NFT are the acronym used to refer to non-fungible tokens characterized by being unique and of limited quantity. They currently have become the most common form of digital assets because they are backed by blockchain technology and have arrived to redefine the web and the digital economy.

The most popular NFTs are linked to the art world or video games, so you probably assume they are only used for trading artistic expressions and digital items. Still, many types of non-fungible tokens are classified according to the purpose for which they are used. 

For this reason, in El Dorado, we will tell you about each of them and their possibilities.

Before we delve into the various applications of NFTs, it is crucial to understand the difference between fungible and non-fungible properties; the first are those consumed when used and exchanged since they have a value associated with their number, size, or weight. An example of a fungible asset is fiat money; if you have a 20-dollar bill, you can exchange it for another 20-dollar bill without any inconvenience. After all, the value is the same; the bill is consumed when paying for any product or service.

While non-fungible assets are irreplaceable and are not consumed when you use them, for example, an exclusive piece of jewelry, you can use it on different occasions without it being consumed. Although it has a monetary value, it cannot be replaced by another because there are no two identical ones.

You can think of each NFT as a unique and unrepeatable piece, similar to the Mona Lisa. There is only one in the world, and although copies can be made and sold, none will replace the original.

Linked to art

As you may have noticed, NFTs have similarities with works of art, which is why this is one of the most popular types today. The most notable projects are tokens representing works of art or digital illustrations, such as the CryptoPunks and Bored Ape. 

The success in this sector is partly for the same reasons that have made the art and fashion markets successful: People like to have status and socialize around commonalities, and this is possible with this type of NFT because owning a unique and desired token gives you status and makes you part of a digital community with like-minded interests.

In addition, they allow new forms of financing for emerging artists, who can more easily sell works of art through the Internet while authenticity is guaranteed.

Music-linked

This is one of the areas that has been gaining importance when it comes to non-fungible tokens, as Web2-linked monetization models offer monetary rewards that leave most musicians a lot to be desired. To give you a clearer idea, in 2021, more than eight million musicians were on streaming platforms like Spotify. However, the number of artists that generated more than 50,000 dollars a year did not reach 15,000 users.

That is why projects have emerged that seek to create, through NFTs, a new music industry in which most profits go to music creators. The possibilities are varied, including creating a music project stored entirely on the Blockchain, increasing streaming revenues for independent artists through new platforms such as sound.xyz, and allowing fans and musicians to co-own musical pieces.

Of course, these kinds of NFTs can also be tapped by superstars, but what's exciting is knowing that they can transform the industry to bring greater profits to independent musicians and their fans.

Access

This is a less explored type, but it is worth mentioning. Can you imagine that you only need a non-fungible token to attend a concert? Well, this is probably possible in the near future, as NFTs can be used to replace event tickets, reducing friction in the market and allowing for broad interoperability. Similarly, they are an excellent alternative to provide exclusive access to digital spaces, such as Discord channels or virtual classes.

Linked to video games

Gone are the times when video games were children's things; today, there are those who, beyond playing for fun, also play for financial rewards. Of course, this has made video game-linked NFTs some of the most popular, thanks partly to games like Axie Infinity, where non-fungible tokens generate digital assets that users can trade for profit.

However, before they were implemented in this sector, players were already spending exorbitant sums of money on virtual goods, although these do not become the user's property but belong to the platform. This means that these digital goods cannot be used in other video games, which is one of the solutions provided by non-fungible tokens; solve the interoperability problem and allow users to be the owners of those items for which they have paid real money so that beyond using them as a reward, they will also become a valuable asset for virtual game development companies.

Exchangeable for physical goods

The power of these tokens goes beyond the digital world, as they can be used to obtain physical objects that are part of a collection; basically, these NFTs become a unique certificate of ownership that allows the holder to claim the physical good whenever you want. This type of NFT is already being implemented by Dolce & Gabbana and Ubisoft, opening the doors so that other industries can incorporate this new technology in their projects.

Of identity

The leading companies linked to Web2 have shown various flaws in handling personal information; These include hacking of sensitive information, abrupt changes in privacy policies, and commercializing personal data. Although blockchain technology was already mentioned among decentralization supporters as an alternative to creating more secure digital identities, the arrival of NFTs has brought this application closer to reality.

Contrary to what some think, blockchains like those of Ethereum and Bitcoin have never been hacked, thanks to the numerous nodes that remain in the network; this means that blockchain technology offers greater security than other traditional alternatives, and NFTs can be the perfect complement to reinforce the levels of security and protection of personal data.

Through these tokens, you would store your data to easily use them as credentials, allowing a more secure way to identify yourself on various platforms in an interoperable way while deciding with whom to share aspects related to your identity.

Linked to databases

Web3 seeks decentralization, but to achieve this goal, it is essential to find alternatives for data storage; Fortunately, NFTs are presented as the solution since, through them, users can become owners of their data stored online. Because the data would remain in a trustless system, there are no third parties who can hack or sell that data without the consent of the owner.

Although non-fungible tokens are still in their early stages of development and adoption, the fact that more and more sectors are studying how to implement them is exciting and a good indicator that this new technology will become part of everyday life. Therefore, understanding each type is essential on this path toward digital transformation. Did you know them all? Or have any of them surprised you? Let us know in the comments! And remember to follow us to learn more about El Dorado and the crypto world.