The concept of intellectual property rights has been a long-standing issue from time immemorial as humans inherently aspire to be duly acknowledged and rewarded for their unique creations, whether it be software programs, music, writings, or other forms of art. Over the years, legal measures such as patents, copyrights, and trademarks were initiated in order to enable creators including application developers and artists to gain adequate ownership, recognition, and remuneration for their inventions. Thereby, limiting unethical activities such as piracy or counterfeiting of original creations. However, it is an undeniable fact that the process involved in obtaining adequate intellectual property rights such as trademarks, patents, or copyright is inherently tedious and expensive. Hence, these constraints are significant limitations for upcoming artists or creators.
Similarly, the present state of the internet, prior to the advent of the blockchain technology, has left a lot to be desired for digital artists and creators. Even though modern internet platforms such as social media have created a digital avenue for artists and other creators to easily showcase their creations, however, the value in most cases is accrued back to the platforms rather than the creators. Also, most web3 platforms are characterized by centralization and censorship of contents, which limits creativity and privacy protections. In addition, there is no systematic way of verifying the authenticity of digital content such as art posted, which makes it easy for others to replicate (pirate). Thereby, making it extremely difficult for creators to be duly credited and renumerated.
These challenges, therefore, buttress the practical importance of Non-Fungible Tokens (NFTs).
A Non-fungible token (NFT) is described as a unique digital asset that represents real-world objects such as art, music, videos, in-game items, or real estate whose ownership is verifiable on a blockchain. Typically, various forms of assets ranging from digital goods that exist within virtual worlds, to claims on physical assets such as real estate properties can be represented as NFTs.
Generally, it is a known fact that talent is evenly distributed globally, however, opportunities are highly concentrated. Hence, blockchain technology provides a democratized avenue for talents globally such as artists to access viable economic infrastructures and opportunities to effectively showcase their artistic works to global audiences. Core Infrastructures, particularly NFT Marketplaces such as Jpg Store, enable creators and consumers to freely exchange value in a decentralized manner without losing their privacy or sovereignty. For instance, an upcoming artist in Nigeria can sell his work for millions of dollars to interested parties across the world and still gain due acknowledgment and reoccurring royalties, even without having to host an exquisite art exhibition or auction Gala in Manhattan.
On the social front, a Politician in an authoritarian regime whose bank accounts have been frozen by the government can directly release NFTs as a way of gathering campaign donations. Thereby enabling the delivery of the true dividends of democracy to citizens without centralized monopolies. In the same vein, poor customers can collectively pool funds together in order to acquire fractional ownership of proprietary assets such as unique artworks or even real estate represented as NFTs. Thereby democratizing the process of creating and acquiring of unique digital or even physical assets in a decentralized, borderless and permissionless manner.
NFT Creation Process
As explained earlier, a non-fungible token (NFT) is a unique data unit on a blockchain that can be directly linked to various assets. Thereby providing an immutable proof of ownership. While it is assumed that the process involved in creating an NFT might be cumbersome or highly technical. However, in actual sense, it is rather really simple.
A standard NFT creation process is outlined below:
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An individual must first select the unique asset which they would like to convert into an NFT.
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Thereafter the asset must then be minted on a blockchain. Minting, in this case, simply refers to the conversion of digital files into an NFT collection whose records are stored on the blockchain. The NFT, therefore, represents that digital asset on the blockchain, and the proof of ownership can be easily verifiable through the immutable record of the blockchain. There are various blockchains that can be used for minting NFTs some of which include Ethereum, Cardano and Solana amongst others.
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NFT marketplaces such as Bluemove and OpenSea enables creators to list and trade their NFTs after it has been minted on the Cardano or Ethereum blockchain respectively. Typically, listing an NFT for sale involves the use of standard digital wallets that are compatible with the underlying blockchain which the NFT was minted. For example, in order to list an NFT on an Aptos NFT Marketplace such as Bluemove, the creator must set up an Aptos-compatible digital wallet such as the Fletcher Wallet and also have some cryptocurrency such as ADA for transaction fees.
Applications of Non-Fungible Tokens (NFTS)
The concept of Non-Fungible Tokens (NFTs) emerged as one of the biggest technological breakthroughs in recent times, and this is mainly because the practical application, use cases, and potentials of NFTs are endless, with new applications constantly emerging so as to offer more value for both creators and consumers. Nevertheless, NFTs still remains a nuanced innovation in its initial stages. Some of the present applications and uses of NFTs are outlined below
PFP and Avatars: This represents one of the most popular use-cases of NFTs, and it is commonly used as a form of unique identification, while in some cases for status signalling or as a digital flex due to the rarity or unique trait of the NFT. Also, people use NFTs such as Crypto Coven as their PFPs as a way of identifying with the culture or causes that the NFT Project represents.
Music NFTs: At this point, many people are aware of the inefficiency of the music industry with respect to providing artists with sustainable means of making a living off their work. Most of the existing streaming platforms are cannibalistic in the sense that they take a large percentage of the revenue of musical artists, and in some cases even censor the types of content that would be posted. To counter this challenge, the concept of music NFT was developed to act as a tokenized version of music audio, video or an entire album. Therefore, artists can leverage on the blockchain technology to bypass various middlemen such as record labels, or streaming platforms. Thereby having the unique opportunity to connect directly with fans and earn money while still retaining the creative control of their work.
This way, a musician in Sri Lanka without a label can release their music directly to fans as NFTs and earn without the fear of content censorship or monopolized control from any streaming platform. In addition, music NFTs platforms such as Royal allows fans to invest in an artist’s work, thereby making the fans co-owners of the music thereby enabling them share in the revenue from the music release. Also, musical artists can release NFTs which can grant Fans exclusive access to concerts, and tours.
In-game NFTs: Most blockchain-based Play-to-Earn (P2E) games enables players to earn and own in-game assets like weapons, skins, digital accessories, characters, and virtual land in the metaverse, which are all essentially NFTs that could be traded to earn financial rewards.
Collectibles: The recent boom in sports trading card as evidenced by projects like NBA Top Shot, has propelled the rise of NFT collectibles which can have varying degrees of rarity, and value for the holders, just like physical collectibles.
Digital certificates: NFTs can also be used as certificates of authenticity offered as proof-of-ownership assigned to individuals or groups. Since NFTs are data units stored on a blockchain in an immutable, permissionless, and transparent manner, it is then easy to identify the authenticity of degree certificates, or real estate certificate of ownership which are NFTs on a blockchain. Thereby limiting the case of certificate fraud or forgery. In addition, platforms such as Mirror enables writers and researchers to mint their blogs as NFTs and earn royalties.
DAO Membership Pass: Decentralized Autonomous Organizations (DAOs) and social groups of all forms in this modern dispensation tend to rely on NFTs to provide exclusive membership access and privileges for members within their communities. It is very similar to elites with AAA card or AARP members whose membership cards offer them exclusive flights, or hotel access. For instance, members of the BAYC communities owning either the Bored Apes or Mutants Apes are given some exclusive privileges like access to the BAYC discord in addition to access to free NFT collectible airdrops such as the Mutant Ape, Bored Ape Kennel Club dogs, and the Otherside Metaverse Land.
Community incentivization using NFTs is important since most aspects of web-3 are open-source which implies that it is easy to fork (copy) everything, however, community and culture cannot be forked.
Criticisms and Solutions
Non-Fungible Tokens (NFTs) are still regarded as a bubble, despite all the promising use cases. This is largely due to some fundamental flaws and challenges associated with the technologies and overall NFT ecosystem which is important to outline and even explore practical solutions.
Blockchain Scalability Constraint: The exponential rise in the interest for Decentralized Finance (Defi) services and Non-Fungible Tokens (NFTs) particularly on mainstream blockchains such as Ethereum has resultantly led to enormous scalability limitations ranging from lower throughput, slower response time, and high gas fees for NFT mints. These issues tend to affect many, particularly the retail investors within the NFT Ecosystem.
However, innovative solutions have emanated some of which include layer-2 scaling solutions such as Optimism or Arbitrum, as well as alternative Layer One (1) blockchains such as Cardano with high throughput and low transaction fees. In addition, Cardano is an environmentally friendly blockchain with an efficient settlement layer that enables users instantly mint or trade NFTs on the blockchain with lower fees and higher throughput.
Poor Interoperability: Most NFTs that are minted on a particular blockchain cannot be accessed, exchanged, or traded on the NFT marketplaces of other blockchain networks. The lack of interoperability makes it difficult for NFT creators to effectively target mass users across multiple blockchains, and this sometimes leads to the forks of NFTs across other blockchains.
Nevertheless, there has been some apparent progress amongst NFT Marketplaces such as OpenSea and Magic Eden offering cross-chain support for Solana and Ethereum networks respectively.
Creator Onboarding Challenge: The success of any NFT project depends on a myriad of factors asides from the aesthetics of the art. Some of the critical success factors include community enthusiasm, network effects and incentivization structures for users. Therefore, even highly talented artists with low literacy levels or limited networks tend to experience challenges in terms of NFT promotions in order to propel the needed awareness and network effect necessary for NFT success. To this effect, creator-first NFT Marketplaces such as Bluemove provides holistic services such as Launchpads in order to host, promote and market NFT project launched on the platform.
Hence, Alfred and his classmates from a remote city in Nairobi, with limited social reach can be able to host their NFTs and gain enormous traction and awareness amongst art enthusiasts in Toronto Canada, and Manhattan, New York. In addition, creator-first NFT marketplaces such as Jpg Store enable the students to constantly earn royalties for any sale of their NFT.
Rug Pulls and Scams: Finally, there has been an increasing rate of scams, rug pulls and minting of plagiarized arts within the NFT ecosystems. Hence, the need for the implementation of enhanced verification systems such as the Jpg Store verification.