Brian Flynn, a product designer and writer, has a blog dedicated to non-fungible tokens called NFTY News. In his latest NFTY #19, Flynn predicts a rise of NFTs with the new open financial systems.
Basics for the uninitiated
A non-fungible token (NFT) is a programmable token that carries unique information and, thus, is not interchangeable with other tokens of the same type. Unlike fungible ERC-20 tokens, many NFTs are ERC-721 compliant. An NFT is bought and sold whole. For example, CryptoKitties, a blockchain game where players collect, breed, and trade unique cats.
State of NFTs
NFTs, Flynn says, are growing in popularity. This, as many believe, has to do with the Fat Dapp theory, which states that the real value of blockchain technology lies in the application layer, not the protocol itself (the Fat Protocol theory). In other words, blockchain is only useful when it meets real end-users. And NFTs are in fact digital assets that users interact with.
Yet, NFTs face the challenge of insufficient liquidity. As such, investors do not have a viable vehicle to invest in NFTs. Non-fungibility means that holders have to find liquidity for each of their tokens, which in the past made non-fungibles an unattractive investment opportunity.
Future of NFTs
Nevertheless, Flynn is confident that NFTs will explode as digital-asset markets see greater adoption. NFTs can be tied to real-world assets and holding them declares ownership. Flynn further explains the advantages of NFTs, such that they can be programmed, for instance, to bring royalties when traded on secondary markets, and thus act as passive-income NFTs. And as the value of NFTs is only limited by programmer imagination, the potential of non-fungibles is still far from being fully explored.