As the internet evolves from its current Web2 state to the emerging standard of Web3, it has brought along many interesting changes. One of these changes is called non-fungible tokens, or NFTs.
What is an NFT?
If you're unfamiliar with the concept, a non-fungible token is essentially a digital way to prove ownership. While many people are under the impression that NFTs are scams or a fad, this couldn't be further from the truth. Back in the early days of the internet, many people had the same belief - now, you'd be hard-pressed to find someone that doesn't use the internet on a daily basis. Let's take a look at some stats: NFTs became a $40 billion market in the year 2021. As of August 2021, there were 280,000 wallets that had either bought or sold at least one NFT. The most expensive NFT artwork transacted to date, called "The Merge", sold for $91.8 million.
NFTs are still in their infancy, and we've already seen some exciting things emerge from the space. People have already begun using NFTs as profile pictures, membership passes, investment vehicles, and more. In fact, a Tampa Bay area home was sold last year as an NFT, fetching a final sale price of over $655,000 in ETH.
How will NFTs change the Future of the Internet?
More than they have already, NFTs will dramatically change the future of the web. Let's explore some of the ways that they've already begun to do so, and how they're likely to in the future.
Memberships and Private Communities
Non-fungible tokens have already begun to be used as tickets and membership passes to private communities. One such example of this is Gary Vaynerchuk's "VeeCon" conference. Attendees of the event are required to hold a VeeCon ticket NFT in their wallet to enter the venue. NFTs make ensuring the legitimacy of tickets easier since NFTs minted on the blockchain can't be duplicated. Further, since NFTs are programmable, the holder of the NFT ticket can continue to receive new perks and benefits in the future.
NFTs enable the creator of the token to set a royalty percentage on their work. This means that as the NFT continues to be sold in the future, the creator of the NFT can opt to receive a percentage of each sale in perpetuity as a royalty payment. In theory, this provides creators an incentive to continue to improve and grow their projects over time to reap the most benefit.
Over the years, many attempts have been made to protect materials, such as watermarks, DRM, DMCA, and others. Unfortunately, none of these solutions have worked quite as originally intended. That’s where NFTs come in; non-fungible tokens act as a certificate of ownership of a file on the internet. This certificate of ownership is recorded on a permanent, unalterable blockchain for everybody to see, meaning that a copy of a file can never be passed off as the original.
Video Games and the Metaverse
Another exciting use case for non-fungible tokens is within video games and the ‘metaverse’. NFTs are already being used across many video games, such as Axie Infinity and Gods Unchained, in a variety of use cases. Some games require players to own an NFT to play the game, while other games are free to play and incentivize players to continue playing and level up by offering them NFTs. Since non-fungible tokens can be freely bought and sold on marketplaces such as OpenSea, this creates a unique dynamic in video games. It requires players to consider both the in-game consequences, as well as real-world financial impacts, of making decisions in the game.
NFTs have provided artists with new ways to distribute and benefit from their artwork. Artists like Beeple, Xcopy, and others have begun to create fine art pieces for the next generation of the internet, with many of their works selling for millions of dollars. Non-fungible tokens allow artists to create generative art that changes over time, as well as enables the artist to collect royalties as their work is transacted in the future.