Although NFTs are on the rise, this technology is still in its early stage. I believe that in the future, existing NFTs will evolve into something else, something that will change many aspects of our daily lives.
Perhaps a brief history of NFTs is needed for a better understanding of how NFTs will have such a massive impact on our lives.
We all know NFTs as unique digital objects, usually associated with art pieces. They can exist in many mediums: paintings, drawings, songs, a piece of music, a concert, and more.
But what about the very first blockchain-based NFTs? No, not the famous CryptoKitties – one of the very first blockchain-based NFTs was Spells of Genesis which used cards for a blockchain-based trading game that was built on top of the Bitcoin blockchain.
There may not be many people who remember Spells of Genesis, but these NFTs marked the arrival of a new gaming era. When the FDCARD was released, it became the first tokenized game asset to enable users to gain true ownership over their digital assets. It was the start of a rising tide that would eventually enable gamers to move from games that are managed and controlled by centralized bodies to truly decentralized games that provide ownership rights over in-game assets.
A lot has changed since then, but if you track the history of NFTs you will see that all roads lead to Spells of Genesis.
With the introduction of Ethereum-based CryptoKitties in 2017 the general public saw how a blockchain-based game can go viral as another significant milestone in the NFT development was made. I would classify these NFTs as first-generation NFTs.
Second-Generation NFTs
The world of NFTs is developing at an unimaginably rapid pace. Next-gen NFTs have emerged, and this time, they have moved beyond being just cards. Three booming trends – cryptocurrency, NFTs, and gamification – have been combined into a metaverse, a virtual world where users can live and act just as if the world was real.
In a metaverse, NFTs can represent anything: characters, resources, plots of land – it all depends on the developers’ imagination. In this virtual world, NFTs add a new, real value to the game. They can be traded in secondary markets, exchanged, improved, or rented – users can do anything they would be able to do with a real-world asset.
Some platforms, such as Axie Infinity, have already turned this idea into a reality. There, users can breed, trade, battle with characters called Axies and earn money for their activities.
Another metaverse that enables users to capitalize on their NFTs is Alien Worlds. The platform enables players to trade and stake their tokens, and the most skilled players get a chance to participate in the management of the planetary world’s treasury.
Leave gaming though.
Many famous brands are creating their own metaverses already. You might know that digital horse racing has existed for a while – but what about horse racing in a metaverse? Stella Artois has launched its metaverse in partnership with ZED RUN where users can breed, sell, and buy digital horses and enter them into races. One Z1 Genesis racehorse is worth 21 ETH (approx. USD 38,600 at the time of writing). Although the horse is virtual, the money is real.
Lindsey McInerney, the company’s Global Head of Tech & Innovation explains: “Stella Artois has always been about creating and facilitating memorable, premium experiences and bringing people together.” 3D racetracks are available in the metaverse for users to enjoy by providing a direct avatar component. This is the first big brand to explore the realm of new digital entertainment experiences.
Another important feature that is already contributing to the mass adoption of NFTs is fractionability. Here, we can observe two models:
- An NFT is divided into fractions and each fraction is owned by different investors
- An NFT is not divided, but the ownership rights to it belong to a pull of investors. Each investor owns a specific NFT share depending on their contributed funds.
Even though fractional NFTs have found a wider application in DeFi, their popularity in other sectors such as art is increasing, too. In my opinion, fractionability is the feature that will finally contribute to the mass adoption of NFTs because it opens the doors to investment for people with average to low income.
I would classify all these types of NFTs as second-gen NFTs. They are already here and provide players with completely new experiences and opportunities, but they are still evolving.
Third-Generation NFTs
What will be the next generation NFTs? In my opinion, it doesn’t look like something completely different will come, but we have all that is needed to move NFTs to the next level:
- There are platforms where we can exchange, sell, or buy tokens safely – users get the real ownership right over their tokens.
- Even though there are plenty of NFT types, among them are particularly valuable projects with long-term perspectives. It shows that NFTs, at least some of them, are worth investing in. We can trust in them and their economy, and thus hope that in the future we can benefit from them.
- NFTs became fractional, which enables anybody to buy a part of an NFT.
- Ownership rights – we already have them. When a user buys or creates an NFT, their ownership rights are recorded on the blockchain.
- Gamification creates a dedicated niche for users who would normally not be interested in the technology, and DeFi is working on the niche so that it attracts investors along with gamers. Both gamification and DeFi contribute heavily to the mass adoption of NFT technology.
3rd Generation NFTs – We Are Almost There
Will something else be invented? Probably, but to me the equation looks complete as follows:
Lindsey McInerney, the company’s Global Head of Tech & Innovation explains: “Stella Artois has always been about creating and facilitating memorable, premium experiences and bringing people together.” 3D racetracks are available in the metaverse for users to enjoy by providing a direct avatar component. This is the first big brand to explore the realm of new digital entertainment experiences.
Another important feature that is already contributing to the mass adoption of NFTs is fractionability. Here, we can observe two models:
- An NFT is divided into fractions and each fraction is owned by different investors
- An NFT is not divided, but the ownership rights to it belong to a pull of investors. Each investor owns a specific NFT share depending on their contributed funds.
Even though fractional NFTs have found a wider application in DeFi, their popularity in other sectors such as art is increasing, too. In my opinion, fractionability is the feature that will finally contribute to the mass adoption of NFTs because it opens the doors to investment for people with average to low income.
I would classify all these types of NFTs as second-gen NFTs. They are already here and provide players with completely new experiences and opportunities, but they are still evolving.
Third-Generation NFTs
What will be the next generation NFTs? In my opinion, it doesn’t look like something completely different will come, but we have all that is needed to move NFTs to the next level:
- There are platforms where we can exchange, sell, or buy tokens safely – users get the real ownership right over their tokens.
- Even though there are plenty of NFT types, among them are particularly valuable projects with long-term perspectives. It shows that NFTs, at least some of them, are worth investing in. We can trust in them and their economy, and thus hope that in the future we can benefit from them.
- NFTs became fractional, which enables anybody to buy a part of an NFT.
- Ownership rights – we already have them. When a user buys or creates an NFT, their ownership rights are recorded on the blockchain.
- Gamification creates a dedicated niche for users who would normally not be interested in the technology, and DeFi is working on the niche so that it attracts investors along with gamers. Both gamification and DeFi contribute heavily to the mass adoption of NFT technology.
3rd Generation NFTs – We Are Almost There
Will something else be invented? Probably, but to me the equation looks complete as follows:
In other words, we have everything evolve the new 3rd generation NFTs – we just need to combine all these features. This is where the main challenge is, and this is why we aren’t there yet.
To make all the features meld into one, something else is needed.
At some point in their lives, NFTs will become independent. What I mean by this is the following: when a token creator sells the token, the token ownership rights and the entire token value is transferred to the new owner, the one who buys the token.
For this to occur, a tokenized rights management solution will need to handle all (or the majority of) NFTs and interact with all the available platforms to enable users to view, sell, buy, trade NFTs, or perform whatever actions are going to be performed with them in the future. Of course, standardization is needed to enable seamless interoperability and interaction among platforms and different NFT types.
We have all the required pieces available – we just need to combine them correctly and make them function as one system to enable the arrival of the next-gen NFTs.
