Twitter recently integrated NFTs to the timeline as hexagon-shaped profile pictures, aiming for users to verify the NFT they display. While not official, a letter published by YouTube CEO Susan Wojciki suggested the platform has tentative plans to embrace Web3 and NFT technology to help YouTube creators make money. Wojciki referred to NFTs as “a source of inspiration to continue innovating on YouTube”.
Not one to be left in the dust, Reddit has begun testing allowing users to set any NFT as their profile pictures, similar to Twitter. Reddit explained tests are at an initial stage and are yet to be made available publicly. This is not the first NFT initiative Reddit has backed, following the launch of its dedicated NFT-activities page, CryptoSnoos, in recent months.
The next generation of NFT enthusiasts will be able to enjoy not only the thrill and adrenaline of cryptocurrency but also a slice of fame as they take their place among sports stars, celebrities, and crypto natives.
NFT 1.0 Requires New Evolution
NFTs create items with ownership rights on the blockchain. So what’s the issue?
Primarily, they lack intrinsic value. NFTs are just pictures, and it’s nearly impossible to prove images are unique or worth anything at all.
However, industry progress has surged exponentially in the past year.
According to Chainalysis, the value of the NFT industry is worth over $41 billion, compared to the conventional art industry, which has stagnated at $50 billion. This rise in growth has meant many investors are now racing to invest in NFT marketplaces like OpenSea and Nifty Gateway, which has, in turn, led to the founding and development of countless startups running to capitalize on the opportunity created by this hype and consequent fundings.
And while NFTs may seem like a great investment opportunity considering the number of people cashing out, NFTs introduce many more issues.
- Content creators almost always lose their intellectual rights.
- They don’t represent actual ownership.
- They introduce rampant opportunities for counterfeiting.
- ETH price has continued to drop, but usage of the network remains expensive due to the NFT boom.
Introducing NFT 2.0
NFTs show how we can use the technology as more than just a means to store data. They represent ownership and uniqueness in the world of crypto. As a result, NFTs evolve independently and play an integral role in the blockchain industry.
While the concept of NFT 2.0 continues to evolve, it’s already being utilized on Uniswap users worldwide.
NFT 2.0 in Uniswap V3
Uniswap V3 launched on May 5, 2021.
It’s a protocol allowing users to provide liquidity only in specific price ranges (the concept of concentrated liquidity) and therefore provides capital efficiency, flexible fees, and reduction of impermanent loss. As a result, the LP token in V3 becomes an NFT rather than ERC-20 like V2 did. These LP NFTs contain the tokens provided as liquidity; this is an excellent example of ERC-20 wrapped inside an NFT, which by definition is a use case for NFT 2.0. Currently there is $3.8 billion locked in Uniswap V3, facilitating $1.8 billion daily transactions.
Millions of crypto users are adopting NFT 2.0 without noticing they’re already engaging in this new NFT revolution.
Features of NFT 2.0
Incorporating dynamism into NFTs is helpful because it changes how the token looks. It also introduces powerful attributes into the token’s design component, allowing the possibility of modification and command inputs (depending on what the developer puts in).
One of the top benefits of this feature is definitely to increase user engagement. For instance, creating NFTs with a time-limited feature serves as a powerful gamification tool that improves retention numbers.
So with these types of NFTs, companies could tokenize tickets for virtual events and enhance them with limited or exclusive access. They could also in-set expiry options, allowing attendees to freely exchange them in a secondary market or keep them as collectibles featuring certain rarity levels.
Here an NFT is created with the technological capability to be modified – in short, it’s upgradeable throughout its existence. However, the most popular use-case for upgradable NFTs is, without a doubt, driving collaborations.
Users can transform their NFTs in multiple ways – a helpful feature for all sorts of entertainment and art industries.
Similarly, global video-game development houses can launch collaborations without needless bureaucracy or outside interference typically required by third parties, which means they can create products together much more quickly.
Another example of NFT 2.0 utility in gaming is the process of burning two NFTs to generate a more powerful NFT or having items that grow more powerful over time.
Interlinking different types of NFTs is a good idea because it decreases investment uncertainty and helps to normalize an overly speculative industry.
Audius, a streaming platform, is a company incorporating this concept well. They understand music and art influence each other – so much now, mainly because of the global economy’s rise in digital goods. So the platform incorporates special offers for users who own Solana or Ethereum NFTs to showcase their collectibles.
Attaching music to collectibles helps enrich the cultural sector by creating decentralized identities for cryptocurrency users while creating stable products.
This feature also allows for nested NFTs, which are developed when one NFT owns other NFTs. An application with potential use-cases in the metaverse, gaming, art exhibitions, and other industries.
Benefits of NFT 2.0
- Unlike 1.0, NFT 2.0 allows smart contracts to link with NFTs. When ownership changes hands automatically on the token and records it on the respective blockchain, creators get royalties every time these assets change hands — essentially creating smart NFTs.
- NFT 1.0 only associated a single resource to the tokens – meaning NFTs could only be linked to one type of design on any given platform and would always appear the same no matter where you viewed it. NFT 2.0 allows for the customization of each token – paving the way for multiple designs and different looks depending on their environment.
- NFT 2.0 facilitates co-owned NFTs so that assets can have multiple owners who chip in to pay for the token, each earning a stake. With co-owned NFTs (also known as NFT fractionalization), there is better trust and a lower risk of fraud or theft because more than one owner has a part in owning it.
The Future of NFTs
Physical artwork is non-duplicatable – therefore, when someone purchases one, the asset changes hands, and the buyer takes ownership of it.
Unlike physical artwork, however, digital art isn’t considered rare or exclusive – creators will still retain their original work after its sale, meaning there’s an infinite supply available for them to share with others and continue selling.
The value of most NFTs is inflationary because there is no scarcity involved in digital art whatsoever. But the future is constantly changing, and the internet is continuously evolving. As a result, new forms of digital assets will continue to emerge.
Still, NFT 2.0 is ideal for making these industries more intelligent, intuitive, and adaptable. Moreover, since there’s no absolute scarcity in the market, this version of NFTs will make tokens more than just another right-click to save.
When will the Bitcoin bottom arrive? Maybe when NFT 2.0 is at the forefront of mainstream thinking.
NFTs are in a raging bull market with blue-chip collections reaching all-time highs amongst record NFT exchange volumes. Many of the projects are merely speculation plays, whilst in the background there is an evolution that we believe will bring the next wave of mass adoption to the crypto space – NFT 2.0 and its deep utility, interoperability, and improved mechanics.
We are keeping an eye out for key developments surrounding NFT 2.0 progress and the value it brings to elevate the entire NFT sector.
Author: Felix Mohr, CTO of Crypto Fight Club
Felix Mohr is the CTO and co-founder of Crypto Fight Club. Aside from spearheading all blockchain and game developments for Crypto Fight Club, Felix (aka @MakerOfGloves) has been in crypto since 2016 as a certified fintech professional from the University of Hong Kong as well as the co-founder of MohrWolfe. His focus now is to bridge adoption to the play-to-earn space in GameFi through building NFT games and decentralized blockchain product lines.