Are Non Fungible Tokens (NFTs) a Good Investment in 2021?

6 Mins read

While the crypto community has been enthralled with DeFi, non fungible tokens (NFTs) have been growing in popularity, slowly but surely.

Non Fungible Tokens (NFTs) allow for digital scarcity and provable ownership of unique, one-of-a-kind assets.

In this research piece, we will introduce you to non fungible tokens and the different platforms where you can use and trade them.

What is Fungibility?

Before we delve into the intricacies of NOn Fungible Tokens (NFTs), it’s worth looking at the difference between “fungible” and “non-fungible.”

A fungible item or token is for all intents and purposes, interchangeable with another unit of the same thing.

For example, one Bitcoin is equal to another Bitcoin, just like one US dollar is equivalent to another US dollar.

If you lend your friend a $10 note, you wouldn’t need them to repay the loan with the same $10 note – any $10 note
will do.

Things that are non-fungible, on the other hand, are not interchangeable with one another and have unique properties that can make them radically different from one another, even though they may look similar.

There are many examples of non-fungible items in the real world, such as paintings, concert tickets, and so on.

Although two paintings may look similar, they may have a drastically different levels of rarity.

Similarly, front row tickets at a concert are much more valuable than tickets for the back row.

Are Non Fungible Tokens (NFTs) a Good Investment in 2021?

What are Non Fungible Tokens

Non fungible tokens, or NFTs, are crypto assets that are indivisible and unique. They can be used to represent both tangible and intangible items.

Non-fungible tokens (NFTs) are crypto assets that are indivisible and unique, creating digital scarcity.

NFTs initially launched on Ethereum, using the ERC-721 token standard, but are now available on a number of other blockchains.

They have many use cases, including digital collectibles, artwork and in-game assets.

How do Non Fungible Tokens (NFTs) work? 

what are non fungible tokens

Tokens like Bitcoin and Ethereum-based ERC-20 tokens are fungible. Ethereum’s non-fungible token standard, as used by platforms such as CryptoKitties and Decentraland, is ERC-721.

Non-fungible tokens can also be created on other smart-contract-enabled blockchains with non-fungible token tools and support.

Though Ethereum was the first to be widely used, NEO, EOS and TRON now have NFT standards.

Non-fungible tokens and their smart contracts allow for detailed attributes to be added, like the identity of the owner, rich metadata, or secure file links.

The potent of non fungible tokens to immutably prove digital ownership is an important progression for an increasingly digital world.

They could see blockchain’s promise of trustless security applied to the ownership or exchange of almost any asset.

As is the challenge of blockchain to date, non fungible tokens, their protocols, and smart contract technology are still being developed.

Creating decentralized applications and platforms for the management and creation of non fungible tokens is still relatively complicated.

There is also the challenge of creating a standard. Blockchain development is fragmented, many developers are working on their own projects.

To be successful there may need to be unified protocols and interoperability.

Features of Non Fungible Tokens

Non-fungible tokens are an extremely powerful kind of token that allows for a flexible way to represent non-fungible assets on a blockchain. Their main properties are:

  • Unique: Non-fungible tokens contain within their code information that describes the properties of each token that make them different from others. A piece of digital art might have coded information about individual pixels, while tokenized in-game items might contain details that allow the game client to understand which item the player owns and its attributes.
  • Traceable: Each NFT has a record of transactions on-chain, from when it was created, including every time it changed hands. This means each token can be verifiably authentic, and not a counterfeit – obviously a very important thing for owners and prospective buyers!
  • Rare: In order for non-fungible tokens to be attractive for buyers, they should be provably scarce. This will ensure that assets remain desirable in the long run, and that supply does not outstrip demand.

Indivisible: NFTs mostly cannot be transacted as fractions of a whole. Just like how one cannot purchase half of a concert ticket or trading card, non-fungible tokens cannot be split into smaller denominations.

  • Programmability: Like all traditional digital assets and tokens built on smart contract blockchains, NFTs are fully programmable. CryptoKitties and Axie Infinity have breeding mechanics coded directly into their tokens. Even more, functionality is possible.

In other words, NFTs combines the best traits of decentralized blockchain technology with non-fungible assets.

Unlike regular digital assets that are issued and regulated by centralized entities, which can be taken from you at any time, it is possible to truly own and control your own NFTs.

Non Fungible Tokens Review

Non fungible tokens combine the best traits of decentralized blockchain technology with non-fungible assets to create provably unique, provably scarce, and provably authentic tokens utilizing blockchain technology.

NFTs are applicable in a wide range of use cases, including:

  • collectibles,
  • gaming,
  • art,
  • virtual assets,
  • tokenizing real-world assets.

They also allow for a flexible way to store, control, and protect the information related to one’s identity.

Non-fungible tokens have had a long history, since 2012 with the introduction of colored coins built on the Bitcoin network. On Ethereum, the first NFT was CryptoPunks in 2017, followed soon thereafter by the CryptoKitties, the most successful and well-known NFT project ever.

During the Ethereum boom of late 2017 and early 2018, NFT activity in CryptoKitties drove a huge spike in activity. When the market crashed in 2018, however, interest in NFTs was also impacted and stagnated until late 2020, when NFTs saw a resurgence.

Despite its benefits, the adoption of NFTs is still low relative to the tens of millions of people who own cryptocurrencies worldwide.

The roadblocks preventing mass adoption of NFTs are inaccessibility, the newness of the technology, the volatility of transaction fees, difficulty to link real-world assets to NFTs, and regulation.

Are Non Fungible Tokens a Good Investment

Non fungible tokens are good investment because they have unique attributes; they are usually linked to a specific asset.

They can be used to prove the ownership of digital items like game skins right through to the ownership of physical assets.

Other tokens are fungible, in the same way as coins or banknotes. Fungible tokens are identical, they have the same attributes and value when exchanged.

Louis Thomas talked about the real value of Non-fungible tokens (NFTs).

Non Fungible Tokens Use Cases

As you can imagine, NFTs can be extremely powerful since they can represent literally any asset, digital or real. Below are just some uses for NFTs:

  • Collectibles: With the likes of CryptoKitties and CryptoPunks, we have seen that NFTs can be used to create incredibly desirable new kind of digital collectibles. More traditional collectors’ items such as baseball cards and stamps are also being tokenized.
  • Gaming: Tradeable in-game items are also one potential use case for NFTs. So far, we have seen most implementations revolve around turn-based battle or trading card games like Axie Infinity or Gods Unchained. With NFTs, however, games such as Fortnite or CS:GO with vibrant item economies may one day support on-chain item trading!
  • Arts: With the launch of the art marketplace Rarible and their yield farming incentive program, tradeable digital art has become a hot topic. NFTs allow artists to monetize their artwork and protect their copyright. NFTs also allows artists to receive royalties every time their creations change hands.
  • Virtual Assets: The Ethereum Name Service and Unstoppable Domains have turned .eth and .crypto domain names into NFTs, which can then be traded. Real estate in virtual worlds Decentraland and Cryptovoxels have also been tokenized into NFTs.
  • Real World Assests: One of the original imagined purposes for NFTs was to tokenize real-world assets that can then be traded. OpenLaw created a system to trade real estate using the ERC-721 token standard, and Nike last year also patented a system to tokenize shoes
  • Identity: With NFTs, users would be better able to protect and control their personal information, like medical histories, birth certificates, and more.

Complete List of Non-fungible tokens

  • CryptoKitties
  • American Gods
  • Art Blocks
  • Aku: The Moon God Open edition by Micah Johnson
  • Ethereum Name Service (ENS)
  • Rarible
  • Hashmasks
  • Superare
  • PixaWizards
  • Crypto Sculptures
  • Bullrunbabes Token
  • Sandbox’s Lands
  • Somnium By Lefty Out There
  • Word
  • NFTBoxes
  • Non Fungible Pepe
  • Zora
  • Wrapped cryptopunks
  • Startrail Registry REcord
  • DCL Registra
  • Chain Guardians LE
  • Neolastics
  • Elements Blocks
  • Codex Records (CR)
  • Joyworld Joytoys
  • Abstract store
  • rooms by Baeige
  • Zed Tokens (ZT)

To get the complete list of Non fungible tokens check here on Etherscan.

Final Verdict

In conclusion, although we have seen promising signs of life within the NFT space, there is still a long way to go before this novel application of blockchain technology reaches mass adoption.

The technology has definitely come a long way since its inception in 2012, but it will undoubtedly take some more time before it is proven that NFTs are more than just an ultra-niche sector for early adopters to play in.

As Non fungible tokes (NFTs) continue to find applications in various DeFi sectors, we look forward to the time NFTs will serve as collateral for loans in DeFi platforms.

How great it will be when a piece of virtual land, house, or artwork serves as collateral for securing a loan from a DeFi platform.

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About author
Johnmiracle Ejikeme is a 7 Figure digital network marketer, crypto enthusiast, and a trader. A humble fellow that fancy investing and technology.
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