What are NFTs? 

NFT stands for non-fungible token. They are unique digital tokens that represent ownership of digital and real-life items such as art and images.

‘Fungible’ simply refers to an item that can be replaced by another identical item. Physical money and cryptocurrencies are fungible. One GBP can be traded for another GBP, and one BTC can be traded for another BTC.

NFTs are different. Each NFT has a unique digital signature, which makes it impossible for NFTs to be interchanged with one another. NFTs are, therefore, non-fungible. Think of individual artworks created by the same artist that cannot be swapped or interchanged, as each is unique.

NFTs are hosted on a blockchain. ‘Minting an NFT’ simply refers to the process of publishing an NFT on a blockchain. NFTs are linked to assets; they are not the assets themselves. Instead, they consist of a token and accompanying data (think of them like a line of code) and this is what is stored on the blockchain. Because the blockchain record can’t be edited, NFTs serve as an undisputable and publicly traceable source of proof of ownership and authenticity for the underlying asset. This is useful for collectable items, designer goods, artwork, and in-game items.

NFT marketplaces are platforms where NFTs can be stored, displayed, traded and, in some cases, minted. These marketplaces generally have the same interface and usability as an online store. The sign-up process can differ slightly from site to site, but typically involves creating an account with the marketplace, connecting a supported digital wallet, or both.

Some marketplaces let you buy NFTs directly for a fixed price, others will use an auction; and some offer both. When an NFT is traded, the marketplace will handle the transfer and record the transaction (including change of ownership) on the blockchain it is built on (e.g. OpenSea was built on the Ethereum blockchain). In exchange for this, all marketplaces charge a percentage fee on sales (e.g OpenSea charges 2.5%). This fee is deducted from the total amount of funds that the seller receives.

Also, thanks to how NFTs are programmed, artists can place a commission on the resale of their artworks. For example, when publishing an NFT, an artist may decide to place a 5% commission on their artwork. This means that each time their art is resold, the artist will receive 5% of the selling price.

Some of the leading NFT marketplaces include OpenSea (Ethereum) and Magic Eden (Solana).

What is the Metaverse?

The Metaverse is a virtual universe where users can interact with one another as digital avatars, and consists of different shared online spaces that can be used for communication, games, and even work. The aim of this universe is to blur the lines between physical and virtual through 3D virtual worlds.

While the metaverse remains largely conceptual, a big misconception is that it’s just another form of virtual reality. Many believe that the Metaverse has the potential to create parallel systems of existence that will revolutionise how we live, and how we communicate with people around the world. For example, some supporters envision users working, communicating, attending concerts and even ‘travelling’ around the world through the Metaverse.

Note: The Metaverse is not to be confused with ‘Meta,’ Facebook’s new corporate name. The social media platform rebranded back in October 2021 as part of a strategic shift in focus towards building its own version of the Metaverse, and announced plans to invest $10 billion over the following year on virtual/ augmented reality technologies.

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Crypto Gaming 

Crypto games are video games that operate using blockchain technology. Many offer a play-to-earn (P2E) model, in which blockchain technologies like NFTs are utilised to enable players to receive rewards that have real-world value.

Generally, players will have to purchase a digital asset (e.g. land, character) as an NFT to play the game. Value in any in-game economy is in the form of tokens that are native to that game, though this could change in the future to Layer 1 coins (i.e. ETH). These native tokens are used for in-game purchases and for facilitating trades between players. The blockchain network is used to secure and verify in-game transactions, in-game history and ownership of digital assets.

Digital assets, along with rewards earned from playing the game (e.g. native tokens) are stored in a player’s crypto wallet, which only they have access to. Users have full ownership of any game assets won­, collected or purchased. This means that if the game is shut down, users will retain their virtual assets, the utility of which often extends beyond the games e.g. NFTs can be traded on marketplaces. ­

An example of a P2E game is Aurory, an anime-style, Solana-based adventure game. In Aurory, a human-like character (Aurorian) is controlled by the player as they explore and complete quests collecting Nefties (NFTs) that you use in battle. Rewards are in the form of $AURY tokens and NFTs.

Important to note:

Many view play-to-earn games as a gateway for onboarding millions of new crypto and NFT users. Whether crypto gaming can deliver on this promise is not yet clear, as questions remain regarding the long-term viability and overall management of many P2E projects. Therefore, the ‘play-to-earn’ feature should just be a feature and not the main attraction of any crypto game.

Exploring the intriguing realms of NFTs, the Metaverse, and gaming, this module unveils the intricacies of digital ownership, virtual universes, and blockchain's impact on interactive entertainment.