Non-fungible Tokens: Promise or Peril?
This is an incremental analysis of NFTs, relevant for stakeholders in digital asset markets and blockchain technology.
The paper examines the potential and challenges of Non-fungible Tokens (NFTs) as digital assets on blockchains, highlighting their applications in art, music, and gaming, but noting issues like high transaction fees and low speed on networks like Ethereum.
Non-fungible tokens or NFTs are the digital assets on a blockchain. NFTs are unique and they cannot be divided like cryptocurrencies. NFTs could store digital ownership of an artwork or collections or can be fan tokens or tickets for clubs. NFTs are based on a smart contract on a blockchain network which supports them, such as Ethereum, Cardano or Polkadot. Most of the NFTs are now minted on Ethereum (ERC-20) network, but it has some main issues like high transaction fees and low speed. There are lots of domains which can be benefited from NFT technology such as art, music, gaming, sport and wildlife conservation. NFTs could be also bought or sold on lots of NFT marketplaces such as OpenSea and Chiliz. The trend is in a huge hype because the market cap and popularity of NFTs are growing significantly.