The Rise of Non-Fungible Tokens

Making digital assets truly unique and collectible.

Photo by Wayne Low on Unsplash

I think most kids growing up in the 90s played a trading card game (TCG) at one point or another. The big three back then were Magic: The Gathering, Yu-Gi-Oh, and Pokemon. All of my friends played at least one, often two or more. I had phases myself. My dad played Magic: the Gathering quite a bit in his younger days, so growing up, my brother and I would try our hardest to beat him. I was so proud the day that I finally beat both him and my brother for the first time. I have so many memories playing those games, but even beyond the actual gameplay, the idea of collecting cards to design your deck was pretty novel for a couple of reasons. Scarcity was an essential aspect of it. When you got a card that was labeled rare or legendary, they were rare because the publisher would literally print fewer physical copies into existence. Also, you could trade your cards back and forth and, in some cases, even sell them for a decent amount of money.

I never entered into the professional arena playing a TCG. I remember going to one Magic: The Gathering contest back in the day and getting my ass handed to me. Nevertheless, I would spend hours developing decks and testing them out with my family. My brother and I made sure to extricate all the rare cards we had and carefully insert them into sleeves and binders for bragging purposes. Half the fun was showing your collection to your friend so they could “Oooooh” and “Ahhhhh” and beg you to trade them X card and plead with you to take a look at their collection. Gone were any thoughts of how much money was poured into obtaining these cards. It didn’t matter. The coolness of it all overpowered everything else.

Fast forward a decade, and with the rise of the internet, the novelty began to wear off. Gamers moved online as gaming companies began requiring an internet connection for verification purposes before anyone could play in the virtual worlds they had created. Gone were LAN parties, and gone were physical TCGs. (They all still exist today, but I’d argue they’re a bit of a shadow of their former glory, no?)

What came to take its place?

Well, the first game to nail the online TCG and make it popular again was Blizzard in 2014 with the advent of Hearthstone. There were attempts before to bring the magic of TCGs back, but Hearthstone stands head and shoulders above the rest, enjoying unrivaled success in this area of online gaming. To its credit, it does many things right in replicating the deep strategy of physical TCGs while correcting a lot of the flaws. Also, Hearthstone is easy to learn. Hard to master and allows for a ton of innovation due to its online capability.

I played Hearthstone quite a bit when it first launched, and even today, I jump back in now and again. It scratches the itch for me, and despite the significant cost of collecting all the necessary cards, I didn’t mind. I still played obsessively. I played with friends and even went to a few Hearthstone tournaments. I never did well, but it was still a lot of fun.

One gripe has persisted about Hearthstone though, and it’s a big one. It’s something that strikes at the heart of what made physical TCGs so much fun back in the day. One of Hearthstone’s major flaws is that the cards in a player’s collection can not be traded away or sold. The cards you own are forever tied to your account. The closest thing a player can do is “dust” cards, which gives the player back a certain amount of resources that he can then use to buy more cards or packs, but no player to player trades can occur. Any attempt to do so will get you banned. I highly doubt that Blizzard will ever change its stance on allowing players to trade or sell cards in their collection. They’ve been burned before attempting to implement similar mechanics involving real-world money in some of their other games. (Looking at you, Diablo III!) Though to their credit, up until recently, trying to figure out how to create real digital scarcity has been challenging.

Remember, what made physical TCG’s work was because a cards’ rarity was directly controlled by how many copies of that card the publisher decided to print. With the internet, that whole thing is flipped on its head. Once a file is put online, anyone who comes across it can freely copy and paste it to their heart’s content. That’s kind of the whole point, and while there are tactics one can employ to protect those files from being copied, those measures focus mostly on obscuring the actual location of a file or using logic to determine how much of a file an individual account or user has rather than preventing the file itself from being copied. Never could digital items be traded freely without the careful management of a central party.

Photo by Ryan Quintal on Unsplash

What in the world are non-fungible tokens?

Good question! Well, to understand what non-fungible tokens (NFTs) are, we must first understand what makes something fungible. The most straightforward example of a fungible token is a one-dollar bill. Fungibility essentially implies that every single token is the same. If you swapped one out with another one, it would be like you hadn’t swapped them at all.

Coincentral defines it best, saying, “Fungibility refers to a currency’s ability to maintain a standard value and uniform acceptance. It generally means that a currency’s history doesn’t affect its value and each piece of that currency is equal in value to every other piece. The $20 bill in your pocket is just as valuable as the $20 bill in mine. If we take them to the store, the shop owner will accept them equally, even if yours was printed in 2018 and mine in 1980. Even if your $20 bill was used in a drug deal before you received it or came from Satan himself, the bill is still valuable at the store. That’s the power of fungibility.

Fungible tokens have two main attributes: a standard value and a collection of uniform attributes. So when we consider NFTs, we must flip those two values on their head. NFTs aren’t standardized. They are unique, in that, if you swapped one out for another, you would get something completely different. Additionally, NFTs fluctuate in value due to a variety of factors. The simplest example of physical NFTs are the old Pokemon or Magic: the Gathering trading cards. Every card is unique and has a different monetary value based on a variety of factors. Back then, it was things like quality of the card itself, its rarity, its age, if it was a misprint or not, if it was holographic or not, who previously owned a card, etc. Beanie babies, sneakers, shot glasses, fine art and pretty much anything else that people collect are also examples of NFTs. Amateur marketplaces will often sprout up around classes of NFTs to facilitate owners and creators trading items back and forth.

Why is this important?

These concepts, which have existed forever, are being brought into the digital space with the invention of blockchain technology. In very simple terms, a blockchain is a decentralized record of information that gets publicly verified by hundreds of computers around the globe on a regular basis. This innovation has allowed dozens of new use cases to sprout up based around blockchain technology. One of those use cases involves digital NFTs. There are already a number of start ups endeavoring to use digital NFTs to accomplish things never thought possible in a digital space.

1) Digital Art Collector is the most prominent marketplace I’m aware of that allows artists to upload their digital art. Through a process called “minting”, they can turn any piece of digital art into a digital NFT and offer it up for sale to collectors. Through blockchain technology, NFT Showroom keeps track of the chain of custody of digital art pieces, the value of a certain piece as it changes over time, and the management of rights between seller and buyer with regards to particular digital works of art.

2) Video Game Collectibles is currently working to create a marketplace geared mainly towards video game collectibles. Digital NFT’s would allow gamers to own the collectibles they buy in a game. It would also allow gamers to carry over their collectibles from game to game, even if those games weren’t made by the same publisher. One of the most exciting projects that Enjin is working on is a gaming multiverse. According to them, it’s aiming to be similar in look and feel to Ready Player One. I’m excited!

3) Digital Trading Card Collector is hustling hard to make the dream of a true digital TCG come true. Digital NFTs have allowed them to create that artificial scarcity, crucial to the physical TCGs back in the day. Splinterlands cards are fully owned by the players, are worth actual money, and can be traded or sold if a player wishes.

These are just three examples, but my point is this: NFTs are on the rise, and they have the potential to change industries for the better. Imagine its implications for photography, filmmakers, business owners, writers, and authors. This is only the beginning.

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