Non-fungible tokens (NFTs) are perhaps the “most exciting” development in crypto in 2021, according to the team at Kraken.
The digital assets firm writes in a blog post that many people might believe the future of NFTs is “bright.” However, relatively few understand their true value and potential, the Kraken team notes. In order to separate the hype from the facts, Kraken Intelligence has prepared an extensive report covering what NFTs really are, how they work, and why they may be considered valuable.
NFTs are more than digital artwork — they “represent identity and verifiable proof of ownership on a blockchain,” the Kraken team explains. They also mentioned that NFTs are able to function as “a passkey to unlock access to exclusive experiences, such as events, blog posts or communities.” Not only that, but any form of intellectual property or physical item “can be minted and linked to a blockchain.”
The Kraken team further noted that Cryptopunks, Cool Cats and The Bored Ape Yacht Club are just some of the “more popular” NFT collections “with a loyal following.” Behind these collections lies a strong community of consumers sharing a “common interest.” The NFT can serve as “a funding mechanism for those same communities and a passkey for those who wish to join,” the Kraken team added.
They also noted:
“After a collection is entirely minted, most NFTs are typically available for purchase on secondary markets. Most corresponding content or art is likely stored off-chain to reduce costs and some creators may store it in a centralized server — which could increase the risk of a dead link to the NFT should the server fail or shut down.”
“There are many factors that contribute to the value of NFTs. Value can be attributed to immutable ownership, digital scarcity and smart-contract-based governance. No matter how much time passes, an NFT’s history can be authenticated and it can not be duplicated. Supplementary value lies in their ability to be utilized across applications and frictionless transfer via a secondary market.”
As barriers between content creators and their audience are removed, NFTs can “disintermediate media platforms who monetize content at their discretion,” the Kraken team explained while adding that this development can “further empower the creator economy.”
The Kraken team added in their report that society, as a whole, is beginning to move towards a digital world “where expressions, creativity, moments, and entertainment are becoming digitized and memorialized on blockchain platforms.”
They also noted that NFTs had started out as somewhat of a niche sector, and their evolution has “caught the attention and introduced many new individuals to the world of blockchain and cryptocurrencies.”
The Kraken Intelligence team also noted:
“We have seen impressive growth in the past few years and even the first half of this year alone, and it appears we have only scratched the surface. In the current ecosystem, NFTs and the storage of their metadata may come with risks that affect their sustainability, but as awareness grows, we believe that NFTs will successfully expand beyond art, sports, music, and collectibles.”
They concluded that NFTs will “transform the way creators offer their goods and services to buyers, or even simply in the way individuals interact with others on the Internet.” Kraken further noted that with the younger and more tech-savvy generation moving offline activities online, we believe NFTs will “disrupt and transform the way we experience culture, trends, and interactions in our everyday lives.”
To view the complete NFT report from Kraken, check here.