Non-fungible tokens represents a unique non-fungible digital asset that is stored in a blockchain. It tracks the proof of ownership of the digital asset from its very existence and its authenticity is verifiable on the blockchain.

NFTs can be created for anything that can be encoded into a digital format.

NFTs can either be minted as ERC 721 or ERC 1155. ERC 1155 standard was developed by the gaming company Enjin and was released in June 2018. It was specifically designed for GameFi, a web3 based Decentralized gaming ecosystem.

Some of the pros of ERC 1155 tokens are as follows:

• Semi-Fungible token which can be converted from a fungible token to a non-fungible token.

• Multiple token types can be deployed in a single contract.

• Batch token transfer and transaction reversal.

Soulbound Tokens (SBTs) are a new variant of NFTs that are non-transferable and non-fungible whch can be used by web3 users to verify and trust each other based on their affliliations and credentials.

Soulbound tokens were first mentioned in a paper published by Vitalik Buterin and others on May 11th, 2022. In the paper, Buterin suggested that, until now, web3 is focused on “transferable and financialized assets, rather than encoding social relationships of trust”. SBTs would form an essential building block for the Decentralized Society, or DeSoc building a tangible social asset.

Some of the Use Cases of NFTs

• Ethereum Name Service (ENS)

• Digital Art Assets

• Collection of Memorable Events & Event Tickets (POAP)

• Decentralized Gaming Ecosystem (GameFi)

• Decentralized Society (DeSoc)

Ethereum Name Service (ENS)

The primary role of ENS is to map unique identifiers on web3, such as ethereum addresses, hashes, and metadata, to readable names like domains, which is then registered on the Ethereum blockchain.

The difference between ENS and DNS is the architecture. ENS is built on top of the Ethereum blockchain a decentralized network with no central entity controlling it. Also ENS replaces manually operated, centrally managed systems with automated smart contracts. Every ENS Name that exists today is minted as a ERC 721 NFT by an ENS contract.

Since the ENS Domain names are based on a decentralized infrastructure, they are censorship-resistant, secure and private. No state entity like any government can ban your .eth domains in any of their jurisdiction.

Digital Art NFTs

Non-fungible tokens caught the world's attention after the $69 million sale of a digital artwork by Beeple at a Christie's auction.

Permissionless creativity empowers the artists with the freedom to make choices and decide what to create. One of the advantage with NFTs is a game changer for artists that they can continue to earn a percentage of the resale of their works in perpetuity.

This differs from the traditional art market, where artworks are sold through auction houses and galleries to collectors, who can then resell them for much higher prices without having to give artists any percentage.

Collectable Events & Event Tickets

Consensys minted a commemoraive NFT called Regensis collection for 72 hours to celebrate the achievement of Ethereum core devs, client teams and researchers. The Regenesis collection was the first public NFT mint on Proof of Stake Ethereum blockchain.

NFT tickets are digital assets that hold your access credentials to an event. They can also offer ticket holders additional perks such as meet-and-greets, exclusive merchandise etc. The event organisers can afford more control over primary and secondary ticket sales by setting the sale or auction price, of the tickets.

A real-world example of NFT tickets in action was Binance's partnership with Southern Europe's largest music festival Primavera Sound.

Decentralized Gaming Ecosystem (GameFi)

Massively multiplayer online role-playing games (MMORPGs) feature micro-transactions, where a player would use debit or credit cards to purchase an item like weapons, dress etc.

There are two drawbacks in this model the companies have full control and ownership of all those in-game items and these items cannot be sold at any point in time for cash and get stuck in it forever.

NFTs changed the ball game it gave players in-game ownership. Players could essentially tokenize anything, including any item that could be exported as an image, video, or sound eventually.  Companies started developing their games around this business model known as play-to-earn (P2E) gaming.

The P2E game’s underlying blockchain will typically run through the utilization of a decentralized network of nodes, or miners, all of which might store a full copy of the entire blockchain, and this will ensure that whenever a single miner or even full miners or nodes go offline, the blockchain can live on, and the player can, at any point in time gain full access to all of their items as NFTs.

Decentralized Society (DeSoc)

1/ A first sketch of Decentralized Society (DeSoc): https://t.co/rdTSL8QpJP…

Honored to have collaborated with @glenweyl and @vitalikbuterin on what will hopefully become a novel field of research, inquiry, and co-creation across our technological stack.

— Puja Ohlhaver (@pujaohlhaver) May 11, 2022

Within a DeSoc context, SBTs are issued by and held within accounts known as “Souls”. Souls are contract addresses in a wallet that hold SBTs and are used to establish provenance and reputation. Souls can be associated with individuals, organizations, or other entities.

One of the use cases of SBTs is to deter DAOs Sybil attacks, wherein an individual or coordinated group of individuals accumulate a critical mass of governance tokens and manipulate proposal voting in their favour.

Pros of NFTs

NFTs are the foundation for the builders and permissionless creator economy. It exposes the creators and artists work to the global markets and their works cannot be censored or artificially manipulated.

Cost efficient to protect the ownership and store an idea or an invention negating the middleman.

NFTs are transparent, provide proof of ownership as it is secured and verifiable on the blockchain by anyone.

Cons of NFTs

NFTs can either be a ticket for an event or conference where storage permanence is irrelevant. On the other hand if its a digital work of art like pictures and videos who is responsible for the storage permanence. NFTs does’nt provide storage on the blockchain as it is just a link like an IPFS CID.

NFTs are not worth it if it does not have a reliable secure censorship resistant permanent storage.

Cost of minting a new NFTs is quite expensive on Layer 1 but as we migrate NFTs minting to Layer 2 like optimistic rollups and ZK rollups it will be less expensive eventually.

Another drawback is if we mint NFTs in a market place like Opensea we get locked with that market place. We won’t be able to migrate to rarible, which is another market place. The reason is we only own the NFT but not NFT minting contract. It is owned by opensea and you cannot update NFTs in case of storage issues.

More over opensea does not adhere to the concept of decentralisation, NFT collections can simply be delisted without any form of community voting. You may inexplicably lose access to your digital assets collection, in an instant.

Huge bullshit Opensea delisting Artists from Cuba! WHY?! I gave this man the funds to start his collection to help feed his family. WTF @opensea pic.twitter.com/dTWW8GA9jg

— ODDMANOUTinc (@SKULLSCROWNS)March 27, 2022

NFTs are not a liquidity generating asset but a non-fungible asset with high volatility. It is one-of-a-kind, unique, irreplaceable and non-interchangeable. Examples include original works of art. Each of these assets has unique qualities that cannot be authentically replicated.

Buyers can only own the NFTs but do not own the IP rights associated with the assets.

It only establishes the authenticity of the digital asset but doesn't deter or restrict downstream replication of that asset unless the asset is encrypted.

Fractional ownership of a physical asset has a lot of grey areas, as it violates the tenants of ownership which is possession is nine-tenths of law. Ownership can be enforced only if you possess something like saying not your keys is not your coins.

Fractional system is prone to debasement and void proven to be true from the times of Romans. It has high potential for scammers, fraudsters and speculators.

Future of NFTs and SBTs

Let me give some case scenarios to get across the potential of NFTs and SBTs with permanent storage.

• If every scroll in the Library of Alexandria and Nalanda was an NFT with permanent storage it would have survived across space and time.

• If the designs, equations and writings of Nicola Tesla were NFTs it would have been a great priori for new ideas and inventions for connon people but not for corporates like wireless charging and Scalar tech.

• NFTs have a better scope for copyrights, designs and ideas but can’t effectively enforce IP rights.

• NFTs have great potential for preserving information across space and time like Akashic Records., if NFTs can provide censorship resistant decentralised ownership and permanent storage.

• SBTs can deter collusion of machines, whales and DAOs Sybil attacks.