Non-Fungible Tokens (NFTs) and the Metaverse, Explained

Acronyms, buzzwords, and digital transformations: We’re facing a thrilling, yet-confusing new world of fast-evolving technologies and revolutionary inventions. COVID-19 and the rise of remote working accelerated major digital advances, causing exponential growth in key technologies such as blockchain, cloud computing, virtual reality (VR), augmented reality (AR), and artificial intelligence (AI). 

These shifts in innovation offer a whole new host of career and business opportunities, but there’s one catch: you need to be digitally fluent to capitalize.

These new technologies are the building blocks of Web 3.0, a decentralized version of the internet that consists of blockchain-enabled applications that support an economy of user-owned assets and data. Web 3.0 is the next evolution of the internet, and it forms the foundations and currency of the metaverse, the immersive solution that we will all use to interact in the future.¹ Mark Zuckerburg, the founder of Facebook, has bet heavily on the metaverse by incorporating AR, VR, and mixed reality technologies into his newly-renamed company, Meta. It’s one of several leading companies investing in these new virtual worlds, and it’s creating new market and career opportunities worldwide. We outline how it all works in this article: What Is the Metaverse and Web 3.0?

One of the most crucial digital disruptions is the rise of non-fungible tokens (NFTs). The term ‘disruption’ has been diluted due to overuse, but it’s truly justified in the case of NFTs – unique digital assets that can represent both internet collectibles and real-world objects. Thanks to blockchain technology, now almost anything in pixels can be tokenized and turned into an NFT.² This simultaneously creates digital scarcity and empowers anyone with the ability to create their own digital assets for profit or innovation.

NFTs and the metaverse offer the potential to revolutionize business models and pivot careers. The only difference is that NFTs have already disrupted several industries, ranging from art and music to gaming and real estate, while the metaverse is yet to launch globally. However, the metaverse will redefine how we work, live, and socialize, and NFTs will power these new virtual economies.

With any technological revolution comes risk and reward, and factors such as misinformation, fraud, and hype can complicate matters. 

To avoid investing time and effort into the wrong application of new technologies, you need to adopt a digital disruption mindset – both at an individual and a business level.

Take the first step by upskilling in these disruptive technologies with our bespoke portfolio of online courses. The reward: You’ll be able to capitalize on NFTs now and prepare yourself for the impending virtual worlds of the metaverse.

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What are NFTs?

‘Fungible’ is a term used in economics to describe things that can be exchanged for other things of exactly the same kind with no change in value.³ Money, for example, is fungible: Five $1 bills is the equivalent of one $5 bill; one Bitcoin is equal to another Bitcoin. NFTs are the opposite: They can’t be replaced or exchanged as they are a special type of immutable crypto asset with unique properties.⁴ Non-fungible tokens (NFT) can’t be forged, altered, or divided. These unique properties allow an NFT to work like a certificate of authenticity, a digital ‘envelope’ that registers the image, video, or physical item by using a one-of-a-kind code to represent the item. This code is secured and stored on a public blockchain – shared, decentralized digital databases, the most common being Ethereum for NFTs.

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So, what’s the history between NFTs, blockchain technology, and cryptocurrencies? A few years ago, people realized that blockchains, which power cryptocurrencies, could be used to create unique, uncopyable digital files.⁵ This is because the files are entries on a transparent, public database or ledger, where anyone could verify who owned them or track them as they changed hands. This is the birthplace and habitat of NFTs, and thanks to the seamless authentication and transparency provided by the blockchain foundations, these tokens were first used to certify ownership of digital art.

In the beginning, NFTs could only be created with one cryptocurrency. Ethereum allows fungible tokens such as ETH, but it differs from Bitcoin in that it also enables NFTs, as it’s able to store additional information about the token using ‘smart contracts’. These are blockchain-based software routines that allow you to establish ownership by adding the registry information to the shared file. ⁶

Even if someone tries to make a copy of your digital artwork, they can’t alter the code that’s linked to the asset and which works as your digital deed of ownership.

Ethereum still forms the underlying NFT framework for many other cryptocurrencies, but there are a few newer competitors in the market now, such as Solana, Flow, and Tezos.⁷

The first purely digital NFT ever sold was Quantum by artist Kevin McCoy at a Sotheby’s auction for $1.47 million on June 10, 2021.⁸ McCoy and tech entrepreneur Anil Dash invented NFTs at a hackathon back in 2014,⁹ where McCoy created Quantum, and it was the first artwork ever ‘minted’. That’s the term used to describe digital data conversion into crypto collections or assets on the blockchain. When you mint a digital creation, you are publishing it on the blockchain and making it available for purchase.

The sale of Quantum is just one example of NFT growth: the market increased by an astounding 18,000 percent in the first half of 2021. The sales increased from $13.7 million to $2.5 billion.¹⁰ The value of Ethereum has skyrocketed by over 960 percent since the first NFTs were minted.¹¹

How are NFTs being used?

NFTs are still getting the most press through their use in the art world as high-end collectibles, but there’s no denying the rise in popularity across all markets. However, not all NFTs are created equal: The most expensive NFT ever sold is a digital artwork called The Merge by anonymous artist ‘Pak’. It sold for $91.8 million on December 6, 2021 on the decentralized marketplace Nifty Gateway.¹² While this sale is incredibly high, 50 percent of all recorded sales on OpenSea, one of the biggest NFT marketplaces, were under $200 in the last six months – and that’s before fees.¹³

The question is: How are NFTs valued? Like cryptocurrencies, the truth is there is no formula or economic foundation. The value of your NFT is based entirely on what someone else is willing to pay for it.

It comes down to demand and market opportunity: Do you want an NFT as an investment, a speculative asset, or something that will unlock value in your business?

There’s a wide gamut of commercial opportunities for NFTs, some outlined below, but the biggest is empowering the new economies of the metaverse. NFTs will allow you to own interoperable digital goods in a virtual world. It empowers your ‘crypto wallet’, which you use to carry cryptocurrencies and your metaverse-only digital goods, such as your avatars, avatar clothing, avatar animations, virtual decorations, and weapons. You won’t just own NFTs in the real world – you’ll own them in the virtual world too. ¹⁴

Progressive companies are already preparing for this: Nike bought the company RTFKT to help leverage the latest in-game engines, NFTs, blockchain authentication, and AR to create unique virtual products and experiences.¹⁵ One of these is CryptoKicks, which allows Nike to tokenize shoe ownership on Ethereum.¹⁶ In other words, when you buy a physical world item from Nike, you’ll also gain ownership of a linked NFT in the metaverse.¹⁷

There are other brand heavyweights following Nike’s example and investing deeply in these emerging technologies, emphasizing how the future will be coded with NFTs. Companies need hybrid strategies around physical and digital products, and NFTs are the key to unlocking value for both.

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Five real-world examples of NFT success

1. Creating unique music experiences: Kings of Leon and their NFT album
   The benefit: Offer exclusive added features to traditional concerts and album launches.
   With the release of their latest album, When You See Yourself, the musicians were among the first to also release a record as a collection of NFTs, generating over $2 million in sales. Each unique token contained exclusive artwork and limited-edition vinyl, along with the chance to earn ‘Golden Tickets’, which guarantee the owner four front-row seats to every Kings of Leon show in the future.¹⁸
2. Providing fraud-free digital provenance in wines: Yao Family Wines and NFT Collectibles¹⁹
   The benefit: Creates fuss-free, trusted authentication for high-end wines.
   Yao Family Wines of Napa, a high-end winery owned by former NBA player Yao Ming, recently auctioned an exclusive bottle of wine alongside a limited-edition NFT. This process provides both instant ownership rights along with a digital investment opportunity. For Yao Family Wines, it cuts down on the manual processes of defining ownership, and the risk of fraud reduces significantly. A wine’s provenance, transaction history, and current ownership are all fully traceable, rendering its value clear to those wanting to buy, sell, or invest.²⁰
3. Upgrading the selling and buying of real estate: The Property Markets Group
   The benefit: Reduce costs, labor, and red tape with NFTs.
   The current transfer of property ownership is highly labor-intensive and expensive, and it requires a significant amount of paperwork. By ‘tokenizing’ the property rights, it becomes much easier to trade and manage them.²¹ Property Markets Group has closed more real estate deals in cryptocurrency than any other developer globally and has more than $5 billion in real estate development planned for the next five years, emphasizing that this isn’t a passing fad.²²
4. Creating digital scarcity and establishing ownership in art: NFT artworks
   The benefit: Providing transparent possession rights for all artists and auction houses.
   NFTs solve the art world’s need for authentication in an increasingly digital marketplace, permanently linking a digital file to its creator.²³ The process is also democratic and decentralized: Anyone can mint an NFT artwork. Artists can set their own rates for their creations – and be in control of their secondary market – democratizing access to new markets for artists worldwide.²⁴
5. Adding financial incentives and market trading to gaming: GameFi
   The benefit: Players can earn money while having fun.
   GameFi (a fusion of the words ‘game’ and ‘finance’) refers to play-to-earn blockchain games that offer economic incentives to players. The ecosystem uses cryptocurrencies, NFTs, and blockchain technology to create a virtual gaming environment where players can earn in-game rewards by completing tasks, battling other players, and progressing through different game levels.²⁵ They can also transfer their assets outside of the game to trade on crypto exchanges and NFT marketplaces.

Still don’t understand? Here’s what you need to know

At the core, NFTs are about defining digital scarcity and value, and proving ownership. NFTs allow you to create and own anything from virtual real estate in games such as Decentraland to expensive gifs like the Nyan Cat. In today’s ever-increasing digital world, it’s incredibly difficult to authenticate or exercise ownership over things that anyone can simply screenshot, copy, or download.²⁶

NFTs offer a secure, decentralized, transparent record or ownership certificate that can’t be claimed by someone else as it lives on a digital public ledger thanks to blockchain technology. It ensures the goods in your digital wallet will be safe and can be used throughout the metaverse, no matter how big it becomes. However, the NFT market does have downfalls, such as a high carbon footprint and high trading risk, but the more you understand about the industry, the more you can lessen the impact of these factors.

NFTs are both a currency and catalyst of the future

You don’t need to be a digital artist or high-value collector to leverage the worth of NFTs – they have already disrupted several major industries and will power the underlying economies of the metaverse. Through tokenization, programmability, collaboration, royalties, and more direct connections between artists and collectors, NFTs may soon be a technology vital to everyday life. ²⁷

If they haven’t affected your industry or career yet, it’s just a matter of time. NFTs have hit the mainstream; ‘NFT’ was even chosen as the Collins Dictionary Word of the Year for 2021.²⁸ NFTs are not overhyped digital gimmicks; they are key to defining signature digital worth and ownership for any virtual asset.

A global survey by GetSmarter revealed that 59 percent of respondents are likely to change jobs within a year. Upskilling through our large portfolio of disruptive technologies and digital transformation courses can empower you with a competitive edge in any industry and career path. To unlock the value of NFTs and master the metaverse, you’ll need to be digitally fluent in these innovative technologies.

Future-proof your career for NFTs and the metaverse