NFTs are getting a lot of hype today, adding to the crypto craze taking over the online world.
In recent years, the market for non-fungible tokens has been the fastest in the crypto and blockchain universe, with celebrities, brands and millions of buyers jumping on board. The technology has also attracted plenty of attention for the innovation and potential opportunities it holds.
And while most of us will have heard of non-fungible tokens, many people still don’t know quite exactly what they are or understand how they’re being used.
Today, we are taking a closer look at not only NFTs but also a new generation of non-fungible tokens that promise to take this technology to new heights - Smart NFTs.
What Are NFTs
NFTs are a type of digital certificate that establish the ownership, authenticity and uniqueness of physical and digital assets. Non-fungible tokens are based on blockchain technology, similarly to cryptocurrencies like Bitcoin and Dogecoin.
NFTs can be linked to an underlying asset like an image or a song through smart contracts which lay out the details associated with a particular non-fungible token. The smart contract will also include the intellectual property rights associated with that NFT.
And while NFTs are now highly prized as a way of safeguarding ownership and IP rights, many companies are also finding innovative ways of leveraging the technology to modernize their products, raise funds, create a more exclusive connection to users, and more.
NFTs have the potential to revolutionize many industries. Currently, we’re already seeing some applications of non-fungible tokens as:
- Digital artworks
- Virtual fashion
- In-game items like avatars and skins
- Crypto collectibles
- Virtual real estate
- Domain names
- Music releases
- Metaverse assets
… and more.
Once they are created, NFTs are permanently recorded on a blockchain's public ledger that is available for all users to consult. The majority of NFTs are currently built on the Ethereum blockchain, one of the largest blockchain systems in the world. Solana is also another popular platform where NFTs can be minted.
Since an NFT represents a unique asset (that is not interchangeable nor replaceable), it creates scarcity around the item and this has fuelled a market that’s brought in investors and collectors interested in investing millions in return for NFTs. In 2021, the NFT market generated over $23 billion in trading volume, setting high hopes for what we might see in 2022.
The success of non-fungible tokens has also helped move forward other trends in GameFi, Play-to-Earn gaming and the metaverse.
More recently, the technology has paved the way for a brand new type of NFTs commonly known as Smart NFTs.
What Are Smart NFTs
Smart NFTs build upon the concept of traditional non-fungible tokens while adding new layers of functionality and programmability. A simple way to go about it is to think of an NFT and a smart NFT like a regular normal phone compared to a smartphone.
Smart NFTs can have a number of properties, including being upgradable and time-limited, that can not only enable more digital efficiency but open new creative opportunities for brands, creators, users and crypto enthusiasts.
Wakatta is one of the few blockchains currently offering this type of additional NFT functionalities. A key feature of smart NFTs is tied to programmability. Simply put, a smart NFT is programmable to change and adapt over time. They can respond to external inputs, actions or triggers.
An early example of this can be seen in a three-dimensional video sculpture called Human One by acclaimed visual artist Beeple. The NFT was sold last year for $29 million, and unlike other digital artworks, this particular NFT is meant to change over time, with the artist confirming “the piece is not complete”. Beeple later went on to add that he will continue “changing and updating the piece for the rest of my life.”
Other artists like DeadMau5 have also started experimenting with mixed media NFTs and tapping into new tools of upgrading their creations that add higher value and utility to non-fungible tokens.
While paintings, sculptures and other forms of real world art don’t change after being purchased, digital art NFTs provide an opportunity to buy something that can evolve.
No doubt that this provides owners even more reasons to have such an NFT. And with the programmability possibilities being almost endless, smart NFTs are a new frontier.
Types of Smart NFTs
While we’re still scratching the surface of this technology, several types of smart NFTs are already emerging and being put to use across industries.
Wakatta, one of the leading blockchains offering smart NFTs, features three categories:
This type of smart NFT type enables users to edit already existing NFTs. In practice, they consist of multi-layers tokens where several tokens can be inside the original NFT. You can think of it as a matryoshka of sorts. Another way of imagining an upgradable NFT is to think of having a picture of the Mona Lisa and adding a mustache to it, for example. Or sampling a song from another artist to create a new track - without having to worry about any legal headaches.
For creators, these NFTs can be promising advancement allowing artists to legitimately take another creator’s works as the basis for their own.
As such, upgradable NFTs can be an incredible tool in enhancing creativity and driving collaboration in the digital space by making use of blockchain programmability.
The time-limited functionality lets anyone buy an NFT for a set period of time, after which the token returns to the original owner. It can also be helpful in setting a time limit for the properties of any given non-fungible token, like the special powers an NFT character has in a game.
A logical application of time-timed NFTs are events and ticketing, where holding an NFT could act like having a digital ticket that gets you into music festivals, conferences, and gatherings. As with any other smart contract, enterprises or artists can configure these tokens to be reusable or gamify their usage as they see fit. And once expired, the tokens can still hold value and appreciate as collectibles and be re-marketed as memorabilia.
Product and service trials are an equally exciting potential of time-limited NFTs as users can access movies, music, books or any other type of content for a specific amount of time before deciding whether or not to purchase a subscription.
Lastly, another promising application of these tokens is the metaverse, where in-platform assets could be tied to specific timeframes.
Non-hashed NFTs allow users to save text details right on the smart contract without the need to write a single line of code. The idea has become associated with next-generation environments, like the metaverse, that rely on convenience and absence of the bureaucracy to function.
Non-hashed NFTs can significantly facilitate administrative procedures related to metaverse participants, from users and content creators to developers, companies and investors. That isn’t to say that there aren’t real world applications. On the contrary, non-hashed NFTs can be used as data containers, where companies or even governments could securely use it to store information about citizens, cars, medical records, and a lot more.
In the end, non-hashed NFTs are a great way of facilitating smart contracts and promoting efficiency in blockchain-based environments.
Another prominent blockchain, Phantasma, has smart NFTs with other features, including:
NFT creators can choose to encrypt a secret code into each NFT, including embedding a secret URL to access bonus content, serial numbers, or codes to unlock special abilities, levels or other content. This content can only be accessed by the owner of the NFT, adding an extra layer of exclusivity and desirability to any creation.
This functionality allows any user to infuse assets inside NFTs to give them a baseline value - or to create a bundle of tokens for future sale. This provides many use cases, such as treasure chests in gaming environments, for example.
What Can Become a Smart NFT?
Just with regular NFTs, smart NFTs can represent virtually any asset, real or virtual. From paintings, to music, in-game assets, videos, real estate and fashion, there’s no limit to the type or number of industries that could benefit from this technological development. Some of the biggest companies exploring smart NFTs include major sports, automobile, gaming, luxury and fashion and retail brands.
Potential of Smart NFTs In The Metaverse
The metaverse is quickly emerging as the breeding ground for tech experimentation and NFTs are at the top of the usability cases seen in such virtual environments. In fact, non-fungible tokens have become essential for the metaverse and the potential now unleashed by smart NFTs will make that even more apparent for several reasons:
As a new tool that lets creators experiment with a new digital medium where they retain complete ownership over their works, mix different visual and audio platforms, seamlessly collaborate with peers without worrying about getting into legal trouble, and distribute and monetise in a fair and transparent manner. Smart NFTs further add to these benefits as they are dynamic (versus static NFTs), and can create a more meaningful engagement with audiences. The metaverse is a highly immersive and interactive virtual space and it only makes sense that its users will want to own digital assets that can adapt to such an environment.
Creating Added Market Value
Smart NFTs are unique digital assets that hold the specific ability of combining a wide range of functionalities and programmability options. Because they’re modifiable items, this creates a new relationship with their owners who can actually use and interact with their NFTs as opposed to just owning them. For all the endless programmability possibilities they can hold and the fact that they are secure and blockchain-certified assets, smart NFTs are sure to have a higher value in any metaverse marketplace
Re-shaping Creator-community Relationships
NFTs have the potential of bringing people closer to their favorite creators and artists, enabling more personable and meaningful relationships. Creators can, for example, deliver exclusive and personalized content directly to their fans, which in turn is completely owned by fans as well (as they are non-fungible tokens). Some of the other dynamic traits that can be added to smart NFTs include physical redeemables and digital redeemables, exclusive access to events, fan badges, discounts, and much more. NFTs with bespoke utilities are a novelty that can open an unlimited number of opportunities across industries.
Because of the very nature of smart NFTs (and perhaps what makes the technology truly exciting), there’s no telling what shape they will take once they become widespread across the metaverse and other digital platforms. These NFTs are dynamic, adaptable, (re) programmable and evolutionary. As such, their applications and abilities are truly limitless.