A Guide to Crypto Collectibles and Non-fungible Tokens (NFTs)

Whether collecting priceless pieces of artwork worthy of being hung up in the Louvre, or simply tingling senses with a hobby by assembling collections of stamps or beanie babies, the essence remains the same – owning a set or a unique item that bears either intrinsic or sentimental value.

The uniqueness of the item in question is highlighted by its scarcity – a quality that sets said item apart in the overall economic system as a rare and, ergo, a highly demanded object. The law of scarcity thus intertwines with the law of supply and demand, ensuring the rise in price and value of the given item by virtue of its being unique. As the supply of an item decreases, demand for it must increase based on economic sense and basic human nature that wishes to have an individual stand out from the crowd by showcasing the possession of rare objects of luxury or value.

The digital realm is the latest iteration of the economic battlefield, where advanced and innovative technologies are vying for market segments, and the volumes of funds circulating there. Truth be told, there is always money to be made on innovations, provided they are accurately targeted on lucrative forms of application of the underlying technology to cater to the participants of said markets.

The advent of decentralized technologies has heralded a completely new turn in the development of real-world assets as their digital counterparts emerged in the form of Non-Fungible Tokens.

The NFT Phenomenon

When it comes to immutability, the blockchain is the undisputed leader, allowing anyone to view, track and audit the movement of assets anywhere on the network. The same quality of immutability can also be used to the advantage of users seeking to solidify their rights to certain assets that exist outside the digital space. Though it had seemed daunting at first, the issue of bridging the gap between the digital and physical worlds was overcome through the advent of two unique token standards – the ERC-721 and ERC-1155.

Both standards allow tokens on their basis to be issued in unique formats with distinctive identifiers that automatically adhere to the qualities stated in their description details. But the Ethereum network is not the only one to have released NFT standards, as NEO, Tron, Eos and other blockchains have all rushed to provide their own formats in order to attract, or rather detract, developers from Ethereum to their own chains.

Blockchain debates aside, all NFTs share a set of characteristics that make them the ideal technological medium for guaranteeing rights of ownership to assets tethered to them.

First, all Non-Fungible Tokens are non-interoperable, which means that they will exist solely on the blockchain they were issued on. In practice, this means that an asset, be it a work of art NFT or a gaming character NFT, will be operable only on the blockchain it was released for. This measure guarantees the NFT will never be lost or lose its value due to swaps or migrations from one blockchain to another.

Second, NFTs cannot be divided into any portions smaller than they already are. Unlike Bitcoin, which can be fractured into Satoshi, Gwei etc., an NFT will remain wholesome throughout the duration of its existence.

Third, all NFT are issued indefinitely, which means that their existence is directly tied to the overall existence of the underlying blockchain’s entire string of records. Once issued, an NFT is permanently and immutably recorded into the network. This measure is an added guarantee against any forgery, replication, duplication, removal or destruction of the asset from circulation. Once a buyer acquires an NFT, it is permanently theirs to dispose of, unlike the tethered real-world object, which can be damaged, lost, destroyed or duplicated. The given quality is an excellent measure of defense against any kind of forgery, as there cannot be two of the same objects in existence if one of them is registered by an NFT.

Fourth, all NFTs can be verified, like any other digital asset on the blockchain. Their records are permanently engraved into the blockchain, which allows anyone to freely trace their origin to the original owner, creator or issuer. This measure hides another benefit, which is the lack of need for any intermediaries when it comes to verifying the authenticity of ownership rights. Unlike specialized agencies that evaluate artwork for authenticity, the blockchain allows anyone with an ETH or other tracker to check the information backing any NFT on the market.

Why NFTs Matter At All

Piracy and forgery are mainstays of the art and creator markets. Just as criticism became the inevitable afterbirth of art, so too did the desire to replicate it without having to pay the original price to the creator. The given actions constitute infringement of authorship and copyright laws – crimes that are punishable to a significant degree in virtually all countries of the world. However, laws are often insufficient to stop forgers from copying priceless paintings and selling them as originals, or digital pirates from copying music and video games for the same purposes of illegal enrichment on the hard work and talent of others.

With crime identification – being caught is the crime, not the act itself. The end losers of the incessant battle between forgers and creators are the artists, who are losing significant amounts of revenue to criminals, who simply copy original works and sell them at considerably lower prices. This state of affairs is precisely what the advent of Non-Fungible Tokens can change.

Apart from being the perfect medium for verifying the origin, authenticity and ownership of rights to artwork as a guarantee against replication and illicit sales, NFTs are also a form of art in themselves. It would be foolish to think that art can be limited to classical paintings or music, as any form of expression accessible to human thought and senses can be considered a form of art in varying degrees of recognition and value.

Where NFTs Can Be Used

Art is not the only area of application for NFTs, but it is the best illustration of their capabilities, as the owner of an NFT tethered to a work of art owns it by right, but the artwork itself can remain in a museum for all to enjoy. In fact, NFTs have immense, untapped potential in terms of application in the real world. The following are just some of the areas where they can be applied:

The gaming industry is one of the largest markets of entertainment, and the decentralized gaming market is catching up rapidly, inching console and PC games off the pedestals of popularity. By being accessible, portable, lightweight, convenient in use, innovative, engrossing and, most importantly – profitable – decentralized games are occupying over 80% of all transaction traffic on the Ethereum network. Such games now feature advanced technologies and graphics visualization through Virtual Reality and Augmented Reality. Most have fascinating storylines and gameplay mechanics that are both addictive and entertaining. In addition, games of this sort sport numerous in-game economic features that allow gamers to monetize the content they create themselves and the items they receive through in-game feats and draws. NFTs have immense applications in the gaming industry, as they allow players to own unique in-game items, weapons, upgrades, characters, collectible, and so on and so forth, while having absolute guarantees that no one will be able to cheat in the game and own the same item that they had paid real money for.

The financial industry has its fair share of use cases for NFTs, as shares, bonds and other valuable instruments can be sold via NFT format to prevent fraud. Banks and other institutions can leverage the qualities of NFTs to issue cards, safe deposit boxes and much more – anything that has to be attributed to a single owner.

The music and visual arts industry are thriving on the NFT sector as DJs and composers are issuing their albums in NFT format alongside digital artists like Beeple, who are selling their works for millions of dollars apiece. A tangible example is the EVERYDAYS: THE FIRST 5000 DAYS artwork by Mike Winkelmann “Beeple”, which was sold on the renowned Christie’s auction – a first for it – for a paltry $69.3 million. Another example is the CryptoPunk random pixelated artwork of a punk’s head that sold for $7.5 million.

Real world corporations and state applications are also in store for NFTs, as governments and companies can use the qualities of Non-Fungible Tokens for selling unique items. Examples include airplane tickets with unique identifiers, or even voting ballots tied to individual users. Luxury and mass brands are rushing to the NFT sector as Gucci is releasing virtual sneakers, McDonald’s is releasing NFT-tethered fries and nuggets, etc.

Money To Be Made On NFTs?

Projects releasing unique NFTs are attracting millions of dollars in investments not only from private users, but from institutional investors. Among some of the more prominent examples in the gaming industry is the Sorare fantasy football game that attracted a whopping $60 million during its sales rounds from such giants as Benchmark Capital. Another example from the gaming industry is the highly popular Japanese gacha-style Chainbinders game set in a fatnasy post-apocalyptic world that attracted over $7 million in investments and offers players a host of collectible cards.

The art industry is also making immense amounts of money on NFTs, as the renowned Christie’s auction house’s Deputy Chairman launched her own NFT platform called TR Lab in partnership with the Rockbund Art Museum and many other esteemed names in the business.


NFTs are a technology bridging the world of assets to the digital realm, facilitating ownership rights verification and dealing a severe blow to illegal use of intellectual property.

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