Non-Fungible Tokens (NFTs): Tokenization in Gaming, Sports, and Entertainment
In 2021, the concept of tokenization is becoming more popular than real-life currencies. Tokenization made possible by the cryptographic mechanisms of blockchain involves the generation of tokens that represent digital or real-world assets. It is essential to consider that almost anything can be tokenized: real estate, securities, commodities, sports teams, gaming or live entertainments.
Although security tokens (STOs) will account for the majority of this value but with the growing demand for unique, rare, and indivisible digital assets, NFTs will also play a crucial role. As collectibles, these tokens will achieve optimal utility in the gaming, sporting, and entertainment industries.
Before we enter into the topic, did you know what is NFTs? NFTs is namely non-fungible tokens. Fungibility is the ease at which an asset may be traded against another unit of the same asset. For example, Bitcoin is a fungible token where it is always equal to another single Bitcoin. However, not all assets are fungible. For example, artwork is a prime example of non-fungibility. What makes an artwork non-fungible is the characteristics of those paintings such as the artist, age of artwork, and subjective beauty of each fine art. If we were to take a piece of museum-grade fine art such as The Starry Night to trade with other paintings, it is almost impossible to meaningfully compare or trade with each other in real life. This is where non-fungible tokens enter into the equation.
Instead of tokens that hold or represent identical value, non-fungible tokens (NFT) represent an item with unique characteristics distinct from other assets. For example, if you own Bitcoin or Ether, you may not care which specific unit you have, as long as you have 1:1 equal units. However, Non-fungible tokens are unique so it does matter which one you have. This has powerful utility when it is programmed into a token as it allows items, such as in-game digital assets or collectibles, to be represented as an actual asset for the first time in gaming history.
Amid COVID-19 pandemic, video games are thriving. Due to lockdown and economic shutdown, almost all across the world have created opportunities for video game lovers. Normally, traditional video games offer players one-time purchases that remain locked in a virtual environment. These in-game assets purchased (such as special vehicles, characters, armor items, skins and more) benefit game developers, but offer limited utility to gamers.
Therefore, with the introduction of blockchain-powered gaming opens opportunities for players where they can freely exchange and earn real value without relying on any intermediaries. Through the use of blockchain-built NFTs, players can prove ownership, trade, and sell their items that they have earned in the virtual world. NFTs can be exchanged in secondary markets or held and transferred between gaming environments. Therefore, gamers can then exchange assets with each other or transfer them from game to game, placing a high value on the in-game properties. Moreover, game assets are also more secure given each generates a permanent blockchain record upon issuance.
CryptoKitties, the long-running collectible game built on the Ethereum blockchain, used NFTs to represent each cat with unique features, rarity and appearance. CryptoKitties is essentially like a digital version of Pokemon cards but it is digitalized on the blockchain network. Each cryptokitty is registered to a bitcoin-style database, and anyone can buy and sell their kittens via an online auction or even created by breeding them.
As we know, sports fans are notoriously passionate about the teams they support and there is a massive market for everything from tickets to limited editions merchandise, collectibles and content. As the world continues to move online, sports teams and organizations are beginning to embrace the use of cryptocurrencies and digital tokens to give fans access to exclusive content and items using this new technology.
Tokenization enables fans, sponsors, communities and other interested parties to participate in the growth, development, and value derived from professional sports franchises. As the tokenization process gains mainstream acceptance, and interests in professional sports franchises become increasingly tokenized, both access to these tokenized assets and the liquidity associated with them will create new economic opportunities, re-write valuation models, and activate an increase in global wealth creation and distribution for all participants.
The latest trending NBA Top Shot, a blockchain-based platform that allows fans to buy, sell and trade numbered versions of specific, officially-licensed video highlights. National Basketball Association, the NBA Players Association and Dapper Labs have come together to create NBA Top Shot, a “revolutionary new experience in which jaw-dropping plays and unforgettable highlights become collectibles that you can own forever,” per Dapper Labs Chief Executive Officer Roham Gharegozlou.
NBA cuts the highlights and then Dapper Labs decides how many of each highlight they are going to sell and number them. They place each highlight into digital packs, just like regular trading cards, and sell the packs on the official NBA Top Shot website for prices ranging from $9 to $230. The pack prices depend on the quality of highlight, the stardom level of the player and the exclusiveness of the card. Once a buyer purchases a pack, those highlights go into an encrypted, secure highlight wallet to be “showcased” or re-sold on the NBA Top Shot Marketplace.
One of the most difficult parts of success for music artists in this day and age is being paid when your song is played or streamed. Piracy, copyright infringement, and plagiarism are significant challenges affecting the media and entertainment industry’s growth. In the past few years, it has become easier than ever to illegally download or stream popular music, resulting in the entire music industry losing millions each year. Therefore, with the introduction of NFT can use blockchain technology to prevent such fraud, making replicating ideas, and artists releasing music on the blockchain will be paid per stream, through cryptographically-secure, immutable smart contracts.
The blockchain is a transparent ledger showing every transaction, movement, and stream of a song. On a public blockchain, both artists and fans can view where and when a song has been played. In September 2019, global music publishing company Warner Music invested in a blockchain-related project named FLOW that aimed at the entertainment industry. FLOW is designed as a platform for developers to create digital NFT merchandise, dApps, games, and tokenized digital assets that power them. The FLOW network is already being used by global brands such as NBA to create digital collectibles.
Warner Music is looking into how cryptocurrency could be used to let fans tip its favorite artist and tokenized limited edition digital memorabilia for some of their artists. Besides that, as NFT holds unique specific properties, it is suitable for the entertainment industry to use it for concert tickets. Fans can purchase digital concert tickets and easily transfer the ownership through selling online on the marketplace compared to traditional printing physical concert tickets.
Lately, American songwriter and record producer Post Malone has teamed up with Fyooz, the social money platform that issues NFTs in the name of music and sports celebrities. Post Malone is one of the most-streamed singers in the world and was the biggest winner of the 2020 Billboard Music Awards, taking home nine awards. His manager Dre London joined Fyooz as an advisor in November 2020. They are working hard to bring the entertainment business and the crypto community together at Fyooz. He further commented that the different types of entertainment, experiences and innovative NFTs that they are working on can help drive mass adoption and evolve the live entertainment business at the same time.
The first drop for Post Malone will be the Celebrity World Pong League NFT which brings recipients the chance to play Beer Pong against the rapper. The show is a Facebook Watch Series aired on Instagram, Messenger and Messenger Rooms. Post Malone going head-to-head against his fellow musicians and artists in a battle to be crowned the World Pong Champion. Those holding a sufficient quantity of FYZ NFTs will then enable them to enter the Celebrity World Pong League and play beer pong against Post Malone. This provides an opportunity for his fans to have direct personal interaction with him. Besides that, the NFTs can be a once-off or a multiple interactions, or indeed a ticket for ongoing events with the artists.
One of the main reasons tokenization has become drastically more popular in recent years is that it has the potential to increase the core value of the rights through increased utility and liquidity. Tokenized rights can be traded on the market with less friction, increasing the liquidity of the rights. Tokenized rights integrate across systems, allowing limitless integration, and increase the utility of the rights.
This allows for the formation of entirely new asset classes that were impractical or simply impossible to create prior to the advent of blockchain technology, potentially unlocking hidden troves of wealth stored in physical possessions; creating new investment models that can be accessed by anybody; and allowing brands to become far more decentralized entities.
The future of the tokenized asset industry is clear. Anybody or anything with significant potential to accrue value over a fixed period has the opportunity to be tokenized and sold over the internet. This could be anything, ranging from celebrities to online personalities, up-and-coming athletes, brands, companies, patents, and just about anything that has an attributed value.
This article is strictly for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Neither the company nor the author is responsible, directly or indirectly, for any loss or damage caused or alleged to be caused by, or in connection with, the use of or reliance on any content, goods, services or opinions mentioned in this article.
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