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Non-Fungible Token: An Overview and Its Uses in the Metaverse

by | Jul 21, 2022 | Technology




Why do we need NFTs

Back in 1989, for the first time in human history, we were able to convene and share information freely, irrespective of where we are in the world. But most people at that time couldn’t experience what it meant to be connected to the internet.

In fact, at that time most people thought the internet itself was a scam or a fad. But the early internet pioneers saw the potential and opportunities inherent in the technology and the rest is history.

Now the internet is ubiquitous and it has become so important in our life that the UN declared access to the internet a basic human right. It is also fair to say that our life is being controlled by the internet to bring a lot of ease to it. 

Today, the internet has become a default in our life as people work, create wealth, find relationships, entertain, trade, and search sense of self through the internet. But even if the internet brings a lot of ease to our life, it has some flaws.

The internet reproduces an infinite replication of data distributed across the planet without cost. Everything that travels the internet is an interchangeable copy and all that without that much security.

This creates a real issue for artists and creators as their jobs and creation are being replicated and distributed throughout the internet with a lot of ease. While property ownership has been protecting the copyright of creators’ work in the physical world, it has been evaded in the online world.

And as the work of creators is being duplicated online, they lose their authenticity. When their work loses its value, they don’t get paid. Why pay for something if you can have it for free on the Internet.

On today’s internet, creators don’t get paid for the work they do with their minds and talents. And the contents that are uploaded to these services are trapped in the company database which means the data is in their possession.

Content is what makes the internet useful. But the internet activity is controlled by a few large corporations. They possess most of the value on today’s internet, not the people creating its content.

Since the inception of the internet, we’ve uploaded trillions if not quadrillion pieces of content on the internet for free. These services not only make money from your content, but they also control it. Digital content can be easily copied, downloaded, and transferred.

Tracking who owns a digital file over the internet can be tricky because it can be copied and distributed effortlessly. So how can you prove who’s the original owner of creation when everyone has an identical copy of it.

When something is easily copyable, it is very difficult to monetize the content because people won’t pay for something that can easily be copied. When something is easily replicated, substituted, or interchanged it is considered fungible.

Now, what if we can make online assets non-fungible. The idea of non-fungible is that things are distinctly different and unique. This is why people are starting to invest in Non-Fungible Tokens (NFTs).

NFT is a technological breakthrough. It offers us the opportunity to break away from that broken system. At the beginning of 2021, NFTs were quite unknown to the general public, and by the end of the year, over USD 25 billion had been spent on them.

NFT artwork was selling for huge fees in 2021, where a 10-second video artwork sold for USD 6.6 million, a video clip of Lebron James slam dunk sold for USD 208 000, or the first tweet of Twitter co-founder was sold for USD 2.9 million.

What makes these assets that exist solely on the internet so valuable is their uniqueness and the way it is managed on the blockchain. Blockchain technology allows assets to be publicly authenticated with a digital signature that certifies who owns what.

NFTs are allowing everyone to own their data, starting with art, and there is a hope that it will revolutionize how values are created throughout the internet and how digital work is monetized. So what the future holds for NFT?

What is an NFT

A Non-Fungible Token is a unique digital certificate registered on a blockchain that is used to record the ownership of an asset. It can be considered a permanent tracking device that proves ownership of an electronic file.

A non-fungible token is a digital asset that links ownership to unique items in the online space. Its value can range from a few cents to millions of dollars. The technology behind this breakthrough makes it difficult to counterfeit or alter the asset.

This technology has unique properties that make them valuable and irreplaceable. They are not fungible and cannot be exchanged for other non-fungible tokens. Think of them as digital passports, with a unique identity.

The underlying technology that enabled digital currencies such as Bitcoin is also backing NFTs. The technology is called the blockchain. It is a distributed public ledger that can be used for many things.

Blockchain prevents digital assets from being duplicated or hacked and removes the need for a centralized authority to manage and validate transactions. The technology keeps track of every content transaction and origination.

Just like cryptocurrency, the ownership of an NFT is recorded in a public database on the internet that is maintained by a network of computers spread across the globe. Everything is run by code, via consensus through the blockchain.

The Use of Blockchain in Non-Fungible Tokens

While the technology behind blockchain is still relatively new, many people have already realized its potential. Distributed ledger technology is a powerful tool for the creation of a non-fungible token.

The evolution of cryptocurrencies has led to the development of non-fungible tokens. Non-fungible tokens are unique digital assets recorded on decentralized databases and are subject to online scarcity.

This uniqueness makes them an ideal medium for the exchange of assets on the internet via a blockchain. Interest in this online asset technology has increased in the last year. They are a useful means of proving ownership of any digital asset.

Non-fungible tokens use blockchain to facilitate transactions and transfer online property. The NFT ownership is recorded in cryptography. This means that they are highly secure, while still being widely used over the internet.

The blockchain records assets and is connected using cryptography techniques. Each block on the decentralized database contains a cryptographic hash, a timestamp, and transaction data. Currently, NFTs are created on the Ethereum blockchain.

Blockchain technology introduced interoperability, scarcity, and fungibility to digital assets. Large companies, such as Facebook, are now experimenting with NFTs in the Metaverse.

How NFT works

The creation of art on the internet is in the form of a digital file. To protect this file and capture the value for perpetuity, you go to an online goods marketplace and “mint” it. In simple words, you register your work as a token on the blockchain.

The work will contain a signature, time stamp, and any rules around its resale. Once you’ve minted your work, it is authenticated and becomes an NFT. If you want to sell it, you connect with your community and let them know that the asset is for sale.

Buyers go to the same NFT marketplaces that artists use. There, they look for art or artist that they appreciate. They can also connect to the artist. People invest in artwork because it resonates with them, they recognize great talent or see potential in the creation.

Once a tokenized asset is purchased from an artist, the buyer records it in their digital wallet. From there, they can show it to online marketplaces, or in galleries, such as RareRooms which is a blockchain innovation by Atlanta’s GigLabs.

An artist creates digital art and converts it into an NFT. When the art is sold, anyone can see the true owner and true creator of the art on the blockchain. The creator can see each owner of that particular art every time it is transferred down the line and can possibly earn a commission.

And attaching an NFT with a smart contract, the contract can specify that each time the property exchanges hand, the new owner has to pay a certain fee. So every time the creation is bought or sold, the creator is being granted royalties for their work.

With NFTs, a buyer and sellers know their art is fairly traded. Transactions are transparent and occur in an equitable ecosystem. A unique quality of this technology is that it allows creators to innovate, collaborate and meet with other artists and connect with fans on the internet.

With NFTs running on a decentralized database, creators can sell directly to the buyer without an intermediary, collect royalties on all future resales, expand their audience to the entire internet, and show their art in virtual galleries and virtual worlds.

The token issue some sort of certificate that certifies who is the creator and who currently owns the work. The certificate proves who owns the original work and proves that everything reproduced similarly on the internet is just copies.

NFTs allow for guaranteed proof of origination and ownership of music, videos, images, and even text. Expert argues that NFTs are the building blocks of the internet of the future. This revolutionary instrument allows a digital file to be sold as a unique artwork.

The use of AI is becoming increasingly popular in all areas of our lives, including art, music, and design. It is already used in the creation of tokenized art and music. The company Eponym has already released an algorithm that converts any piece of text into a beautiful piece of abstract art. These AI-generative art are being sold in NFT marketplaces.

The OpenAI project aims to create an infinite supply of high-quality procedurally generated NFTs. Alethea AI aims to merge AI and NFTs and create a new class of intelligent assets. These assets will have AI personality traits and will evolve as they are fed with data.

A platform called OpenSea has at least 250,000 active users trading NFTs. The platform has a USD 13.3 billion valuation. It is reported that on average USD 10 – USD 20 million worth of NFT is traded each week.

Artificial intelligence in the metaverse is used to create digital avatars and process data to create a hyper-realistic world. Another project, UneeQ, combines AI and computer algorithms to create an AI human-like digital NFT art. Moreover, it understands and communicates in human-like ways.

NFT powered by AI will have a unique identity, defining its unique traits and offering a range of benefits. The future of the internet will be based on non-fungible tokens. With the increasing demand for computerized goods and services, NFTs are here to stay.

Uses of NFT

Non-fungible tokens are a logical progression of cryptocurrencies. The emergence of this technology has heightened high interest in the concept, mainly because they are suited for trading on the blockchain.

They serve as electronic records of ownership and are suitable for trading on distributed ledgers. This is because they are unique and subject to digital scarcity.

NFTs are programmable, and they made the collection of royalties easier with a few simple lines of code compared to the physical world where it requires an enormous amount of legal and manual work.

This represents a big breakthrough for any industry that runs on royalty payments, such as publishing, art, or music. The music industry can hugely benefit from this technology. An artist could create a new song and they could turn that into an NFT and sell the entire rights to their song as a digital creation.

The Nyan Cat is a wildly popular NFT and an instantly recognizable cat meme. Since being uploaded to the internet, it has accumulated hundreds of millions of views. Due to its virality, when it was auctioned as an NFT, it was sold for 300 ETH, or the equivalent of over USD 600,000 at that time.

Now the person who owns this token is letting everyone see, like, or reshare it. Nyan Cat is still free to travel the internet but now as its popularity continues to grow, so does its value. The creator Chris Torres has received direct compensation for his creation and every single time it is resold he receives royalties.

This decentralized business model gives financial power back to the creators and reduces the power of the broker, the middleman, and social media platforms.

Real estate transactions could be made easier. Usually, when someone purchased real estate, a title agent gets involved to verify that whoever is selling it has ownership. But with an NFT, the seller just has to prove that he is the account holder and has the private keys to make the transfer.

While non-fungible tokens remain a niche technology, many industries are beginning to adopt them. For instance, a peer-to-peer charity application called KitaJaga recently launched an NFT campaign. It rewards 20 users with tokenized artwork for participating in the campaign.

A number of global brands have launched their own non-fungible tokens in the decentralized world. Coca-Cola, for example, has launched branded digital apparel collection on the blockchain platform Decentraland, hosting a Rooftop Party to celebrate its launch.

The hospitality industry has started to identify NFTs as valuable marketing tools and collaborative opportunities. Marriott International, a hotel chain, has collaborated with artists to create its own tokens, and it has awarded 200,000 reward points to consumers who purchase them. These rewards are essentially deeds in an entirely new way.

The growth of the metaverse is fueled by the development of non-fungible tokens. This virtual world consists of a 3D space where users can interact with each other. In this virtual world, NFTs serve as digital items that can be bought and sold on a blockchain.

Importance of NFT in the Metaverse

A non-fungible token is a digital item stored on the blockchain. It can be used to purchase virtual goods or services or to vote in governance. Its value increases over time and is generally considered to be an asset, rather than a currency.

Everything in the real world is being recreated to some extent in the metaverse. The metaverse is a virtual universe that mirrors our world in a more diverse and breathtaking realm. Everything a user can do in the real world is also allowed in the virtual world but with more features.

NFTs will play a big role in this virtual universe. The metaverse is an immersive experience that people can participate in via Virtual Reality and Augmented Reality. This digital world creates an intuitive interface using immersive technology where you can adventure digitally.

The NFT is a great way for people to own things in the metaverse. If created correctly, they may help usher in the beginning of a human society in an immersive realm. Non-fungible tokens will provide proof of ownership for digital assets and enable the creation of unique virtual items.

By providing a means for authentication and security, non-fungible tokens are helping build the foundations for the next generation of digital assets, communities, and economies. With NFT, users can have unique items and prove their ownership in the virtual realm. 

Crypto enthusiasts are excited about the potential of NFTs in the metaverse. With their decentralized nature, they provide the means to prove true ownership of computerized items. Moreover, tokens are interoperable.

Some crypto enthusiasts claim that they offer indisputable proof of ownership. In addition, NFTs can be used in various metaverse games, environments, and apps, and without the need for permission.

The importance of a non-fungible token in the metaverse cannot be overstated. Many virtual activities need a metaverse currency. The use of blockchain and cryptography is essential. This technology allows us to exchange virtual assets and make transactions without the involvement of banks or other centralized institutions.

Many blockchain-based platforms use NFT and cryptocurrency. Decentralized platform allows people to create, own, and monetize digital assets. As blockchain is based on the principle of decentralization, it distinguishes the metaverse from the traditional internet.

Blockchain-based metaverse enables users to access any digital space. However, it is important to note that the legal status of virtual “owners” is unclear.

A major role for NFT in the Metaverse is that it can be used to purchase avatars, digital art, and other assets. It can even be used as proof of ownership for real estate and land. This could allow for the creation of a genuine human society in an immersive universe.

While Metaverse mechanics are still in flux, the industry is growing fast. Facebook, for example, changed its name from Facebook to Meta on October 28, 2021. After the name change, interest in the technology skyrocketed and the company became a “metaverse company”.

To keep track of the identity of metaverse users, blockchain technology acts as the equivalent of a social security number. Because it records all unique details and transactional history, it is a key tool for preventing metaverse crime.

In addition to this, real estate is an important commodity in this immersive world. However, defining and regulating real estate is a challenge, especially in an infinite meta-universe. NFT powered by blockchain can help address this challenge by serving as an immutable record of real estate transactions.

The intersection of decentralized technology and the metaverse has led to many new projects, focusing on massive transformations in online interaction. One such project is Decentraland, a platform where users can own virtual property using LAND tokens.

NFTs are also a key concept in a vast ecosystem, allowing users to use them as virtual deeds for virtual property and exclusive access. It will be interesting to see how the concept of NFTs will evolve in the future.

You can use augmented reality gear to overlay virtual apparel in terms of tokens onto your real-life feet. And because of NFTs, anyone can create digital fashion that can be bought, sold, and worn in games, online platforms, metaverse, and even in avatar fashion shows.

Gucci sells sneakers that only exist in the virtual world, and you can never wear them, but your avatar can. It is possible that NFTs could attract billions of users into the world’s metaverse in a near future. Because it is argued that gamification of task increase engagement.

Future of NFT

A non-fungible token is a digital representation of an asset that is not interchangeable with other assets. This unique property of these tokens allows them to represent real-world items, making them more efficient for trading and reducing the risk of fraud.

Besides securing identity, NFTs can also represent property rights and individual identities. It is a certificate of ownership recorded publicly on the blockchain. The certificate is similar to a contract that you get when you purchase something in the physical world.

An NFT is internet native and denotes ownership of a file. It is a paradigm shift that is going to disrupt the world of content creation and its financial rewards.

Gone are the days of the internet being a giant copying machine, intermediaries taking larger cuts than creators, and artists not receiving royalties.

And NFTs don’t just prove ownership of an asset but it also improves its functionality. In the physical world, ownership fences people out. It prevents others from enjoying what you own like you wouldn’t be happy if someone enter your home uninvited.

However, an immersive space is expansive and exponential which means that it is home to the infinite. NFTs offers a system of ownership that reflects this expansiveness. With them, ownership doesn’t preclude others from enjoying something. In fact, the more a token is seen, appreciated, and understood, the more possibility it has to increase in value.

NFTs create the possibility to democratize investment. Instead of owning a single piece of physical property, digital real estate is easily divided among multiple owners. The same tokenization ethic applies to other assets.

For example, paintings do not need a single owner, their digital equivalents can have multiple owners, thereby increasing their value. It’s easy to see how NFTs could change the way we live.

Tokenized assets such as artwork are becoming a popular form of digital art. By issuing a non-fungible token, artists can sell their work to a new crypto audience. In addition, celebrities have discovered a new way to connect with their fans.

And all this isn’t science fiction, the technology already exists and is working. Tokens are already being used by the next generation of internet pioneers. It is said that the NFT will revolutionize the internet in the coming decade.

It will create an internet where everything is controlled and rests in the hands of creators, not tech companies. An internet where ideas and creativity can be directly supported.

It will create an internet where information can be free, but where you get paid for the work you do with your mind and talent. Its future is not yet known, but if it can catch on, this type of digital asset will be a great asset for any online business.

It is argued that a metaverse is a place where we will spend most of our time in the future. But just like the real world, this online universe is very complex, and there are many problems yet to be solved. Problems such as who builds it, who owns it, how it is built and its goal will determine the future of the metaverse.

While NFTs are often associated with odd artwork and sky-high auction prices, there’s a fundamental technology behind them that points to a booming economy, a new gaming landscape, a new path of personal expression, and a revolution in global commerce.

NFTs will revolutionize every online industry, starting with the creative economy. NFT’s digital artworks are over-hyped and overpriced but the technology is worth watching closely. This is just the beginning of the decentralized movement.