You first need to know the definition of “NFT.” NFT stands for Non-Fungible tokens, specifically Non-Fungible ERC721 tokens. Once you know what this is, you need to know why they’re changing the way we think about the web.
The idea is that it’s possible to give assets names on the blockchain that are unique to each asset. These assets can be anything from a simple digital file, artwork like a painting or sculpture, or even physical goods like cars and clothes. Imagine if your car was registered on the blockchain with a special “name.”
What is NFT?
Non-Fungible tokens are unique digital assets that are not interchangeable, meaning each is special and unique. Each token has its own back story, value, and use cases. These Assets can be purchased by anyone, like collectibles or trading cards.
The most popular example you might already be familiar with is Crypto Kitties. These Cryptokitties were a huge success in 2017 because they showed the world that people would buy these digital collectibles.
What is the Metaverse?
Metaverse is a virtual space where we can store data and interact with others. The vision of the metaverse is that it will be used to create an entire universe of interconnected digital assets. A key part of this is non-fungible tokens (NFTs), which are tied to physical or digital products and represent them on the blockchain along with their metadata.
The metaverse is a virtual reality that allows individuals, businesses, and digital platforms to coexist and communicate with one another. It encompasses anything from non-fungible tokens (NFTs) to virtual social and gaming platforms like Roblox (for example).
Even these games can be updated to include NFTs, so if someone collects specific tokens or items within the game, they’re added to the blockchain. These assets become real and can then be traded outside their original context.
In this future world of NFTs, people will be able to identify products better using technology that’s impossible for us to imagine. A perfect example is how we use QR codes today.
How can metaverse users use NFTs?
Proof of identity and authenticity:
Other users can verify your identity by scanning a QR code. If your QR code has an NFT on the blockchain, it’s proof that you’re real and not a bot. Proof of authenticity, ownership, and identity will be a significant obstacle when constructing a metaverse predicated on trust and facilitating safe transactions.
The NFT is one possible solution that has been proposed for this problem. This is because it is built on blockchain, and the primary function of blockchain is to maintain an unchangeable and permanent record of all transactions.
It is difficult to reproduce something already existing in the material space unless the person copying the item possesses the specialized abilities, materials, and technology necessary to fake the object.
However, something exists as a digital entity. In that case, the material barrier is removed, and in many cases, no special expertise is necessary other than the ability to follow the directions in a tutorial.
Even if it is exceedingly unusual that someone in the physical environment will ever claim to be you in the company of people you know, it is far simpler to forge your documents or steal your digital identity. The same thing has likely happened to you.
A person’s identity can be reliably established through their digital avatar. With NFTs, even if someone were to try to duplicate the appearance of your avatar by purchasing the same digital clothes as you or even identical avatar skins, they would not be able to impersonate you. This is because your NFTs will prevent them from doing so. The tokenized version of an avatar will be one of a kind and impossible to fake.
Storage of digital assets:
File storage is a huge problem for many people worldwide, especially in countries where storage isn’t well-established. Using NFTs as digital assets means you will have more storage available for your convenience, so you don’t need to worry about storage space when uploading videos or pictures.
NFTs are universal, so that they can be used across different platforms. If you buy a digital sword (an NFT) on one platform, it’s the same digital sword and the transfer of the assets whenever you log into another platform. One of the benefits of the widespread implementation of NFTs in the metaverse is that it will make possible the transfer of objects from one virtual world to another without any interruptions.
That is the first step toward an interoperable metaverse, which, according to the foremost authorities in the field, is required to develop a genuine metaverse rather than merely a multiverse of distinct virtual worlds. If we take this step, we can establish an actual metaverse.
Every single virtual environment, whether it be a game, a virtual museum, or a hangout area, is constructed on its unique programming framework, completely enclosed under a specific developer’s intellectual property.
This indicates that transferring any object from one virtual world to another is either impossible or exceedingly hard, depending on the specifics of the object.
NFTs, on the other hand, are kept on their separate blockchain infrastructure. Tokenized products, like avatar skins in games, weaponry, accessories, tickets, digital luxury bags, or even real estate, will enable your virtual assets to follow you into every virtual world you visit after they have been implemented at scale with deep integration.
However, the use of this technology in the metaverse reality is not limited to those applications. Moving tokenized digital assets from the internet to a physical location is possible.
Building the infrastructure:
What we’re seeing right now is the creation of a new way of looking at the web, making it a more digital place to store information. Most people still use this data through applications and websites, but we have the technology to build something better.
NFTs can be used to build a new patent-less, p2p Web in the future through distributed applications. This can happen using decentralized databases and peer-to-peer protocols and will not depend on any centralized authority.
The value of data is a highly contentious issue, even today. For example, take Facebook’s recent privacy breaches regarding how Cambridge Analytica took advantage of the data they collected from 65 million people during the 2016 US election.
DeFi (decentralized finance):
DeFi is a financial framework, a technical construct that can provide the building blocks for future applications and environments. These “blocks” include all the various elements of finance: banking, credit, investing, payments, and more.
NFTs are particularly suitable for this new blockchain-based infrastructure because they can be issued on their blockchain and can therefore be used to represent digital assets with full transparency and immutability.
There are several NFTs already in play and in development, such as CryptoKitties and the plan to create a real-world Waffle House restaurant powered by one million NFTs. The latter is an ambitious project led by the team behind the Avatars Platform and will be built on top of the Ethereum blockchain.
Another example is one on OpenSea, where you can buy digital art pieces for yourself or as a gift for someone else.
Because the metaverse is the natural continuation of web 3.0 and most of its present economy functions on the technology of blockchain, decentralized finance, also known as DeFi, will be the cornerstone of processing transactions in virtual worlds. The same may be said for NFT.
One example is collecting rent, dividends, royalties, or other forms of passive revenue from using NFT that users have acquired. Another is selling NFT to investors.
In the video game F1 Delta Time, the month of December 2020 saw MetaKovan emerge victorious in an NFT auction for a portion of a virtual Monaco racing track.
Because it is an NFT, he is eligible to receive dividends of up to 5% from any races or special events that take place on it. Some non-fungible tokens, like CyberKongz ($BANANA) and Mutant Cats ($FISH), are created to give their holders virtual cash returns.
NFTs also be staked, nested, or used as collateral for loans. Storing an NFT in a smart contract based on the DeFi protocol to create a yield is known as staking.
One potential application requires shareholders to hold onto digital assets for a predetermined time before they are allowed to resell them or collect their reward. Adding a new network-future token (NFT) or smart contract to an existing network-future token (NFT) is all involved in NFT nesting.
GameFi (game finance):
GameFi is a substantial step towards a new game economy using NFTs and DeFi. This will happen not by creating new games with all-new NFTs but by adding the NFT economy to existing game economies. This will allow the game’s developers to have complete control and ownership of their platform while providing some utility to the users and allowing them to generate value.
The blockchain is the most promising technological innovation of the 21st century, and it has created a new way to store digital assets and create value. NFTs represents the next step in tokenization, which allows you to fully control your digital assets without limitation.
NFTs solve the problem of ownership that we have been suffering for centuries and make it possible for a more digital ecosystem to be created. With NFTs at its foundation, tomorrow’s new virtual economy will likely create a new way of using value and new revenues for the users.