Exploring NFTs Beyond Crypto Collectibles
The Ethereum Blockchain is attributing to the majority of DLT byproducts including smart contracts, DeFi, and NFTs, yet finding the unicorn EIPs you should be paying attention to in 2020 can be challenging at best.
Ethereum Improvement Proposals (EIPs) are essentially a list of pull requests submitted by anyone who thinks there’s room for improvement in the broader Ethereum ecosystem.
Some popular EIPs include but are not limited to the popular ERC-20 token standard, the ERC-137 Ethereum Name Service, and the ERC-721 non-fungible tokens, commonly known as NFTs.
Although ERC-20 tokens are undeniably the most commercial Ethereum improvement protocol to date in terms of utility, especially after gaining excessive attention during the ICO boom of 2016-18, probably the most accessible EIP for newcomers would be ERC-721 and not ERC-20.
I mean sure, we all trade ERC-20 tokens regularly, but how many of you have launched your ERC-20 token? That’s right.
That doesn’t necessarily mean launching your ERC-721 token is easier or less frustrating when compared to other token standards, but I am confident for a variety of reasons that 721s are generally more attractive to users not familiar with blockchain architecture and its programming languages.
Τo interact with a crypto collectible rather than a token pegged directly to monetary value and market practices incentivize users more about what there’s to do in Ethereum besides aggressive arbitrary opportunities.
Relevant Article: H&M Looks to Authenticate Products With NFTs
ERC-721 Tokens Explained
The golden era of ERC-721 tokens was probably when the Ethereum network reached its peak back in 2018, when CryptoKitties, or simply digital pictures of two-dimensional cats, were selling for tens of thousands of dollars worth of ETH.
The deal is that a non-fungible token is usually a unique single edition or limited edition token, that holds additional data, and/or media, able to interact with the Ethereum blockchain and various decentralized applications.
In CryptoKitties’ case, an NFT is a CryptoKitty. Buying it with ETH means you get the NFT in your wallet, where you can store it, transfer it to another wallet or user, or sell it in NFT marketplaces and other decentralized exchanges (DEXs).
Since these tokens are unique, and part of the blockchain archiving system, it didn’t take long before we saw enormous prices going through to acquire an NFT that were at some point held by a popular crypto figure, a celebrity, or just good looking pieces of art.
What makes NFTs special is the fact they simulate the scarce conditions of a physical asset while being part of the digital realm where anything from the date of creation of each respective NFT, its creator address, as well as its initial value are archived and transparent to the public.
Crypto Art like gifart, animations, 3d sculptures, and even music are some of the most popular NFT use-cases, although there is much more value in what an NFT could be used for, besides being a fancy decoration or collectible asset.
Read More: Ethereum Now A Victim Of Its Own Success
Unlockable Files Pegged To NFTs
Hailing from the music industry, I’ve been dreaming of unlockable audio NFTs since 2016. The problem back then was that you had to figure out how to combine IPFS, a cloud service, web3, and ERC-721 smart contracts into play.
Thankfully nowadays, that’s a piece of cake, and numerous NFT factories of the likes of Mintbase, and Rarible offer you the possibility to attach unlockable audio files to NFTs you mint through their platform.
That should make natural sense from a collector’s perspective, especially if you’re familiar with the 12″ vinyl scene.
Owning a record doesn’t only mean you have a limited edition copy of the release, but it also means you’re one of the few people eligible to listen to the music carved on the wax plate.
Similar to the vinyl music, NFT music is scarce, and only the NFT owners are eligible to access the file behind each release.
At the same time, second-hand markets can pump the value of the release, depending on the aesthetic coherence, level of creativity, and artist popularity over time, again similar to physical releases.
Of course, locking files behind an NFT is not only about music, and one could offer his customers private links to download a video, or other filetypes, a secret pass-code for an event or game, and more.
I have high hopes for unlockable files, and I’d assume that at some point, people would be buying .cad files, smart-house designs, and even fertility specimens through NFTs.
Trying to become a standalone industry on its own, NFT tickets are piercing through traditional event management systems by offering complex types of digital redeemable tickets that could be used at a specific location, date, time, or for a specific number of times.
Since we’re talking about blockchain and NFTs, it is impossible to re-create, as in forge these tickets, and even harder to steal them, or re-use the same ticket among ten friends.
Entering the club by hitting a QR code is not a cyberpunkish future, but something we’re already experiencing both in Virtual metaverses such as Cryptovoxels and Decentraland, as well as in physical events.
Read More: AlphaWallet CEO Explains Why Web3 Wallets Are Better Than Custodian Ones
Now, this is an interesting concept that’s being developed by the Mintbase team as you read this. Surely more NFT factories will start to consider this over time, if not already on it, but the core concept is that you’ll be able to buy an NFT pegged to physical items and then redeem it to claim your product.
Although I can’t lay down all of the details involved with the entire process, the idea revolves around NFTs that represent a t-shirt let’s say.
You can choose to keep your NFT and redeem it in the future or transfer it to another user without using it.
That creates an e-commerce chain where we can buy and sell assets without actually sending them over and over again, using packaging, postal services, etc.
Instead, we can transfer the ownership of the physical asset the NFT is pegged to, and when someone decides to claim the physical asset, the NFT will be marked as used or redeemed to avoid double-spending.
This process involves heavy regulatory aspects and KYC processes to ensure sellers are accredited shops that are eligible to sell what they’re promoting via NFTs on a legal level.
Redeemable NFTs are something that will change the way we buy, hold, distribute, gift, and re-sell things in secondary markets.
Proof Of Ownership
Have in mind that owning an NFT means you own the digital asset in your 0x web3 compatible wallet.
On its turn, your wallet’s assets are visible to the public through a typical block explorer such as Etherscan.io.
That means that an entry point, assessment agency, or government organization could check if you own what you claim you own, by simply using QR technology.
That could be a badge, license, proof of attendance, or anything subject for questioning, and owning it, proves you own it. Simple right?
After excessive research, I ended up with ERC-1238 among other EIPs that could act as more viable alternatives for proof of ownership contracts.
The reasoning being, NFTs might be non-fungible tokens, but they are transferable, meaning that if we’re seeking to create a digital identification system, it would be easy to transfer or sell your ID if its form is subject to ERC-721 protocol.
NTTs or a combo of NFTs and non-transferable protocols can eventually lead to where people could prove who they are, where they work, what they’ve achieved, and more by only providing a QR or NFC.
Feel free to hit me on Twitter if you’d like to discuss the future of complex token standards.