they handle their identities. We are talking about privacy, interoperability and reputation.
rLogin is one of the first steps for users to get access to Decentralized Finance with their self-sovereign identity. Users can have their own accounts and access Web3 and Identity 3.0 (SSI) platforms. Thus, the DeFi market would provide users with financial freedom while the SSI part would give users their privacy and power back. This is just another example of how RIF enables decentralized solutions. Users would not only get access to decentralized finance services but also handle their identities and private information.
Blockchain technology is enabling a world with less centralized control and with a focus on the individual as the owner of its own finances and identities, among other things. RSK is part of this revolution through numerous activities, projects and services.