What is NFT

What is NFT?

• NFT stands for 'Non-Fungible Token'

• a digital item on the blockchain that users can create and trade

• format could be digital art, photography, music and contracts

• 'generative' NFT combines multiple traits by certain algorithm to form an image/video NFT, generally released in limited number

• adopt blockchain features - unique, public transaction records that are verifiable & traceable

Market positions of NFT

There are various types of NFT playing different role in the NFT space, to value a NFT, we have to first identify what market position they are.

1.Profile Picture NFT

• 80% NFT are PFP-based, as an eye catching PFP is the 1st impression to attract investors

• 99% are short term hype, pump right before reveal & dump when it’s ‘outdated’

• the spreading of PFP NFT among social media like Twitter & Discord is especially fast

• Successful projects:

  • Cryptopunk is the 1st mover NFT purely a PFP digital art

  • BAYC, Azuki, Doodles, Pudgy Penguins are having strong communities and reputation

2. Metaverse Identity

• It’s always the next step for projects to further strengthen brands’ awareness

• Successful projects:

  • BAYC - originally a PFP NFT, but now it’s further building its own metaverse and tokens

  • CloneX - strongly backed by Nike, RTFKT is building its own digital identity & brand assets

3. Metaverse Land

• Metaverse is a magic word over the past year. Even it’s cold down a bit, but it’s still the mid-term goal of most NFT projects.

• Successful projects:

  • Sandbox - the biggest app based metaverse collaborates with Warners and game brands

  • Decentraland - Browser based metaverse has partnered with Samsung and fashion brands

  • BAYC Otherside - launched its metaverse targets to offer immersive gameplay experiences

  • CloneX, Adidas - A lot of brands are working on their own metaverse to create new web 3.0 social, branding & shopping experience

  • 9GAG Memeland - released The Potatoz, The Captainz as a proof of citizen of Memeland to enjoy Memeland future benefits

4. Pass / Voucher

• Taking the advantage of blockchain’s trackable and verifiable characteristics, NFT pass is adopted to digitize membership in real world

• People holding pass are able to enjoy member privileges

• Unlike real world membership, NFT pass can be easily transfer and sell to others

• Successful projects:

  • Sandbox Alpha Pass - be early players to participate in Play and Earn experience

  • Sewer Pass - hold to participate BAYC's Dookey Dash game to win NFT rewards

  • Flyfish Club - gain access to its restaurant and culinary around the world

5. Digital Art

• Placing Art on blockchain for better spreading, promotion & trading among collectors

• Successful projects:

  • Artblock collaboration with artists

  • Independent artists on Rarible & SuperRare

6. Domain Name

• unique, customised, shorten address to be used in web 2.0 & web 3.0

• Successful projects:

  • Ethereum Name Service (ENS) - unique shorten Ethereum address

  • Unstoppable Domains - unique, customised address for all web 2.0 access

7. Donation

• Leverage blockchain’s fast, transparent advantage to facilitate donation activities

• Support local artists and spread social causes via on-chain images/videos

• Successful projects:

  • UNICEF Patchwork Kingdom - artist turns Giga project’s data into NFT for fundraising

  • NFTs for Ukraine - Ukraine government, UkraineDAO raised huge amount of financial support

8. Soulbound token (SBT)

• bind to specific address, the token is not transferable

• as a proof of attendance of an activity / asset ownership / achievement / qualification

• Successful projects:

  • Ethereum EIP-5114 standard token

  • Binance Token Binance Account Bound (BAB)

What gives NFT values

Based on above categorisations, together with blockchain’s features, NFT mainly serves 4 purposes:

• digitised art - collectors collect and trade NFT like typical art pieces

• crypto avatar/intellectual property (IP) - to be involved in specific NFT community/space

• game items - a more transparent way to see how game items are created, obtained & traded

• pass/ticket/cert - a proof of ownership of certain benefits

In conclude,

• as most NFT collections have a limit numbers, the higher demand the higher its value

• again, probably 80%+ NFT are purely a picture with no plan, but we do see NFT is a new ‘container’ to keep digital assets in a secure & transparent way

• it’s not surprise there’ll be more use cases that leverages NFT capabilities, time will tell