“What is it that you want for yourself? Is it big enough? Remember, whatever you come up with, 10x it. Challenge your brain to break the bounds.” This is the philosophy of world class high performance coach Brendon Burchard, and this is the challenge for those moving into the nascent and expanding domain of the non-fungible token (NFT), as its full potential is yet to be explored.
The NFT is a new frontier in the securities and token economy; a breakthrough in the way we keep track of unique assets on the internet.
It has many properties that expand the range and possibilities of the security token.
An NFT is a token with a unique identifier attached to it, making the token unique and specific so it can be used to represent a non-fungible asset.
This creates new opportunities in the blockchain trading and exchange space to trade what have typically been non-fungible assets like a house or a piece of fine art.
So NFT tokens aren’t currencies or traditional tokens which can be likened to a share, they represent a unique asset on the blockchain and mean that the tracking of a document of ownership becomes easier to represent on the blockchain.
“Transfer is simplified, ownership is verifiable on the blockchain and authenticity is easily established,” explains Charlie Waldburger, ICO Business Strategist and Writer.
Cryptokitties – where every cat is represented by one token that has a unique identifier – were one of the first use cases of how an NFT can be subscribed to a unique asset to make it easily tradable.
With NFTs, when it comes to trading and recording or storing asset ownership on the blockchain, “investors will be limited only by their imagination,” says Waldburger.
“There is no reason that this securitisation effort won’t eventually overtake major equity markets or institutional capital markets in size,” he adds.
Albert Einstein once famously said;” your imagination is a preview of life’s coming attractions,” and this is proving to be true once more, as the way the world conducts business is once again ready to be rewritten.
And it’s an industry with a big imagination that has kicked off the potential for widespread movement of assets into the non-fungible token space.
According to Waldburger, the gaming industry has led the way, as “major gaming companies are already making millions by creating rare digital goods inside popular video games. This is the start.”
So, how big is the potential opportunity that the non-fungible token represents?
“There are trillions of dollars of illiquid, often-physical and non-fungible assets that are ready for tokenisation.
“Consider fractionalizing ownership in Air Jordans, vintage Chevys, or fine art. Unique, digital assets are ripe for this too,” says Waldburger.
We’ve already seen companies bringing tokenisation and liquidity to real estate – one of the largest and most prized asset classes. Now, non-fungible tokens are set to bring a greater variety of assets that have for centuries been considered non-fungible, to the blockchain. This could include physical and digital assets as well as documents such as certificates or even IDs.
The non-fungible crypto space could be very big in the very near future as it enables the digital representation, exchange, and trade of an ever bigger variety of non-fungible assets.
But NFTs are the new kids on the block of the ICO and the token economy domain, this means an ecosystem for NFT trade is yet to be established before securitisation of both physical non-fungible assets and digital assets with NFTs becomes widespread.
According to Waldburger, the last major remaining hurdle is the “necessary infrastructure to support trading – like an exchange.”
These NFTs will have to be traded in a different way to the traditional crypto-token, since each NFT is unique.
Marketplace and trading infrastructure for NFTs are yet to be built
New exchange platforms and marketplaces have been emerging to cater to NFT trading:
Fanbits enables creators to turn their content into unique crypto collectibles that their fans can buy and resell.
Metamask is a browser plug-in for Ethereum wallet, used to access dapps
Mokens helps you design and create your own crypto-collectibles with a simple web interface.
Wax is a decentralised platform that enables anyone to run a fully functioning virtual marketplace with zero investment in security, infrastructure, or payment processing.
ZeppelinOS offers developer tools for tokens, and published an implementation of the ERC721 standard.
Opensea has entered the space as one of the first NFT dedicated marketplaces.
Openbazaar, a blockchain-based distributed marketplace has started trading crypto collectibles.
OpSkins, a marketplace for video game skins and digital items have launched their own crypto currency to use on the platform.
Rarebits has entered the scene as an auction-based marketplace for crypto collectibles.
oxcert.org offers developer tools for issuing and managing NFTs.
Bitcrystals aims to create a platform for games to use crypto features.
Codex Protocol has launched as a decentralised registry for unique assets including art, fine wine, and watches.
Ethereum offers a platform for the latest collectible projects.
What or Who might be displaced?
History has proven that where ever there’s great innovation and the old falls away as it gives in to the new, there are winners and losers. With all these new market entrants catering to a better, faster, and more efficient way to record and trade assets, old structures and business models are bound to be gradually displaced and eroded.
We’ve already seen how new blockchain-based business models are disrupting major industries and enterprises such as the franchise industry, the scientific publishing industry, investment banks, financial institutions, trading and exchange platforms, and predictive financial forecasting models.
So which companies and infrastructures will be collateral damage to the token economy, and what new elements do NTFs bring to the table to significantly change current business strategies and processes?
Waldburger says, “as non-fungible crypto asset popularity grows, there will be a major blockchain and token-induced restructuring of middle men.
“Collectively, these players have thrived in an intermediary capacity: performing services that the user or business couldn’t because of some legacy technological, regulatory, bureaucratic or monopolistic reality.”
But these players will now be displaced because “the evolution of digital token technology is such that many of these services will be imbedded in the token itself. It can self-regulate, contract and comply – by design,” says Waldburger.
“Will government intervention slow the token industry potential in the near term? Of course!” he adds.
And although “unleashing the full potential may be too disruptive, too quickly” soon, he believes, “the third parties and custodial type services seen in financial transactions, in particular, will dwindle.”
Although innovation in the business world is typically 40 years ahead of regulators, and uncertainty caused by lack of knowledge on how an industry will be regulated can hinder progress.
Thus no one can forecast how long this dwindling of third parties will take, or what obstacles will surface as the business and finance world transitions to using tokens with embedded services that could include regulation, compliance, and contracts. However, as the token economy develops, innovators will be able to increasingly use NFTs to cut out the middle man who had previously been involved in many of these transactions.