7 NFT Applications that You Need to Know

Introduction

NFT, short for Non-fungible token, has seen unprecedented growth in 2021. Market research firm DappRadar estimated that NFT sales reached $24.9 billion in 2021, an increase of more than 200 times over the previous year. The impact of NFT was felt across almost every industry.
As of February 2022, the highest-priced NFT artwork was digital artist Pak’s experimental NFT “Merge”, which was sold for $91.8 million, according to statistics from websites “DEXERTO” and “YourNFTs”.

By Pak twitter
In second place was artist Beeple’s “Everydays-The First 5000 Days,” a work of 5,000 tiny digital images that eventually sold for $69.34 million at Christie’s.

By Christie’s twitter
Common currency or items can be continuously copied and replaced, while each NFT, based on the decentralized, encrypted technology of blockchain, is unique and irreplaceable. If you buy an NFT, you also have the ownership record and the right to use the asset on the chain. In other words, you buy the “ownership” of NFTs such as artwork, music, and digital images, not just the item itself.

What is NFT

NFT: Non-Fungible Token

It refers to a class of unique digital assets that are immutable, indivisible, and irreplaceable. The ownership of these assets can be transferred on the chain.

1. Irreplaceability: Any NFT is irreplaceable and unique.
2. Indivisible: The digital unit of the prepared NFT is a token, and cannot be divided into smaller units for trading.
3. Uniqueness: The above two characteristics and the anti-counterfeiting function make each NFT unique.

NFT Protocol: ERC-721 and ERC-1155

ERC-721: The first standard protocol for non-fungible tokens in Ethereum
ERC-20 is the standard protocol for fungible tokens (such as BTC, ETH) in the early days of the Ethereum blockchain; ERC-721 is the first standard protocol for non-fungible tokens (NFTs) in Ethereum. Tokens issued through ERC-721 are non-fungible tokens.
If both tokens are issued under the ERC-20 protocol on Ethereum, the two tokens can be replaced freely. The tokens here refer to fungible tokens. If NFTs are issued through the same standard protocol ERC-721, they can also be converted and traded directly.
ERC-721 can be applied in a variety of scenarios, including games, intellectual property, physical assets,proof of identity, financial instruments, tickets, etc. Established by Dieter Shirley, CTO of CryptoKitties, ERC-721 is currently widely used in projects such as CryptoKitties and Decentraland.

ERC-1155 is an advanced standard protocol, compatible with both fungible and non-fungible tokens.
The smart contract of ERC-1155 can transfer multiple types of tokens at once. This helps save the Gas Fee, and allows various types of tokens to be traded on ERC-1155. Unlike some tokens that need to get different contract permissions before they can be traded, ERC-1155 smart contracts allow direct exchange between fungible tokens and non-fungible tokens. Its expanded compatibility makes it possible to smoothly transfer between different DApps, greatly increasing the convenience.

Applications of NFTs

The year 2021 can be called the “Year of Metaverse”, with many companies entering the metaverse. Facebook, the world’s largest social platform, even rebranded its name to Meta, inspired by the word Metaverse. As one of the necessary elements of the metaverse, NFT bridges the gap between the real world and the virtual world. By recording the ownership, NFT makes the items in the virtual world valuable in the real world to some extent. NFTs also accelerate the digital assetization of real items, opening the door to the metaverse for us.
Chris Dixon, the partner of a16z, has compiled the 7 most common types of NFTs on Twitter, grouped into three main themes.

By cdixon.eth twitter

Art NFTs

Artwork NFTs

Making physical artworks into NFTs or issuing virtual artworks NFTs, which immutably record the ownership on the chain , ensures that the artworks cannot be forged.
We can comprehend the general NFT market situation from several well-known cases:
Justin Sun, the founder of TRON, purchased $30 million worth of artwork by Picasso, Warhol, and Beeple and made them into NFTs. This also shows the potential business opportunities for converting physical artworks into artwork NFTs in the current market.
What’s more, Injective Protocol, a blockchain company, bought a Banksy artwork called “The Idiot” for $95,000 and burned it. They photographed the burning of the artwork and sold it as an NFT. This made “The Idiot” the only artwork in the world, thus making it rare and increasing its price.
Not only are new digital artworks created and sold in the form of NFTs, but galleries can also mint digital twin artwork NFTs (digital twins are digital copies of assets, that’s, the digital records of ownership of physical assets). QR codes are displayed next to the painting to verify the authenticity of the painting and prevent counterfeits. Investors can also claim NFTs while purchasing artworks, bringing virtual galleries to the real world.
Collectibles NFTs
Artworks are similar to collectibles, but collectibles are more commemorative and do not necessarily display the artistic meaning.
Sina Estavi, CEO of the blockchain company Bridge Oracle, acquired the tweet of Jack Dorsey, the first tweet in the history of the Twitter platform, for $2.91 million, and turned it into a digital asset certificate NFT, which Jack Dorsey donated to charity with 50 bitcoins from the auction.

By jack twitter

Music NFTs

A Music NFT is the tokenization of a piece of music, sound file or cover. Those who buy music NFTs not only own the music itself but also obtain ownership of part of the creative rights. Meanwhile, the listener can trade the NFT again because it is based on the blockchain and the number of NFTs is limited. This also helps solve the problem that musicians are unable to obtain fair royalties.
DJ 3LAU was the first musician who tokenized an album, earning $11.6 million from 33 NFTs sold. His next project, Royal, aims to preserve the ownership of songs by tokenizing them, thereby ensuring musicians can gain royalty profits. Musicians can divide these music NFTs and sell them. By doing so, part of the ownership of the songs can be sold to fans and investors, while a majority stake is maintained.

By DJ 3LAU

Financial NFTs

Drops is a decentralized autonomous organization that provides loans for NFTs and DeFi. Its main service is to provide loans to users who mortgage NFTs, and use existing assets to create liquidity.

Gaming NFTs

In 2021, hundreds of games were built around NFTs. At present, a growing number of NFTs are applied in games.
In November 2017, CryptoKitties, the first game using blockchain technology based on Ethereum, was born. The game guides users to collect, breed and sell cat NFTs. Its popularity can be seen in the congestion of the Ethereum network immediately after its launch.
CryptoKitties is a game of collecting and breeding cats. Players can get exclusive cats by buying, gifting or breeding cats. Each cat has 256 genes, which evolve into different appearances, colours, sizes, personalities, etc. Two cats can breed a brand new kitten. There are a total of 4 billion possible changes in gene arrangement and combination. The rarer the cats, the more valuable they will be. Players can freely set the trading price of each cat, and the trading currency is Ether.

By CryptoKitties

P2E NFTs

Blockchain and NFTs are increasingly used in the gaming industry, and new business models emerge one after another. For example, Play to Earn (P2E) is a game where players can collect NFT rewards and convert them into cash or fiat currency.
Launched by Vietnamese developer Sky Mavis in 2018, Axie Infinity, an NFT game on Ethereum, is the most popular P2E game at the moment. In this game, users acquire the governance token Smooth Love Potion by purchasing, breeding and training Axies to fight and complete certain tasks. With over 1 billion US dollars of trading volume on the Axie platform, the token can be traded on the secondary market. Obviously, this game has successfully made Play to Earn games popular.

By Axie Infinity

Avatar PFP and Community NFTs

Streaming and Community Entertainment NFTs

As NFT applications are growing diversely, social media giants have already realized that the market is advancing towards the Web3 business. Media and entertainment companies have used blockchain technology to distribute content. As a result, NFTs have gained further development.
In the early days, Mark Elliot Zuckerberg announced that NFTs will be used in Instagram, and YouTube also declared that NFT will be integrated into its creator’s tools. By using these tools, creators can directly acquire the profits brought by video copyright.
Infringement of intellectual property rights and unfair profit distribution by brokerage companies are age-old problems. The characteristics of blockchain make it possible for NFTs to protect the autonomy of artists and creators, and play a positive role in the media and entertainment industry.

Avatars and PFP NFTs

Profile for Picture (PFP) and avatar NFTs are the most successful projects throughout history. Some PFP NFTs can be used as digital identities providing access to the community and membership. They became popular in early 2017 with the release of CryptoPunks. At that time, 10,000 CryptoPunk NFTs were minted quickly through the algorithm and given away for free to people who were of great interest and had an ETH wallet.
Twitter is also developing a new technology that allows users to verify NFT ownership and display a small Ethereum mark next to their NFT avatar.

By CryptoPunks

Conclusion

New NFT projects are being released every day, and the potential applications for NFT are becoming more diverse and continue to grow, to the point where some believe that all purchases will be accompanied by NFT in the future.
Although it is impossible to accurately estimate its market size at the moment, the NFT market will certainly gradually expand. The high returns of cryptocurrencies come with high risks. You need to consider whether there is still value after the fever has subsided, and you need to be aware of the investment risks when trading NFTs. It is recommended to select NFT projects that have gone through a complete cycle of bull and bear markets.