Gerrit van Sittert | December 22 2022
Gerrit van Sittert | December 22 2022
The Ethereum blockchain foundation sparked the adoption of non-fungible tokens (NFTs) by creating the ERC-721 standard, a framework for anyone to create NFTs on the Ethereum blockchain.
Since then, NFTs have exploded into the public eye. While it seems that nearly everyone has heard of NFTs, the reality is that people rarely know how they work and why they are important. It is remarkable that an industry with multiple billions of dollars in value can be so poorly understood.
The truth is that NFTs now extend much further than the Ethereum blockchain, have birthed new industries, and vastly expand existing ones. This article will explore what NFTs are, how they function, where they are making an impact, and how they will likely appear in your life.
NFTs are facing inter-chain and marketplace fragmentation limitations similar to the issues Orion is solving for cross-exchange crypto trading. Orion Protocol recognizes that our unique aggregation technology has the potential to also benefit the NFT marketplace.
In the simplest sense, an NFT is a means to identify any unique entity and record that information on a blockchain. In this way, an NFT functions as an immutable digital signature of a given entity.
Fungible is a term in economics that refers to the ability to interchange one good or commodity for another because they are essentially the same. NFTs are non-fungible, which means an NFT cannot have a digital equivalent in the same way that two units of a currency can be the same.
Another key feature of NFTs is that they are programmable by way of smart contracts. This fact dramatically scales the potential use cases for this technology to represent a diverse array of both static and dynamic digital objects.
Assets are anything that has the ability to accrue or store value, which requires an element of scarcity. The principle of scarcity boils down to the potential for a market to form around the supply and demand of a good or service. The principle of scarcity is baked into the nature of how NFTs function, hence their attractiveness as a digital asset.
However, NFTs are unlike any other asset due to the versatility that results from their programmability. They are being used in digital art, video games, sports events, the metaverse, and more.
NFTs are perhaps the most well-known in the realm of digital artwork given the rapid growth and extreme valuations common in this industry. Artists create their own NFT collections, which are then auctioned to eager collectors and investors. Some NFT projects have sold for millions of dollars within minutes of being released.
The onset of crypto video games is another industry seeing rapid growth and making ample use of NFTs. Collectibles are a common feature in traditional video games but NFTs open the possibility for gamers to build their wealth with NFTs while they play. NFTs in video games will often come in the form of avatars, skins, or weapons used during gameplay.
Remember that an NFT can represent ownership of almost anything, such as a piece of music, a physical artwork, or even a house. However, NFTs can also be used to represent multiple owners of a single asset, too.
For example, someone may want to sell part of their ownership in a Banksy painting to liquidate their wealth. NFTs offer the possibility to do exactly that in what is called fractionalized ownership.
While Ethereum set the standard for the non-fungible token, NFTs now proliferate on multiple blockchains growing in market cap. Part of the reason why the NFT space exists across various blockchains is that different blockchains offer different benefits.
Solana offers the most prolific chain for trading NFTs after Ethereum. While Ethereum still boasts the most notable NFT artwork, Solana offers different benefits. Solana is particularly useful where higher transaction speeds are more critical. For example, many video game companies have chosen to develop their video games on Solana for this reason. Digital artists may want to deploy their NFTs on Solana if they hope to cater to gamers and game developers.
There are various ways to buy and sell NFTs but, especially for digital art, an NFT marketplace is the prevalent method. Other NFTs, like "land" in the metaverse or skins in a video game, can be bought and sold directly without the need for a marketplace platform.
Many of the most popular NFT marketplaces, like OpenSea, exist on Ethereum while some exchanges are starting to develop their own popular platforms. Binance and Crypto.com are two exchanges that are building sizeable NFT exchanges for people to buy and browse their favorite NFT collections.
From art to video games to the metaverse, crypto, as we know it today, would not have been possible without NFTs. The NFT world is continuing to grow to offer more reasons why potential users should adopt crypto.
Without NFTs, much of the infrastructure we are seeing in the development of the metaverse would not be possible. The landscapes, objects, avatars, and events in the metaverse are largely constructed through the use of NFTs.
The future of the digital economy is relying on the convergence of multiple blockchain networks each rapidly innovating in its own direction. At Orion, we are developing industry-leading solutions to help users move their crypto across the crypto space seamlessly. Orion's ability as a liquidity aggregator to combine various exchange sources and marketplaces means it remains at the forefront of decentralized trading, with NFT marketplace aggregation still to come as well.
Join us today to see how connecting your digital wallet through Orion can help unify your crypto trading experience across chains and the with top aggregated exchanges such as Binance, OKX, KuCoin, Curve, Uniswap, PancakeSwap, AscendEX, SpookySwap and QuickSwap.