1. Introduction

2. Technical path of NFT

3. NFT Trends and Marketplace

NFT Implementation by the Field

Within the scope of this study article, a unified effort was made to classify the various sectors of NTF application based on the analytical data acquired from specialist statistical sources13. Utility tokens are assigned to a distinct area, although information about them will be stored in subcategories such as sports. Relevant facts will be utilized to characterize current industry trends. According to the available research, NFT can be applied in areas far removed from the general list, including the supply chain, patent protection and the pharma industry, and even academic research publications.14

This is not an exhaustive list of the evidence that may be used to determine how and where NFT is applied and how it can be changed for future technologies. In this study, we categorize the model according to statistical data to provide a natural interpretation of the sector and its tendencies. This study is not intended to examine all existing outcomes and projects in the sector; consequently, only two or three examples of successful or promising programs will be provided:

• Collectible
• Social Tokens
• Metaverse
• Game
• Arts
• Sports
• Utility
• DeFi15

The NFT, according to an out-of-class system, is grouped in the following format. Tracking tendencies will be given further for each area. But there are also subgroups- such as NFT of random numbers, the trend currently being tracked as part of the specified system. Probably today’s application is far from all possible ranges.16

Collectible tokens: This type of token is valuable for collectors owing to its restricted distribution. They can be utilized in various industries, including sports, games, art, and music, but their applicability is limitless. In June 2017, Crypto Punks was issued on the Ethereum network as one of the first non-fungible tokens (NFT). The number of NFTs available for the Project is restricted to 10,000 due to its terms. Crypto Punks and other early projects, such as MoonCatRescue and CryptoKitties, paved the way for the NTF craze. After then, several successful ventures, including Bored Ape Yacht Club (10.000 p.), Mutant Ape Yacht Club (15.800 p.), Mee bits (20.000 p.), and others, were released.

According to the evidence, it is abundantly evident that artificial scarcity is created to increase demand. By the conventional supply-demand model, the price of NFT rises as demand increases. Based on interviews and statements from holders of collectible tokens, it can be deduced that some of these tokens possess a social standing. Users alter their avatars and begin using the NTF avatars even in public. This strategy establishes a distinct tribalism in the metaverse. The NTFs they possess serve as identifiers (like IDs in the real world) in the crypto community, allowing them to conduct transactions by examining the transaction history associated with the NTF owner’s wallet. If the wallet owner loses their reputation due to an unjust transaction, it is possible that the value of the NFTs sent to that collector would also decline. Investigation reveals that fractionalization of NTF for shared ownership is also possible.17 Still, the social nature of the token will be rendered irrelevant, as was the case when one NTF was transferred to the DAO’s decentralized investment network, which purchased that NTF for its portfolio.

As shown in Figure 1, the average cost of the CryptoPunk has grown from a little over 100 dollars to 550,000, and unique owners reached more than 3000. The price of each NFT, as already alluded to, is different. In October, one of CryptoPunk NFT “sold” for 124,457 Ethereum -- about $532 million18. The NFT collection is the second most popular token after the Bored Ape Yacht Club. One of these tokens was sold for $2,750,000. Since the beginning of trade, its average price has climbed to $150,000, with 5735 different wallets (owners).19

As indicated previously, the collection also contains pieces of art, like “Everydays - The First 5000 Days” by Beeple, which was sold at auction for a record-breaking 69 million dollars at the time (April 2021), which can be included in both categories of NFT. Based on a study and recent sales of “CryptoPunk” for over nine times more than the Beeple’s NFT after only six months, it is likely that the current market for collectible NFTs is far from saturated.

Social Tokens: Another area is creating community tokens by influencers, community leaders, or public figures. With an audience and relevant content to provide Rally is one of the platforms and the most popular in this direction in which this type of NFT can be developed.20

Rally is constructing a Creator-driven network based on open-source technology and a community-centric approach to economics, ownership, and government. With Rally, creators will be able to issue their own fully customizable, branded cryptocurrency called Creator Coins, representing their distinct digital brand, and giving supporters value and utility.

According to talks with token inventors, each utilizes the token for a unique reason. Diversifying their income, boosting the engagement of their subscribers, and, according to some content creators, reducing their reliance on centralized platforms when posting material are among the goals. It is worthwhile to examine this user interaction moment in greater detail. Based on the statistics, it can be inferred that the ownership of a token by a community member or influencer’s follower will be personally invested in the success of this NFT since as demand for the token increases, so does the well-being of all its holders. Therefore, they are motivated to promote the communities to which they belong through advertising.21

It is also important to note that tokens and the communities that they build around themselves alleviate the issue of creators and followers being dependent on centralized site censorship, rising advertising costs, and other negative aspects of sites like YouTube. This study will evaluate this issue in the subsequent section. The pricing of these tokens should also be included in this article. It conforms to the Token Bonding Curves scheme (TBC). A TBC is a pricing curve that provides a functional relationship between the current supply and price of a Coin. A TBC serves as the fundamental mechanism for an AMM (automated market maker) to facilitate buying and selling, as well as the overall link between the supply and price of a Coin. The bonding curve ensures that early purchasers can sell for a profit if additional purchasers arrive. It naturally rewards early adopters.22

Table 1. List of most popular tokens by market cap. Source: https://coinmarketcap.com/tokens/.

Table 1. List of most popular tokens by market cap. Source: https://coinmarketcap.com/tokens/.

Metaverse: The metaverse, coined by Neal Stephenson, is the stuff of science fiction. The word metaverse is a combination of the prefix “meta” (meaning “beyond”) and “universe”.3D virtual places linked into a perceived virtual universe. The creation of the metaverse was inevitable, given the migration of most services to the digital realm and the rising digitalization of people’s daily lives. The introduction of blockchain technology has fueled this tendency, and NFT has accelerated the expansion of the universe. According to Crypto Veterans, NFTs are the Metaverse’s Revenue Model. Imagine a virtual world where every imaginable item may be bought, sold, or traded to visualize the potential magnitude of NFT assets in the Metaverse. Like this universe, the Metaverse would not be confined by real-world limitations such as limited natural resources, supply chain risk, or the laws of physics.23

This practice got so popular that Facebook renamed itself Meta and revealed intentions to hire 10,000 individuals to build the Metaverse. Additionally, the company announced that its Metaverse would enable NTF tokens based on Ethereum. A game like “Sandbox” that has not yet been launched is an example of a future Metaverse. “Sandbox” is a virtual environment where gamers may monetize their gaming experiences using SAND, the platform’s utility coin. With non-fungible tokens (NFTs) and rewarding their engagement with SAND (Sandbox Whitepaper). Another instance is “Decentraland.” A virtual world built on the blockchain, depending on land ownership. The land is a scarce, non-fungible, and transferable digital asset kept in an Ethereum smart contract. It can be obtained by using a MANA ERC20 token. WhitePaper on Decentraland and many other initiatives are prepared for market entry.

NFT for games: According to the data, NFT Games are distinct from merely storing crypto valuables. NTF combines traditional gaming elements with innovative gameplay mechanisms to give players greater control over gaming assets24. Games within a constructed ecosystem provide the opportunity to trade or sell non-fungible tokens for profit.

For most games on the blockchain and in the web3 space for more in-depth use (where the NFT certificate can be given to almost any digital thing in the game), specific tools are created to combine standard tools with their NFT version.

SDK stands for software development kit. Also known as a devkit, the SDK is a set of software-building tools for a specific platform, including the building blocks, debuggers, and, often, a framework or group of code libraries such as a set of routines particular to an operating system (OS)(İBM).

In most situations, the designers aim to raise the player’s interest in the gameplay and prolong the playing duration. The development of blockchain-based games affords the chance to improve player engagement.25 NFT is also a new world that shifts the perception of traditional games, which do not often provide economic rewards to players, in a new direction, such as play-to-earn.

Play2Earn (play-to-earn) games relate to the gaming idea in which a platform offers players the opportunity to earn in-game assets that can be transferred to the real world as valuable resources. This, in turn, creates an entire chain of a new economy within the metaverse, as previously mentioned. The metaverse has its economy and ecosystem, which is remarkable in that it is connected to the real economy through exchange platforms and is already beginning to contribute to and alter business conditions. Axie infinity is an outstanding example of the new industry. Axie Infinity is a Vietnamese studio’s NFT-based online video game released in March 2018. Axie Infinity is a Pokémon-inspired environment where anyone can earn tokens through skillful gameplay and ecosystem contributions.26 Currently, Axie Infinity has more than 2,2 million participants, making it the most popular blockchain-based game.

Using in-game tokens, Smooth Love Potion (SLP), and Axie Infinity Shard, players can purchase land and breed Axis (AXS). These tokens are also helpful in the real world. Using data from Coinmarkets, the following graph depicts the increase in the value of the game token. Since its introduction, the price has nearly multiplied by 1,000.27 In addition, there are numerous additional projects for games such as Star Atlas, Delta Time, and many others. During the epidemic, NFT made it possible for thousands of people to work to earn a living. Monetizing players’ game experience is a paradigm utilized in e-sports for some time, but now on a larger scale. People in the Philippines, for instance, forsake “traditional low-paying jobs” in search of opportunities in the metaverse. (Dizon, Gabby, 2021) This world also generates its player guilds. Yield Guild Games (YGG) is a DAO for investing in non-fungible tokens (NFTs) in virtual worlds and blockchain games. EA and other gaming titans recognize the potential future of NFT. In the final section, we will examine the positive and negative features in greater depth.

NFT for Art: With the launch of Non-Fungible Tokens (NFTs), the art market and content creators are seeing a paradigm shift at a time when the area is attracting many artists. At the same time, many authors try to take advantage of the blockchain’s prospects and ride the buzz. One of the biggest challenges for artists in the age of electronic information was the issue of intellectual property rights. Examining the primary setting where NFT is used in this context— namely, digital art—is crucial. Since this direction’s inception, copyright has been a major worry. Piracy hurts both upcoming and experienced musicians. A particularly complex task for regulatory organizations is tracking the multiple pirate marketplace in addition to the dual use of art in public spaces. A new technology that can control data capture with extreme precision and lower transaction costs has become more in demand in a creative culture since the turn of the 20th century.

Standard blockchain currency, such as the ERC-20, could only partially satisfy the enumerated criteria of art due to their practical uses. To execute NFT and maximize profits for the product’s creator, the unique contract technology establishes additional percentage deductions for each token resale. This not only settles the ownership dispute but also results in a long-term investment for the artist. Only 12% of the $43 billion in potential money generated by the music industry in 2017 went to musicians, according to a Citi GPS analysis. The use of an intermediary and the high expense of the work transaction is the second main problem.

Markets with middlemen, such auctions, and dealers, as well as the high taxes on luxury real estate in different countries, have received a lot of attention. Previous studies have shown that art is not a conventional financial asset due to differences in returns, liquidity, and high transaction cost. It differs from traditional markets in that there is a strong attachment to the brand name, the product’s value increases over time, there are many communities that support product development (like those for crypto assets), there is a very high return on investment, which is also seen on the crypto market, and each player has a different perception of the product due to their individuality.28

As an example of transaction costs, auction houses may charge a commission of up to 25% of the hammer price for artworks selling for less than $200,000. For more expensive works of art, this price is reduced by about 12%. Since it makes it possible for artists to sell their goods directly on NFT markets, as mentioned in the section above, without the involvement of intermediaries or other interested parties. Even though the modern NFT departs from the traditional conception of copyright, the agreement is an intelligent smart contract. Hence, a distinct contract can be created for each new coin. Future counter measures against digital piracy are also conceivable.

This is the new primary sales data for art in NFT. As we can see, at the time of November, sales of primary tokens fell by almost three times compared to August 2021. The reason can be, mineral the fading of the entire crypto market, but this is a topic of communication between crypto products for another study.

NFT for Sport: According to study, the sports sector adopted blockchain almost at the same time as all other economic sectors. Numerous tokens devoted to the sports industry have already been released in 2019. The following categories were used to distinguish them: markets, fan engagement, betting on sports, and funding.29

Sports and esports fans may crowd-manage their preferred teams, games, leagues, and events thanks to Chilliz, one of the most well-known projects that runs Socios.com. Fan Token(s) that may be bought using Chilliz Token, a cryptocurrency-branded utility token with the logo or name of the affiliated sports club or organization. The business uses both conventional and non-fungible tokens. The success of the initiative is demonstrated by one of its most recent partnerships. With a 100-piece limited edition NFT collection, AC Milan will be the first soccer team to introduce an NFT campaign on the fan interaction and incentives app. Digital currency known as “fan tokens” gives users access to a variety of fan-related membership privileges, including the ability to vote on club policies, incentives, item designs, and unique experiences. Because NFT-ticket solutions offer a more certain solution to this issue, clubs and organizations have reacted favorably to them. Savvy NFT Tickets are distributed as special digital assets by event planners, sports organizations, and athletes. Because of blockchain technology, they are simple to transfer and sell.

After the initial programming, the procedure for rapidly manufacturing new tickets takes less than process. Unlike conventional ticketing, the costs associated with minting and selling NFTs are minimal. Several clubs have already implemented a sales mechanism via the NFT. FC Dynamo Kyiv, the leading team in the Ukrainian Premier League, issued NFT tickets for the 2021 season (representing 25% of all tickets).

The protocol is another company that offers solutions on the market. In addition, they provide solutions for Fan Tokens, Digital Collectibles, and Loyalty & Rewards. One of the promising areas of NFT is also expected to be Loyalty Programs. Tokenization of program connections Teams can encourage “profit-building” conduct as well as increase Fan and Sponsor Engagement. There are additional venues where sports enthusiasts can purchase unique tokens, such as “So rare” for a collection of NFT football trading cards. (https://sorare.com) Formula One fan may collect NFT cars, racetracks, drivers, and tires through F1 Delta Time. This blockchain-based game will employ the Ethereum and ERC-721 and ERC-20 standards for non-fungible and fungible tokens, respectively.30

Nonfungible utility tokens: Utility tokens, sometimes known as NFTs for specialized uses, are conceptually most tokens used for a variety of functions, including gaming and metaverse NFTs. But in this chapter, we’ll look at precisely the part of the NFT that gives its holders an advantage. These NFTs give holders unique access to blockchain platform features as well as a right of access to products or services. Special opportunities, early product access, membership- only virtual events, IRLs, and dividends can all be made possible.

This is just the tip of the iceberg because the implementation process for this type of NFT has just begun. The token in this form has a variety of uses Utility tokens may be assigned for the “N project” implementation function. 8,888 NFTs of eight randomly generated numbers between 0 and 14 were used, the inventor claims.

The market capitalization of The N Project reached 10,256 ETH (about $40 million at the time). Three days after its debut, it rose to the position of sixth most well-liked NFT project (temporarily). The NFT Project With Random Numbers on Black Background Hits $40 Million, Market Cap shows that these numbers may be used to create artwork, profile pictures, animated artwork, and even a War Card Game. Various ongoing initiatives provide various bonuses, such as entry into VIP areas, discounts on travel and lodging, and more, if their NFT is held.

NFT for Defi: A public decentralized blockchain network can now access financial products thanks to a technique known as decentralized finance, or Defi. open without a middleman to everyone. With most of the functions delegated to smart contracts, the system’s architecture can establish an irreversible and highly interoperable financial system with unparalleled transparency and equitable access rights. Defi is supported by AI, Blockchain (including distributed ledger technology and smart contracts), Cloud, and Data (large and tiny). The two most common vectors in the blockchain business are decentralized finance and non- fungible tokens. NFT might be used to increase liquidity for providers and solve the curve model problem, as well as to release value from collateral for Defi. However, using NFT as collateral casts doubt on the token’s liquidity; as a result, some systems permit lenders to slash tokens they deem promising. In general, NFT can be used in various solutions for Decentralized Finance and is now just in its infancy.31

4. General Trends and Pricing of NFTs

5. Issues and Challenges in Implementation

6. Conclusion

References

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