What are NFTs? Non-Fungible Tokens Explained (UPDATED for 2022)
Last year, we “bravely” tackled the subject of NFTs in gambling. Ever since then, a lot has been going on in the world of NFTs and thus, we feel our old blogpost deserves an update. Anyway, NFTs are still a hot topic, even in the online gambling industry, and people still want them. However, more and more people (including ourselves) are finally starting to see what NFTs really are and their actual worth.
Stick around to learn more about what NFTs are in general and, more importantly, how they might affect the online gambling industry.
What are NFTs?
How would you like to pay thousands and thousands of dollars for, absolutely, nothing?
Let me try that again: How would you like to spend thousands of dollars for nothing but a certain kind of nothing that will have your “name” written on it?
You drive a hard bargain, bro, but let us try and sweeten the deal even more.
How about this: “How would you like to buy something that will have your “name” on it, and be associated with a picture. You won’t own the picture and it’s still absolutely nothing, but, and hear us out here, you will get to flip it for a profit later (hopefully?).
That’s what NFTs are all about.
NFT stands for Non-Fungible Token. Non-fungible means that it’s unique. What makes it unique is that it’s marked on the blockchain network. This means that when you buy nothing it will be written on the blockchain, which will be available for everyone to see, that you have bought nothing.
It doesn’t end there because the blockchain will also list everyone else who has bought that same nothing in the past. When you, eventually, decide to sell this nothing, the new buyer will also be listed.
In a nutshell, an NFT is a digital signature. You pay thousands and thousands of dollars to buy a signature that claims you own something… which, in this case, is nothing.
This Non-fungible token is, quite literally, nothing.
But I thought NFTs are supposed to be stickers of monkeys and gifs of cats?
If you thought this, we’re sorry to say that you are wrong, however, don’t worry. Almost everyone (including us) got it wrong the first time, hence this update.
Let’s clear the air about NFTs once and for all.
When you buy an NFT, you don’t buy the sticker, nor the gif, nor the audio, nor whatever comes associated with the NFT.
Again, you are buying nothing, remember.
In the beginning we tried to “win you over” by saying how you can buy nothing but have it written that you are the owner of this particular nothing?
Well, people who are in charge of NFTs figured that it wasn’t enough so they, cleverly, attached pictures next to all the nothings they are selling. After all, it’s better to say that your nothing is associated with a picture of an ugly monkey than a string of random letters and numbers.
These pictures and gifs are there just so they can associate your nothing with a spot on the blockchain that you currently own. Kind of like a queue that stands still in an art gallery.
But if they are, essentially, nothing, why are so many people buying them?
You’ve probably heard that old saying where someone is such a good salesman that they can “sell Ice to an eskimo”. We imagine that someone like this may have been able to jump-start this trend because of how “valuable” NFTs are.
One reason people are buying NFTs is because of the hype. Most people assume that buying NFTs is like buying an expensive piece of art.
On the other hand, people who know what NFTs are are simply flipping them for a profit. Even if they are nothing, they still have a value that’s growing (as of writing this, at least).
One thing is clear, back when they first came to be, someone had to really convince someone else to pay a lot of money for nothing.
So, how are NFTs made?
Allow us to explain: let’s say someone wants to create NFTs. This is called “minting”. They will buy a bunch of empty spots on the blockchain network (usually 100-1,000 spots). All these spots will be the same, will be worth nothing but will be completely unique, at least according to the blockchain.
The person who just created those NFTs now has 1,000 empty spots, but now he/she needs people to buy them. They can make these spots more attractive by making 1,000 unique pictures.
Unfortunately, making 1,000 unique pictures is hard work, heck, even making 1,000 bad unique pictures is pretty time consuming. Instead, they will simply use a “character creator” of sorts, to create 1,000 copies of the same character but each one will have unique features. But this doesn’t even mean that they will all have something unique, no that’s still too much work.
Instead, they will simply have hats, jewelry, different eye shapes and colors, and each picture will have a unique combination of these features. That’s why NFTs look so much alike, bro.
So, I don’t actually own the picture or gif when I buy an NFT?
Exactly. When you buy an NFT, you don’t own the picture. You own nothing (remember)? All you’ll get is your “name” written on the blockchain saying that you are the current owner of nothing.
Now, if you actually did own a digital picture, that would simply be buying digital assets online, and we don’t want that, do we? No, we just want a picture associated with your spot on the blockchain. And not just a unique, good look picture, any old, crappy-looking picture will do, even if it doesn’t belong to the creator of the NFT…
Stolen artwork? You betcha!
Fortunately, these aren’t present when it comes to online gambling but, it’s true. People in charge of minting NFTs don’t care much about where the pictures associated with them came from. By the time the NFTs are minted, the original creators can’t do much about it. In essence, when someone buys such NFTs, they are, technically, supporting art-theft.
How do NFTs work?
While NFTs are based on blockchain technology, they differ from cryptocurrencies. For example, Bitcoins are fungible because you can trade one of your coins for another and neither of them will be any more or less unique. An NFT is, as we’ve already explained, is a digital signature(nothing) associated with a type of media.
In theory, any piece of digital asset can become an NFT. Things like digital art, a video game item, a video clip, sound clip (such as a song) are all fair game for becoming NFTs. This also leads to a lot of confusion about how valuable NFTs actually are but we’ll get to that later.
The NFT Market
As already mentioned, the NFT Marketplace is mostly based on the Ethereum Blockchain network. Artists can sell digital artwork as NFTs to the blockchain and get a commission when someone buys or trades their NFTs. In order to buy an NFT, a person needs to have a wallet that supports NFTs and some Ethereum. Using Ethereum, people can buy NFTs and transfer them to their wallets. Afterward, the value of NFTs can increase and decrease so NFT owners can put their tokens back on the market, and potentially make an even bigger profit.
NFT Ownership Explained
Explaining NFT ownership isn’t as straightforward as you might think. If you own a bunch of cryptocurrencies, they will be associated with your crypto wallet. As long as you keep your wallet safe, they will belong to you. Now, with NFTs, things get a bit complicated. For example: if you buy a digital file, you aren’t really preventing other people from downloading it. You are simply making an agreement with the blockchain that you are the owner of that particular art. It’s almost like buying a public park bench. You may own it, but anyone can sit on it.
This is one of the main reasons why lots of people question the value of NFTs. Of course, with Blockchain games, things aren’t as chaotic. A person can, for example, own an in-game costume that’s truly unique and trade it around with other players. Owning an NFT is more of an agreement than an actual acquisition.
The Many Forms of NFTs in the Digital World
While it started out as an idea to help digital artists protect their work, the idea has gone a bit off-rails recently. Because of its digital nature, it’s possible for anyone to turn anything into an NFT as long as it’s digital. People have literally turned tweets into NFTs and sold them for thousands of dollars. While we aren’t going to talk about the morality of selling tweets, we are going to cover how some popular NFTs work.
NFT Digital Art
It used to be that, when an artist draws a picture and posts it online, it no longer belongs to them. Literally, nothing is stopping anyone from right-clicking on that piece of art (pictures, portraits, trading cards, etc.) and downloading it. Heck, once downloaded, nothing is stopping people from printing it, framing it, and putting them up on their walls. So, how do NFT sales help?
Nowadays, when an artist creates a digital picture, they can turn it into one or more NFTs. Normally, only a handful of NFTs are created per digital art piece. Once all the NFTs have been sold, the Artist will receive a commission on each one sold and maybe even a small commission when those NFTs get traded amongst users.
The question here is: What is stopping people from downloading a picture that’s someone’s NFT? The answer is simple: Absolutely nothing. You don’t have to own an NFT picture in order to download it and given how much some of them cost, it seems absurd. NFT owners can “legally” use their NFTs as profile pictures and trade them for a profit with other users.
In the end, owning an NFT picture is all about being able to say that you LITERALLY own nothing that is associated with a picture and having proof that your ownership is recorded on the blockchain. Not to mention, buying NFTs is also a great way to support the original artist.
NFT Gaming has given rise to a new form of trend in the game industry. While video games normally follow the Buy-to-play and Free-to-play model, NFT technology has given rise to the Play-to-earn model. Just like the name suggests, players are able to play games and earn real money from them. Now before you get too excited about making money by just playing games, please note that, just like always, there is a catch… or six.
On paper, Blockchain gaming makes sense: you play a game and you collect or buy an item( with real money) and that in-game item is an NFT. As the owner of the NFT, you get to keep it, trade it or even sell it for a profit. Since NFT items are limited it created a scarcity of that particular in-game item which in turn increases its value. Sounds great right? Play a game for a good while, get a rare item and sell it for a profit, right? Sure, but as we said, there are catches.
For one thing, these particular NFTs are only valuable in the game they came from. Outside the game an item is worthless. Secondly, while most NFTs are sold for Ethereum, NFT gaming items almost always have their own unique tokens which game developers control directly. So, before you even start playing play-to-earn games, you need to buy some of their own currency and don’t forget about all the gas fees that come with conversions too.
Finally, even though we live in an age of realistic graphics, NFT games tend to look pretty outdated and usually aren’t very fun to play. Because of all these roadblocks, many people are calling NFT games a scam.
NFTs in Casino Games
This brings us to NFTs in Casino Games. While the idea of including NFTs in casino games is still relatively new, a few names in the online casino industry have started to experiment with the idea. Just like with cryptocurrencies, online casinos are definitely “on board” with the idea, but development is still in its very early stages. Unlike cryptocurrencies like Bitcoin, Ethereum, Litecoin and others, NFTs are unique so determining their value and wagering them isn’t as easy as it sounds. Fortunately, many game developers have done their homework on NFT projects and have come up with a few ideas to incorporate into online casino games.
How Do NFTs Work With Online Casinos?
Firstly, some casinos will have their entire site based on blockchain technology where players can earn casino-specific NFTs by just playing games at the casino. This is more along the lines of crypto mining than earning/buying NFTs. The currency/NFT will usually be of little value and will (probably) only be useful within the online casino.
Another way online casinos have been experimenting with NFTs is by buying entire NFT collections and offering them to players as prizes. Evolution gaming recently spent a good amount of money to acquire CryptoPunks NFT digital assets and offered them as prizes on their games (instead of money). The prices for these digital files went in the tens of thousands.
Finally, as of writing this, a brand new NFT collection is in development. Sloties are NFTs made specifically for online casinos. Users can own one of 10,000 unique sloties and earn a passive income from casinos that incorporate them. This new take on slot games will have users gamble their NFTs rather than fiat currency. Slotie game developer is also working on a way for users to “breed” their Sloties and create junior sloties, similar to how Axie Infinity works. Naturally, Sloties will use their own digital currencies and will probably require a unique digital wallet as well.
Are NFTs a Scam?
If any of this sounds fishy to you, that’s because it is. While there’s no denying that NFTs are currently valuable and highly sought, the reality of the situation is that it all seems like some kind of a big scam. On the other hand, there are clear transaction histories (available to everyone) on the blockchain which states that NFTs have been sold and traded for thousands of dollars. For these reasons, we have compiled a list of advantages and disadvantages of NFTs.
- They are valuable. There’s no denying that NFTs are valuable. As of writing this, everyone and their mother wants to get in on NFTs to either keep them or flip them for a profit. I think it’s safe to say that nobody can truly determine whether NFTs will be profitable in the future so right now might be the only opportunity to make a profit on them.
- Bragging rights. Even though most NFTs are, technically, available to everyone to use, there is a special kind of feeling knowing that you are the actual owner of one. Just like owning a vintage car locked up in your garage for nobody to see, there’s a special happy place for proud owners of a non-fungible token.
- Passive income. Some NFTs, such as in-game items can earn their owners a passive income similar to interests. Crypto Enthusiasts and NFT holders can potentially acquire lots of NFTs and simply sit on them while they rake in a profit each month.
- Questionable real-world value. People have almost gotten used to the idea that cryptocurrencies will always have some form of value, however, it’s extremely difficult to justify the value of a good tweet or a lousy picture that just happens to be an NFT. When all is said and done, people are buying downloadable pictures that only have their digital signature. We wouldn’t be surprised if one day everyone suddenly snapped and realized that they have been spending their money on something that’s worthless. At the same time, we might be completely wrong.
- NFTs can be centralized. This is especially true with pay-to-earn games where NFTs are only worth something to the people who are playing the game. While you can buy lots and lots of things by using cryptocurrency, NFTs are really limited in their use. Once a game stops being relevant, the NFT will become practically worthless.
- Some NFTs look like crap. While there’s nothing wrong with making a brilliant piece of digital art and selling it to people as an NFT, some people are taking things to a whole new level. Some of the most valuable NFTs out there look like amateurish drawings and that’s a generous overstatement. It seems that the only reason why anyone is talking about some of these works is because of their digital format. People are literally able to take screenshots, slap an NFT label on them, and sell them for a profit. It’s things like these that make us question how smart it is to own NFTs.
Are NFTs the Future of Online Gambling?
In short: it’s way too early to say. Even though we’ve seen a slew of crypto casinos it’s too early to say that Bitcoin and Ethereum casinos are here to say. With NFTs, we are even less sure.
Right now, it’s pretty clear that there is some value to be found in NFTs (no matter what they are) but only time will tell if NFTs will be growing in price and popularity, or will they fade into obscurity.
If you are interested in getting in on the action, our advice is to do it now. NFTs have never been more relevant than they are now and that may not be the case in the near future. So, if you are planning to buy NFTs, don’t forget to sell NFTs as well so you don’t end up with a bunch of worthless digital signatures. Only time will tell how much the gambling industry will benefit from incorporating NFTs and, more importantly, if they will want to keep investing in NFTs for future online casino games.
Depending on how you look at things, the popularity of NFTs can be viewed as a golden opportunity to make a profit or it will become a “this one time, when we were drunk” story. If you think you can make a profit by buying and selling these digital pieces of art, don’t let us stop you. If you’d like to take a wait-and-see approach, we can’t say we blame you either. Whatever you may decide, remember to play responsibly.