The crypto ecosystem has given rise to many niches, with some gaining more traction than others. One of the up and coming areas within this nascent ecosystem is the Non-fungible Token (NFT) market. This class of digital assets is a popular topic amongst the crypto community and artists who understand the value proposition of NFTs.
So, what are NFTs and why are they popular in today’s crypto market? To put it simply, NFTs are digital assets with distinguishable features, which means that each NFT token is unique. This is not the case for fungible tokens such as Bitcoin, where one unit of BTC carries a similar value to another equal unit, hence non-distinguishable. NFTs introduce the aspect of distinguishability, allowing crypto users to own a unique token.
NFTs have become a popular means of representing art and real-world assets on blockchain networks like Ethereum. This new crypto niche is now creating a wide range of opportunities for innovators, artists, DeFi users and existing industries that can leverage tokenization for on-chain digital identities. The next section of this article highlights five clear benefits of investing in the burgeoning NFT space.
- True Ownership
NFTs create an ecosystem where artists can authenticate the actual ownership of their work by recording the metadata on-chain. Typically, most art pieces are physically stored, which exposes them to the risk of being stolen or duplicated. NFTs eliminate these shortcomings by allowing artists to keep the records of the actual copy on a blockchain network. In doing so, anyone can publicly verify the ownership of a particular art piece.
While most NFT projects are in the developmental stages, artists can use existing NFT platforms such as OpenSea, Mintable and Rarible to mint tokens representing their art pieces. Ideally, minting involves creating a new NFT token and introducing the digital asset into circulation through available NFT marketplaces. Once recorded on-chain, the NFT is a unique and distinguishable asset whose ownership can be traced back to a specific entity.
- Access to DeFi NFT Services
Some NFT projects have gone a notch higher to provide Decentralized Finance (DeFi) services such as lending, borrowing and staking. One such ecosystem is the Hoard marketplace which allows users to buy, sell, loan or rent NFTs. This platform empowers developers with tools to integrate digital art, in-game items and domain names with the Ethereum blockchain.
The Hoard team intends to build a Decentralized Autonomous Organization (DAO) NFT platform governed by the community. This DAO ecosystem will be powered by Hoard’s native token HRD, whose total supply is 1 billion with 48% set for distribution to the community.
Notably, NFT users on Hoard can also provide liquidity for the native HRD token via decentralized exchanges. This token is currently listed on Estonia’s P2PB2B exchange following a token sale regulatory clearance from the Danish Financial Authority.
- Growth Prospects
As mentioned earlier, the NFT niche is currently a hot topic amongst the crypto community, gamers and artists. The past few months have seen NFT marketplaces grow tremendously as more creatives mint their tokens to represent art ownership on-chain. This area of innovation is now being touted as one of the most promising crypto niches, with diehards predicting that NFTs will change the future of creative work and the entire financial ecosystem.
It is also quite noteworthy that sports organizations have also made a debut in the NFT market. The National Basketball Association (NBA) is one of the prominent sports organizations invested in NFTs. NBA currently supports an NFT marketplace dubbed ‘NBA Top Shot’, which allows users to collect top NBA moments and store or sell them as NFTs. That said, the growth prospects of NFTs are still significant and present more opportunities for creatives and investors to join the market.
- On-Chain Liquidity
The crypto ecosystem has created decentralized market ecosystems through DeFi services. This new financial ecosystem introduces on-chain liquidity, where users interact with DeFi protocols instead of third parties. In essence, retailers and institutions can tap into the growing crypto market liquidity by tokenizing art, in-game items and real-world assets, amongst other products.
With NFTs, one does not have to rely on traditional financial markets for liquidity. NFTs present the opportunity to wrap real-world assets such as property onto a blockchain network. This means that a property owner can mint an NFT token to represent their property on-chain, creating more liquidity opportunities to sell the property or use it to access financial services on marketplaces such as Hoard.
- Value Preservation
Creatives are often disadvantaged when it comes to the value preservation of their art. NFTs change this narrative by introducing an ecosystem where art pieces can yield income for generations. For instance, the descendants of ancient artists such as Leonardo da Vinci would still be receiving royalties if the art pieces had been recorded on a blockchain network instead of only being physically stored.
Furthermore, NFTs allow market users to prove the authenticity of a particular art piece. This means that only the legitimate owners or beneficiaries of an NFT token can realize its market value by selling or using it as collateral. NFTs make a bullish value preservation case for both creatives and investors who have an eye for art with such fundamentals.
Conclusion
The NFT marketplace will likely shape the future of creative work, online gaming and digital identities. Going by the trends, more retailers and institutions will jump into the NFT bandwagon as creatives or investors looking for a market edge. However, there is a lot that needs to be done before we see the mainstream adoption of NFTs.
For starters, the market needs to be regulated to build confidence around consumers. NFT innovators also have to develop bridging solutions that allow creatives to sell NFTs across multiple blockchain ecosystems. These are but a few of the existing pains that need to be solved before NFTs can fully realize their potential.