What will bring blockchain to the mainstream?
We are sure at this point you are familiar with blockchain.
Blockchain is the digital, public ledger where cryptocurrencies occur. Through a blockchain, everyone in the network can see every account balance. Every transaction includes a file with a sender, recipient public key, and the number of coins involved in the transaction. The transaction is sent with a private key by the sender in the form of cryptography.
A blockchain is decentralized and is constantly growing with completed blocks. The most recent transaction is added in chronological order, which allows the blockchain participants to keep track of the transactions without central recordkeeping.
Blockchain was created by the same developer who invented Bitcoin in 2008. Since the creation of cryptocurrencies, while the digital money may not be embraced by everyone, blockchain technology has grown in popularity, along with many other financial technology innovations.
This technology has so many uses that go beyond cryptocurrencies. It is being developed for uses in accounting, managing business operations, and by major banks everywhere. What will be the first major use of blockchain by consumers? Many are saying it is non-fungible tokens.
What Does Non-Fungible Mean?
In order to completely understand a non-fungible token, let us look at what it means to be non-fungible. Something that is fungible, in our example, a token, can be replaced by something identical and is easily interchangeable.
Money is a great example of a fungible item. When one lends another person a bank note of a certain value, let’s say $1, when the money is returned, it does not have to be the exact same dollar that was loaned. Another dollar has the same value as the initial currency. The same can be said about a single bean or an apple.
When an item is non-fungible, it means that while two items may look identical, each has a unique attribute that makes them irreplaceable or impossible to trade. For example, plane tickets look the same but you cannot simply trade them with another. They have unique characteristics like seat number, passengers’ names, departure times, etc.
Cryptocurrencies like Bitcoin or fungible tokens. If a person gives another Bitcoin and receives one back, there wouldn’t be a noticeable difference and each token would have the same value, depending on the current value of the coin, that is.
What is a Non-Fungible Token?
A non-fungible token, or NFT, is a digital collectible and is predicted to be the first big consumer use of blockchain. They possess unique digital characteristics that make them different and digitally scarce.
Non-fungible tokens are the digital equivalent of baseball cards. Each token varies in information and level of rarity.
One example, and the origin of the term “non-fungible token,” was CryptoKitties created by Dieter Shirley. CryptoKitties were digital cats that rose to popularity in early 2018. The digital collectibles were so popular, and were transacted at such a high rate, that the Ethereum blockchain slowed to a crawl! Each digital cat had a unique appearance and personality, with genetic material being stored on the Ethereum blockchain. Some were rarer than others. Sales of CryptoKitties hit $12 million by the end of 2018 with the most expensive token being sold for $120,000.
The reason Cryptokittes was so iconic was because it was the first use case for blockchains, that was not currency, that created value for users and built an entire ecosystem.
What can give a non-fungible token value? To be considered a non-fungible token, it must meet all five criteria:
- Uniqueness- An NFT must be unique and irreplaceable.
- Scarcity- Everyone can know how many of an NFT there are because it is capped in numbers in the code.
- Accessibility- A non-fungible token must be accessible to the public through the blockchain.
- Durability- Non-fungible tokens must exist as long as the blockchain is alive. Even if the creators of CryptoKitties are gone, the cats still exist on the blockchain.
- Extensibility- The tokens can be used and combined to make new assets and experiences, such as KittyHats that are available for the cats.
What’s the Future of NFTs?
Non-fungible tokens are gearing up to penetrate the over $1 billion gaming market, finding its way into existing games as well as new games that were not possible before blockchain. For example, after seeing the popularity of the digital cats, some fantasy games are quickly following by allowing for fighters can be collected after battles.
This will increase the growing gaming market and also create ownership of their digital goods in their games. Many experts think this will be the gateway for mainstream crypto adoption.
Beyond gaming, some are seeing a more social use of NFTs. Imagine going to an event, such as a concert, and receiving a verified crypto token that can only be received at the event. Attendees can display the token on social media and the NFT them becomes a social symbol. Collecting tokens can lead to more valuable coins, creating a symbol of status. Reaching a certain status with the coins may then grant access to content only accessible to people at that status.
Major League Baseball in the U.S. even plans to launch a game where baseball cards will be traded on blockchain.
In the end, developers aren’t trying to replace our current systems but rather creating new ways to interact with them.
The shift we are seeing is that of a digital age. Tech-savvy individuals are seeking easy access, convenience, efficiency, and speed in every part of their lives, including their finances. Having the ability to make transactions from the convenience of a phone or other electronic platform is what is creating this strong push towards Fintech.
Looking beyond blockchains, we are seeing technology have a hand in simple things such as payment and holding money, and more complex life aspects like investment advising. Some companies are even developing ways artificial intelligence can assist in hedge fund managing!