The digital auction market is rapidly developing and actively embraces all the latest achievements and best practices from both traditional finance and the world of cryptocurrencies. Recently, non-fungible tokens – NFTs -have become more and more popular and important.
What is NFT?
“Ordinary” cryptocurrencies and tokens, just like fiat money, are completely fungible. One particular bitcoin or dollar is in no way different from another bitcoin or dollar and you can safely exchange one for another without any loss in value. The possibility of such an exchange is the definition of fungibility. NFTs are unique. Every NFT coin is unique and cannot be replaced by another, even if the other token is issued in the same blockchain by the same algorithm.
At the same time, without a blockchain, NFTs cannot function. Only the blockchain technology guarantees that every token will be truly unique and authentic. The inability to retroactively alter data in a blockchain virtually eliminates the possibility of forging a unique token.
NFTs is not the newest idea in crypto – they have been around since 2017, and at the very beginning of 2018, the ERC-721 standard was approved in Ethereum. To date, this is the standard that most NFTs on the market meet. However, to date, many blockchains have implemented similar protocols. A good example is the BEP-721 NFT standard in the Binance Coin blockchain, approved in the second half of 2020. That is, after several years of NFT development, the “titans” of the crypto market became really interested in the concept.
What are NFTs for?
Gaming has become the first use case of non-fungible tokens. The blockchain games “pandemic” started with CryptoKitties in the Ethereum blockchain. And it was in this game that used the first popular NFT token in history.
The list of possible applications of NFT in games is virtually endless. Starting from trivial exchange of unique tokens (as it was in Cryptokitties), like the exchange of cards in collectible games, to the expansion of the in-game economy. In most popular games, players can only trade resources, consumables, and common items. NFTs enable an adequate trading of unique items and in-game assets (bases, buildings, allies, and so on). This opens up both excellent new opportunities for game monetization, and for the development of game worlds, the economy of which can be made even closer to the real one.
NFTs are, for obvious reasons, an ideal tool for identifying an individual and preventing identity theft. For example, with NFTs, you can digitize academic qualifications and awards, eliminating the possibility of appropriating other people’s merits and the appearance of fake “scientists”, “veterans”and “award-winners”.
Another obvious use of NFTs is copyright protection. The rights to the artwork can be easily tokenized in a NFT. This not only simplifies copyright protection and significantly reduces the likelihood of conflict situations, but also simplifies the rights transfer. Simply put, NFTs facilitate digital art market development, as it becomes easier to sell and buy art.
Besides, the tokenization of rights to “analogue” artworks, thanks to NFT, becomes easier as well, so non-fungible tokens contribute to the development of the entire art market.
The production of all kinds of collectibles, such as limited-edition figurines or models, is a well-developed and thriving industry. With non-interchangeable tokens, the collectible market will fully come to the digital space.
NFT allows you to make each ticket unique and almost completely eliminate the problem of counterfeit tickets, since every valid ticket will be unique and easy to track. This will benefit both sports, art, transport and all other industries where ticket sales are used for monetization.
In addition, NFT tickets can also play into the hands of ordinary users by bringing some order to the secondary ticket market.
NFTs are already used in DeFi, primarily in yield farming strategies. The Yearn Finance protocol was the pioneer of NFTs for DeFi: in 2020 the platform decided to create a non-fungible token in accordance with ERC-721 NFT standard for digital asset insurance.
This is probably the most promising area of NFT development. At least from a financial point of view. If digitizing a company’s shares is a fairly simple task, then tokenizing real, physical assets without using NFT is an almost unsolvable task.
Basically, one Apple share is no different from another Apple share. But, for example, for the tokenization of real estate, the use of NFT becomes necessary, since two land plots of exactly the same size can easily differ in value by tens of times.
Real estate tokenization via NFT has already been tested for a while. So far, most of real estate NFTs are for virtual land, as in Decentraland, but this is only the beginning.
In addition, the list of assets for which NFTs have become a real discovery is not limited to real estate. For example, Ethereum Name Service uses NFTs to trade .ETH domains.
Rapid growth of the NFT market
Non-fungible tokens today can be considered the fastest growing market available for investment today. By the end of 2020, the NFT market traded volume exceeded $250 million. Yes, these figures look very modest compared with the crypto market as a whole, but here is the dynamics… Compared to 2019, the NFT market has grown fourfold. And when you factor in the art and collectibles market, the NFT market grew to $338 million in 2020, according to a report by L’Atelier, a subsidiary of BNP Paribas.
In some segments, the growth is even more impressive: in December 2020, the volume of the NFT art market was $ 8.6 million, while in November it was only 2.6 million.
Reasons for the rapid growth
Of course, there are many reasons for the rapid growth of the NFT market. However, three of them are really conspicuous:
Availability of “launchpad” NFTs do not flourish in a vacuum, they rely on already established and well-known cryptocurrency markets. That is, NFTs do not have to create a market from scratch.
Easy to understand. Money and value are very abstract concepts and quite difficult to explain. The rights to a real asset, even in the form of a token – this is simple and clear to almost anyone.
Convenience for gaming. NFTs are not only about boring money, assets and investments, but also about games, art and music, which are much more attractive for the average Internet surfer.
Despite the high potential of non-fungible tokens and the rapid development of this market, NFTs face serious obstacles to further growth and development.
Many projects (especially those not related to art and games) are quite complex for a person not familiar with blockchain technologies.
There is an interesting conflict of perception between developers and users. NFT developers mainly came from the crypto industry, where technology is put at the forefront and users are ready to invest in the technology alone if it is interesting, as well as to learn the new platform’s interface. But most of the potential NFT audience is interested in the product or asset that is behind the token. For them, technology is nothing more than a factor that provides convenient access to this product or asset.
However, in recent months, the situation has changed: non-fungible token projects are becoming more user-friendly.
Lack of infrastructure
This problem is twofold:
The value of simplified transfer of assets and rights to them using tokens is significantly reduced due to the relatively low prevalence of blockchain technologies. To fully utilize all the benefits of NFT, we need blockchain technology to become as habitual as mobile Internet and smartphones.
The lack of marketplaces. Traditional cryptocurrency exchanges are poorly suited for NFT trading – they simply do not allow you to evaluate the unique characteristics of tokens. Dedicated NFT marketplaces are required. Their number is constantly growing, but it is still not enough to meet the demand.
A great market opportunity for new businesses
The NFT market provides unique opportunities for a new or existing e-commerce online businesses, investors and users.
First, it is obviously a promising segment of the cryptocurrency market, which is able to bring significant profits to investors. The NFT market growth in 2020 speaks for itself.
NFTs definitely deserve the most careful study, so we are launching a series of reviews of the largest NFT marketplaces, non-fungible tokens projects, and types of assets sold with non-fungible tokens. Stay tuned and you will learn everything about this one of the fastest growing segment of the crypto market in 2021!
Second, Merkeleon has a lot to offer the NFT market. As mentioned above, there is a shortage of high-quality marketplaces for trading unique tokens in the NFT market. It means that a crucial market niche is not occupied yet and can be secured with great promise . In turn, our team of industry specialists has a unique experience in the cryptocurrency segment of deploying trading platforms and conducting digital auctions of a wide variety of goods, services and assets for a wide variety of audiences.
Simply put, the Merkeleon team is able to create a reliable, convenient, and productive NFT marketplace in a reasonable time, as well as deploy a platform for conducting regular NFT auctions.
We invite all members of our community to join the discussion of creating mutual NFT platforms based on the Merkeleon auction platform based on your unique vision or business ideas. Such a platform will not only provide ample opportunities for earning income, but also push forward the development of a critical branch of the digital economy.