If, like a curious Alice, you’ve gone down the rabbit hole researching the exciting world of digital collectibles, the chances are you’ve come across the acronym NFT or Non-Fungible Token. You may even have seen the more technical terms (ERC-721, ERC-1155), but more on them later.
Use this article to gain a high-level understanding of what this new technology is, what opportunities it opens up and how it will change the world as we know it.
What’s this got to do with digital collectibles?
In our industry, non-fungible digital items are already commonplace. People have spent small fortunes on micropayments in games like Fortnite to buy limited edition swag and weaponry.
While those items are non-fungible, they can’t be used outside the game or sold on to others. In short, despite paying for the items, the player never owns them in any real sense. At least not outside of the game itself. The game’s publisher has full control over the asset and its distribution at all times.
The blockchain, however, allows developers to add an extra layer to their in-game digital assets that effectively hands ownership and management permission to the end-user. This process is known as ‘tokenization’ and turns the item into an NFT (using the ERC-721 standard, which we cover in more detail here), at which point developers can also bestow unique information that makes the object extremely rare and desirable, like a limited-edition or one-of-a-kind weapon.
In the context of games, NFTs give players real ownership over their items. This is allowing them to monetize the rare assets they earn or buy in-game on open marketplaces. You see this in action in our own game Reality Clash; or in the likes of CryptoKitties. But NFTs can equally be used in non-game environments, such as for digital NBA and NFL trading cards, real-world property or works of art.
Non-Fungible Tokens (NFTs) and the future of digital ownership
What does ‘fungible’ mean?
First, it’s important to understand the difference between the words ‘fungible’ and ‘non-fungible’ – this helps most people grasp the basics.
Fungible applies to things that can be easily replaced by another of equal value. When you get cash out of an ATM, you don’t read the serial numbers on the paper, you trust that your cash is as good as everyone else’s cash.
Let’s dig into that:
If you give someone a £20 note in exchange for 2x £10 notes you still have £20.
In the digital economy Bitcoin is fungible in exactly the same way. Still with us? Great.
Okay, but what about ‘non-fungible’?
Non-Fungible items, however, can be classed as unique and special – they’re not easily replaced.
We live in a non-fungible world.
Take this example:
I want to see the new James Bond film. I go to the Odeon cinema website and buy a ticket. But, somehow, I mistakenly turn up at a Cineworld cinema. Oops. They’re also showing the James Bond film and at the same time, but my ticket is no good and they won’t accept it.
That’s because the ticket is non-fungible and I’m asking a totally different company to accept it. We live in a non-fungible world.
Create a collectibles online store
Now that you’ve created your digital assets and preserved them for the life of the internet and even beyond, what to do with them? Our DAT platform provides the perfect branded storefront for your shiny new wares.
Customers create an account using our secure platform and you have access to all this data, it’s your store after all! These assets, once purchased can appear in your app as playable characters, weapons, decals, power-ups, vehicles or pretty much anything you care to represent them as – even in an online bragging-rights gallery.
You get to control the frequency and availability of the assets and their initial pricing. This is key to generating demand for rare or earned items which can be free rewards for achievements that will add to their future value, like a war hero selling his medals to collectors.
Create a marketplace
So you have a successful storefront and people are buying your assets safe in the knowledge that they own them forever. But what now? Here’s the beauty of digital assets on the Blockchain – they are tradable.
Behind the scenes it’s a transfer of the token to a new user which our platform handles but to the customer it’s a thriving stock exchange where values soar and fall according to demand and best of all, as the virtual broker, you get a % of each and every trade!
Driven by blockchain data
The same tech that drives virtual currencies like Bitcoin and Ethernum is behind our DAT platform, so you know it is secure and dependable.
Expect to see Elon Musk buying some collectibles soon!