Non-fungible tokens, also called crypto-collectibles, are digital assets which represent artworks, physical things, or cameos. People can turn artworks, music, tickets, game items, college certificates and commercial real estate into NFTs. Furthermore, people can turn their life cameos, such as match events, into NFTs, which they can trade.

Since each non-fungible token has a unique identity, it makes it possible for different NFTs to represent different things, making them tradable. Although both NFTs and cryptocurrencies exist on the blockchain and are digital assets, they are different, based on their attributes.

As a fact, NFTs became popular this year, 2021 due to their economic potential. Basically, content creators such as musicians and painters can earn much more from their creations than ever before. For example, the NFTs grew in popularity following the landmark sale of Beeple’s artwork at Christie’s auction in March this year.

Specifically, Justin Sun purchased Beeple’s artwork for a record-breaking figure of $69 million. Thereafter, there were many other high price NFTs sales. Interestingly, this led to an increase in the NFT market capitalization to over $2 billion since their inception in 2014.

Characteristics of NFTs

The major focus of this article is to discuss the key attributes of NFTs, their use cases and categories. Here are the major characteristics of NFTs:

Uniqueness: There are no two NFTs which are identical, therefore people cannot interchange them. This is so because each NFT has its own metadata, meaning that people cannot alter them.

Scarcity: Creators of NFTs keep them rare in order to maintain high values.

Indivisibility: We cannot divide NFTs into fractions as we do with cryptocurrencies. This is because people usually buy full units of NFTs, not fractions, as the non-fungible tokens represent ownership of assets, events, or communities.

Ownership: An NFT exists on a specific account on a DLT. As a result, the creator of the NFT keeps control of it.

Transparency: There is transparency in the way people transfer the NFTs. This is because the decentralized distributed ledger keeps traceable records of all transactions, resulting in people verifying all activities related to them. 

Interoperability: People can trade the tokens on various blockchain systems, using a decentralized bridge or centralized custodial service.

Applications

NFTs have various functions. In most cases, they enable people to earn money from their creations. So, what are the major uses of NFTs?

Gaming: Many games have got in-game items with value. These may include accessories, such as weapons, which individuals can use in other games.

Identity: NFTs play an important role in establishing proof of identity or ownership of goods or even services. For instance, if people tokenize academic records, documents, physical appearance, among others, that creates proof of ownership.

Collectibles: We have many cases where people tokenize collectibles which they have. In fact, since human history, people gather aesthetic goods in order to reminisce on their past or important events such as victory in wars. Nowadays, people can turn these collectibles into NFTs.

Digital assets: It is now possible and common for people to create unique digital assets. In our digital age, using the blockchain technology, people can tokenize their assets such as pieces of land, houses or even precious stones such as gold and silver.

Physical art: Artists can make much money by tokenizing their artworks. This enables them to continue to benefit from their pieces of artwork, even when their current holders trade them.

Social tokens: The internet allows people to create events and social communities. However, sometimes disputes arise about who owns some of these communities. With the advent of non-fungible tokens, people can create NFTs that represent their communities. We call such types of NFTs social tokens.

Categories of NFTs

NFTs exist in different categories. Nonetheless, some of the non-fungible tokens can fit in two or more categories. Basically, there are three broad categories of NFTs which are original copy of work, digitally native NFTs and NFT Metadata.

The first major category is the original copy of work, which is documented on the blockchain. There are also the digitally native NFTs which show ownership of rights to different pieces of work. Finally, we have the NFT metadata which shows the  rightful owner of metadata files which exist on the internet.

Thus, apart from these three broad categories of NFTs, we have several subcategories which include collectibles, artwork, metaverse applications, sports, event tickets, gaming industry, music, memes and domain names. We shall briefly focus on these.  

Collectibles

In basic terms, a collectible is an item which is valuable to the people involved because of its rarity and its popularity. Traditionally, people can collect aesthetic pieces of art or metal coins and stamps. These days, they can represent these priceless items in the form of NFTs. For instance, CryptoKitties are an example of online collectibles which are in high demand. These exist as NFTs.

NFT Art or Artwork

There are various forms of programmable digital artworks which people can turn into NFTs. Essentially; these artworks show creativity and versatility by their creators. Therefore, gifted artists can spend much of their time creating digital artworks which are in high demand online.

Event tickets

There are tickets which exist as NFTs, enabling people to attend special events, such as sporting conferences. Thus, event managers mint a specific number of NFTs which give individuals entitlements to take part in certain events. When the people purchase the tickets, they receive NFTs in their wallets.

Music and media

Musicians can mint their music albums into NFTs, giving them the opportunity to earn much money from their creations. Therefore, musicians monetize the work through NFTs. This, principally, enables them to earn loyalties even when people resell the music. Also, this eliminates the problem of piracy, which has been rocking the industry for many years now.

For example, a musical group called King of Leon became the first music outfit to sell its music as NFT.

Gaming and the metaverse

There is much use of NFTs in the gaming sector. This is very popular with video games which use in-game assets such as weapons. With the advancement in the gaming sector, these in-game items are transferable to other games. Therefore, gamers can buy and sell gaming assets as NFTs.

Another recent development is the metaverse, which is a virtual universe where people can interact with one another. As an instance, people can sell virtual land or houses. A typical example is that of Decentraland where people can buy and sell real estate. Notably, the metaverse creates a virtual sphere with virtual reality, non-fungible tokens and digital currency.

Trading cards

Traditionally, we have physical cards such as basketball cards, which people can share. Now, we have a virtual version of such cards as NFTs. Further to this, they can also represent some physical assets, such as virtual sneakers. As we have noted, there are many trading cards which people can buy and sell on NFTs marketplaces such as OpenSea or Mintable.

 

Sports

Lately, NFTs have become part of popular and elite games such as basketball. Hence, sporting teams can create their own NFTs, which represent some memorable moments of a game. For example, a popular soccer team can capture a spectacular goal and turn it into an NFT. The most popular sports that have ventured into NFTs include boxing, basketball and Formula 1

The NBA Top Shot allows interested individuals to buy the spectacular highlights of their game experience as NFTs. Therefore, people can share or sell these NFTs and generate more revenue.

Fashion Industry

NFTs in the fashion industry are also trending. This is because people can now create, buy, or sell virtual clothes. For example, an individual can buy a pair of shoes for his/her avatar. This is because people can post their avatars on social media platforms, such as Facebook, clothed in virtual garments. This was not imaginable a decade ago, but is now a reality.

Domain name

When an individual has a domain name in the form of an NFT, it means that he/she has complete control over it. The most important reason for this is that the domain owner has got a private key for it. Therefore, people can link the domain not just to a website but also to crypto wallets. It is also important to note that people can sell these domains for a fortune.

For example, the most expensive domain to date is win.crypto which fetched $100 000, on the NFT market.

Memes

In another interesting development, people can convert their memes into NFTs, which they can sell. Because of this, many meme creators have the potential to earn a lot of money. We have witnessed the sale of memes for sizable sums of money. Some of the most popular memes include Disaster Girl, Bad Luck Brian, Charlie Bit My Finger, Overly Attached Girlfriend and Nyan Cat, to name a few.

Final words

The digital world has come up with big innovations such as NFTs and cryptocurrencies, which have brought additional sources of income. Despite both cryptocurrencies and NFTs existing on the blockchain, they differ remarkably. As the name denotes, NFTs are non-fungible, while cryptocurrencies are fungible. Besides this, there are various categories of NFTs, which include event tickets and memes.