In a lot of regular games you can buy items for you to use in your game. But if that item was an NFT you could recoup your money by selling it on when you're done with the game. You might even make a profit if that item becomes more desirable. For game developers — as issuers of the NFT — they could earn a royalty every time an item is re-sold in the open marketplace.
This creates a more mutually-beneficial business model where both players and developers earn from the secondary NFT market. This also means that if a game is no longer maintained by the developers, the items you've collected remain yours. Ultimately the items you grind for in-game can outlive the games themselves. Even if a game is no longer maintained, your items will always be under your control.
This means in-game items become digital memorabilia and have a value outside of the game. Decentraland, a virtual reality game, even lets you buy NFTs representing virtual parcels of land that you can use as you see fit. This means you could ask someone to send you ETH via mywallet. This works in a similar way to a website domain name which makes an IP address more memorable. And like domains, ENS names have value, usually based on length and relevance. With ENS you don't need a domain registry to facilitate the transfer of ownership.
The tokenisation of physical items isn't yet as developed as their digital counterparts. But there are plenty of projects exploring the tokenisation of real estate, one-of-a-kind fashion items, and more.
As things become increasingly high-tech, it's not hard to imagine a world where your Ethereum wallet becomes the key to your car or home — your door being unlocked by the cryptographic proof of ownership. With valuable assets like cars and property representable on Ethereum, you can use NFTs as collateral in decentralized loans. This is particularly helpful if you're not cash or crypto-rich but own physical items of value. More on DeFi. The NFT world and the decentralized finance DeFi world are starting to work together in a number of interesting ways.
There are DeFi applications that let you borrow money by using collateral. This guarantees that the lender gets paid back — if the borrower doesn't pay back the DAI, the collateral is sent to the lender. However not everyone has enough crypto to use as collateral. Projects are beginning to explore using NFTs as collateral instead.
By putting this up as collateral, you can access a loan with the same rule set. This could eventually work with anything you tokenise as an NFT. This gives investors and fans the opportunity to own a part of an NFT without having to buy the whole thing.
This adds even more opportunities for NFT minters and collectors alike. This is still experimental but you can learn more about fractional NFT ownership at the following exchanges:. In theory, this would unlock the possibility to do things like own a piece of a Picasso.
You would become a shareholder in a Picasso NFT, meaning you would have a say in things like revenue sharing. It's very likely that one day soon owning a fraction of an NFT will enter you into a decentralised autonomous organisation DAO for managing that asset. These are Ethereum-powered organisations that allow strangers, like global shareholders of an asset, to coordinate securely without necessarily having to trust the other people. That's because not a single penny can be spent without group approval.
As we mentioned, this is an emerging space. But all their infrastructure exists and can work together easily because they all speak the same language: Ethereum.
So watch this space. More on DAOs. Ethereum makes it possible for NFTs to work for a number of reasons:. NFTs are growing in popularity which means they're also coming under increased scrutiny — especially over their carbon footprint.
To explain further we're going to have to get a little more technical so bear with us The whole NFT ecosystem works because Ethereum is decentralized and secure.
Decentralized meaning you and everyone else can verify you own something. All without trusting or granting custody to a third party who can impose their own rules at will.
It also means your NFT is portable across many different products and markets. These qualities of Ethereum makes digitally owning unique items and getting a fair price for your content possible.
But it comes at a cost. Blockchains like Bitcoin and Ethereum are energy intensive right now because it takes a lot of energy to preserve these qualities. If it was easy to rewrite Ethereum's history to steal NFTs or cryptocurrency, the system collapses. When you mint an NFT, a few things have to happen:. All these tasks are done by miners. And they let the rest of the network know about your NFT and who owns it.
This means mining needs to be sufficiently difficult, otherwise anyone could just claim that they own the NFT you just minted and fraudulently transfer ownership. There are lots of incentives in place to make sure miners are acting honestly.
More on mining. Mining difficulty comes from the fact that it takes a lot of computing power to create new blocks in the chain. Importantly, blocks are created consistently, not just when they're needed. They're created every 12 seconds or so. This is important for making Ethereum tamper-proof, one of the qualities that makes NFTs possible. The more blocks the more secure the chain. If your NFT was created in block and a hacker were to try and steal your NFT by modifying its data, the digital fingerprint of all subsequent blocks would change.
That means anyone running Ethereum software would immediately be able to detect and prevent it from happening. However this means that computing power needs to be used constantly. It also means that a block that contains 0 NFT transactions will still have roughly the same carbon footprint, because computing power will still be consumed to create it. Other non-NFT transactions will fill the blocks.
So yes, there is a carbon footprint associated with creating blocks by mining — and this is a problem for chains like Bitcoin too — but it's not directly the fault of NFTs. A lot of mining uses renewable energy sources or untapped energy in remote locations. And there is the argument that the industries that NFTs and cryptocurrencies are disrupting have huge carbon footprints too.
But just because existing industries are bad, doesn't mean we shouldn't strive to be better. And we are. Ethereum is evolving to make using Ethereum and by virtue, NFTs more energy efficient.
And that's always been the plan. We're not here to defend the environmental footprint of mining, instead we want to explain how things are changing for the better.
For as long as Ethereum has been around, the energy-consumption of mining has been a huge focus area for developers and researchers. And the vision has always been to replace it as soon as possible. More on Ethereum's vision. This vision is being delivered right now. Ethereum is currently going through a series of upgrades, known as Eth2, that will replace mining with staking. In this world, stakers commit funds instead of computing power to secure the network. The energy-cost of Ethereum will become the cost of running a home computer multiplied by the number of nodes in the network.
If there are 10, nodes in the network and the cost of running a home computer is roughly kWh per year. That's 5,,kWh 1 per year for the entire network.
We can use this to compare Eth2 to a global service like Visa. In Eth2, that same number of transactions would cost That's without considering the many optimisations being worked on in parallel to Eth2, like rollups.
It could be as little as 0. Importantly this improves the energy efficiency while preserving Ethereum's decentralization and security. Many other blockchains out there might already use some form of staking, but they're secured by a select few stakers, not the thousands that Ethereum will have. The more decentralization, the more secure the system.
More on energy estimates. If Ethereum did more or less transactions from one minute to the next, the energy output would stay the same. The process has already started. The Beacon Chain , the first upgrade, shipped in December This provides the foundation for staking by allowing stakers to join the system. The next step relevant to energy efficiency is to merge the current chain, the one secured by miners, into the Beacon Chain where mining isn't needed.
Timelines can't be exact at this stage, but it's estimated that this will happen sometime in This process is known as the merge formerly referred to as the docking. More on the merge. However there are other standards that you might want to look into. The ERC standard allows for semi-fungible tokens which is particularly useful in the realm of gaming. This standard lets you mint as many as you like in one transaction!
This explains how we arrived at our energy estimates above. These estimates apply to the network as a whole and are not just reserved for the process of creating, buying, or selling NFTs. The The average desktop computer, all that's needed to run proof-of-stake, uses 0. At the time of writing, there are validators from 16 unique addresses. Of those, 87 validators are assumed to be staking from home. It is assumed the average person staking from home uses a watt desktop personal computer setup to run an average of 5.
The rest of the validators are run by custodial stakers such as exchanges and staking services. It can be assumed that they use w per 5. This is a gross overestimation to be on the safe side. In total, Ethereum on proof-of-stake therefore consumes something on the order of 2. This is a reduction of at least The cost of , Visa transactions is kwH - Bitcoin network average energy consumption per transaction compared to VISA network as of , Statista. Year-ending September they processed ,,, transactions — Visa financials report Q4 It's estimated that Eth2 will allow the network to process between 25, and , transactions per second, with , as the theoretical maximum right now.
Vitalik Buterin on transactions per second potential on Eth2. At the bare minimum, Eth2 will allow 64 times the amount of transactions as today which sits at around 15 transactions. Show related SlideShares at end. WordPress Shortcode. Share Email. Top clipped slide. Download Now Download Download to read offline. Huytraining Follow. Giao Trinh Mapinfo. Related Books Free with a 30 day trial from Scribd.
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