NFTs: Digital Assets with Real-World Value
Just last week, Collins dictionary chose NFT as its ‘word of the year’ for 2021 – mostly because people are making $$$ from the blockchain-based tech and it’s been buzzin’ like a ubiquitous bee. But what exactly is a digital token? And how does it affect our lives, commerce, and the metaverse on the whole? Let’s start with the basics:
What are NFTs and how the heck does a digital entity have value in the real world?
Of course, we most often hear the term ‘non-fungible token’ mentioned in connection with cryptocurrency, but that can be misleading. You see, the sales and ownership of both NFTs and crypto can be tracked on public blockchains – but unlike cryptocurrency, NFTs are unique and cannot be interchanged.
Let’s dig down to the root with the lesser-known word ‘fungible’, which, to most, sounds like a nasty skin condition. ‘Fungible’ simply means interchangeable or exchangeable.
Fungible goods are items that are interchangeable because they are identical to each other for practical purposes. In financial terms, commodities, common shares, options, and dollar bills are examples of fungible goods. Stocks are considered fungible goods as well, because it doesn’t matter who owned them previously, or (in the case of cross-listed stocks) whether they were purchased on the NYSE or TASE or anywhere else.
However, assets like diamonds, land, real estate, or even trading cards are non-fungible goods, because each unit has unique qualities that either add to or subtract from its value. Individual diamonds have different cuts, colors, sizes, and grades, so they cannot be referred to as fungible goods. The same goes for real estate: Even on a street of identical houses, each house gets a unique view, different levels of noise and traffic, and is in varying states of disrepair.
Now, on to NFTs.
Here’s the short version of Wikipedia’s definition:
“A non-fungible token (NFT) is a unique and non-interchangeable unit of data stored on a blockchain.”
For those in the audience too shy to ask, a ‘blockchain’ is a digital ledger consisting of records (or ‘blocks’ of data) that is used to record transactions across a network.
So, in other words, an NFT is a unique digital certificate, registered in a blockchain, that is used to record ownership of an asset. What makes it different from other fungibles, is that the ‘asset’ in this case is digital. ‘Unique’ is important here too – it’s a one-off, not ‘fungible’ or replaceable by any other piece of data.
The biggest NFT boom has been felt in the art world, however, with digital artworks selling for unheard of amounts of cash. Yes, digital art, such as music, drawings, memes, videos, or gifs – like this Dogecoin one, inspired by the iconic Nyan Cat animation.In fact, anything digital can be sold. Like this blog post, or a pic of my dog. There’s a pet-rock club out there (I wish I were kidding) where basic digital drawings of rocks are made for the sole purpose of being sold as NFTs. There’s also Jack Dorsey’s first tweet – yeah, this one that’s been on his profile for the past 16 years for anyone to see – that just sold for $3 million. And Beeple, a digital artist whose “Everydays” artwork sold for a whopping $69 million. Here it is for free:
It’s impressive, admittedly…
But wait, if these are NFTs, how can I have access to them and use them here? I mean, if you buy a piece of art it’s ONLY yours, right?
Well, yes, but also no.
And this is where things get kinda complicated. Let’s look at the latter, longer part of the Wikipedia definition: “NFTs can be associated with easily-reproducible items such as photos, videos, audio, and other types of digital files as unique items (analogous to a certificate of authenticity), and use blockchain technology to give the NFT a public proof of ownership. Copies of the original file are not restricted to the owner of the NFT, and can be copied and shared like any file.”
That means you can copy any NFT’s digital file as many times as you want. And because it’s digital, the copy is as good as the original. But the NFTs themselves (the tokens) are designed to give you something that can’t be copied: ownership of the work. To put it in terms of physical art collecting: anyone can buy a Van Gogh print, but only one person can own the original.
What does any of this have to do with gaming, and where does Sayollo come in?
Well, to begin with, the worlds of crypto and video games are quickly colliding, with the new “play-to-earn” (or “web3”) game model bringing forth a new generation of gaming experiences that combine real-world economies with new player incentives. Some in the industry are already touting web3 games as the obvious next-step in the gaming industry’s future.
Needless to say, fear of change posing a threat to present revenue, the biggest companies in the industry (like Steam) have outright banned blockchain-based games on their platforms.
But while they’re cowering in the dark, holding desperately to their vast playing fields, the future is being built up in the lesser corners of the metaverse. Little by little, the blockchain gaming market has become one of the fastest-growing segments in the game industry, and it’s showing no signs of stopping.
Here’s a simplified timeline of gaming business models:
In the beginning, we had to pay real money to play games. Like putting quarters in arcade machines and buying games on floppies and CDs.
The games we play today, both online and on mobile, make their money through monetization (ads) and with an in-game economy of digital goods (coins, weapons, skins, etc.).
– Play-to-Earn (web3):
This is a whole new paradigm that’s based on creating real-world value via in-game items and NFTs. Meaning, rather than paying for a game, the game would pay you to play it, rewarding your time and efforts with in-game incentives and NFTs.
As digital goods purchased in-game, NFTs are a natural choice for mobile games and, in particular, our gComm purchasing space, where players can complete the entire purchasing process without ever leaving the game. The two platforms are virtually made for each other, and we can’t wait to see how mobile game publishers and brands bring their NFT wares to the metaverse via gComm.
Despite the resistance by some of the bigger distributors, a consortium of gaming companies has already conceded that crypto is, indeed, coming for the gaming market. As a recent statement published by SpacePirate Games puts it: “The future of gaming is decentralized player-owned assets, where gamers are valued for their time and efforts spent in-game. Whether that’s an NFT or another asset class, change is happening.”
The bigger players aren’t saying much, but will inevitably concede as the market picks up more steam (pun very much intended).
Indeed, there are already several games available that let you buy NFTs as in-game items. Like plots of land, weapons, tools, even take part in the decision-making process of a storyline or character’s fate.
That’s a serious flex for any gamer… but what happens if that game becomes discontinued? In fact, what is the future of NFTs, when technology is constantly changing and digital data of one form may be replaced by another? There’s a lot of discussion around that, which leads us to the question:
Are NFTs a fad, or a true new avenue of digital commerce?
A major report released earlier this year, identified NFTS as “one of the key emerging technologies, spurring innovation through trust, growth, and change”. Obviously, with tech giants everywhere occupying more of the metaverse every day and adopting NFTs as a means of both marketing and commerce, new opportunities and revenue streams are being created and unlocked within the realm of the metaverse. And as the rising trend of NFT purchases continues – over $2.5B generated in just the first half of 2021 – for the time being, at least, NFTs are gaining more and more traction and appear to be here to stay. For now, at least.
Not surprisingly, the truest (and only relevant) answer to this digital predicament, lies within Gen Z’s outlook as a whole. The ‘digital generation’ nails the (perhaps fleeting) significance of the NFTverse with a simplistic ‘here & now’ philosophy that many of the art curators/collectors and entrepreneurs out there are missing: It’s great because it exists right now. Enjoy it for what it is, sell your art, buy digital work, and take part in the marketplace. Experience everything because experience is everything.
That’s one hell of a Zen approach to a multi-billion-dollar industry.
And that’s why Gen Z is the future.
CEO & Co-Founder