NFT's and Collectibles
NFTs and Collectibles are two very different things. It is imperative to distinguish Non-Fungible Tokens (NFTs) and Collectibles, in order to understand the scope of what is possible when NFTs become linked to Collectibles (tokenized collectibles). The latent capital sleeping within tokenized collectibles can be unlocked by processes, specific to Decentralized Finance (DeFi) such as Staking, Lending and Borrowing.
The specialized press is guilty of neglect, when it identifies non-fungible tokens and Collectibles, completely denying NFTs their own specificity. It is as if NFTs were only a new type of collectible, to be put alongside Trading Cards, Vintage Cars and Sports Memorabilia.
I am actually quite pleased to be given a platform in order to help disentangle those two objects. The urgent task before us is to define, once again, NFTs, and then do the same for Collectibles. A non-fungible token is such an unusual notion that it is essential to define it, over and over again, in order to continually bring its essence to the forefront of our mind. Defining those two concepts will naturally bring to light the very obvious differences between them.
What is a NFT?
A Non-fungible token is a token that is issued on a blockchain network, such as Tezos, Ethereum, Bitcoin (many others exist). What is important to understand when speaking about NFTs, is that their issuance implies specific standards. Standards are sets of rules that non-fungible tokens follow. There are many standards in use today. Examples of such standards include: Ethereum’s ERC721, which is the most widely used standard today, and ERC1155, a multi-token standard which is used to create NFTs and other types of tokens. Other blockchains, such as Tezos, have their own standards.
These tokens can be linked to digital or physical items. When a non-fungible token issued on the Ethereum blockchain, for example, is linked to Art, we have what we call: Crypto Art. When it is linked to Real Estate, we have what we call: tokenized Real Estate. These tokens can be linked to tickets, certifications (for authentication purposes), fashion items and many other physical or digital objects.
Let us keep this definition in mind as we move on to a succinct definition of collectibles.
What is a collectible?
A collectible is a physical or a digital item that is worth more than it was originally sold for because of its rarity and popularity. The actual price of a collectible or its Future Value usually depends on how many of the same items are available as well as its overall condition. Common categories of collectibles, as we can see below, include antiques, toys, coins, comic books, and stamps.
The difference between those two objects should be blindingly obvious. Furthermore, it is possible to link a non-fungible token to a collectible, such as a vintage car, stamps, or sports memorabilia – this would not be possible if NFTs and Collectibles were one and the same thing.
Linking NFTs and Collectibles can be a fantastic authentication mechanism, since blockchains can record transactions histories, ownership histories and guarantee the authenticity of items, completely stopping counterfeiters in their tracks.
Also, considering the fact that the vast majority of collectibles are idle and illiquid assets that do not generate any kind of revenue for their owners (and even worse, scores of collectibles depreciate at different rates), tying a non-fungible token to a collectible and inducing this tokenized collectible into the world of decentralized finance unlocks the latent capital sleeping within collectibles. The collectibles market is valued at 370 billion dollars. This valuation dwarfs the NFT market’s 1.5 billion valuation. The convergence of NFTs and collectibles could easily turn both sectors into a trillion dollar hybrid.