From CryptoKitties to Tokenized Assets
The Evolution of Digital Ownership
You’ve probably heard about tokenized assets when they were trending around 2021 and 2022. Headlines buzzed with stories of digital art selling for millions of dollars, like Beeple’s Everydays: The First 5000 Days, which sold for $69 million.
CryptoKitties, CryptoPunks, and even virtual real estate in the Metaverse captured the public’s imagination. People invested fortunes, sometimes losing significant sums, in the NFT frenzy. In the Metaverse, you could even become a landlord by buying digital land in platforms like Decentraland and Sandbox.
Tokenized assets, known as NFTs, have faced skepticism due to the hype around inflated valuations for digital art and collectibles, but dismissing them as a phenomenon rather then a promising innovation really overlooks their potential. The first known tokenized asset was called “Quantum” and consisted of a videoclip of the creators wife. It was sold on Namecoin for $4, as the term “monetized graphics”.
Whether tied to art, gaming, real estate, or even physical goods, NFTs represent a versatile, evolving technology with applications far beyond the speculative frenzy that initially captured public attention. The key may lie in shifting focus away from the term itself and instead leveraging the technology to create tokenized assets — from real estate and digital art to gaming and phygital products — seamlessly in the background.
What are Tokenized Assets?
At the core, NFTs — now more commonly referred to as tokenized assets — are a way of storing and moving value, similar to traditional assets but with very unique capabilities.
The strengths:
- Ability to authenticate ownership
- Providing royalties for creators
- Operate across different platforms
NFT stands for Non-Fungible Tokens — unique digital assets stored on a blockchain. Raw materials are fungible as gold is fungible, 1 gram of gold is worth another piece of 1 gram of gold from another place. Fiat is fungible, 100 dollars is worth ten 10 dollar bills. Unlike raw materials and fiat and cryptocurrencies such as Bitcoin or Ethereum, where one token is interchangeable with another, tokenized assets are unique. They represent ownership of a specific item, such as artwork, collectibles, or even virtual real estate.
NFTs are primarily built on the Ethereum blockchain but have since expanded to other protocols, such as:
• Polygon (Matic): A layer-2 scaling solution for Ethereum with lower transaction costs.
• Cardano: An eco-friendly blockchain exploring NFT applications .
• Solana: Known for low fees and high transaction speeds .
Tokenized assets solve the problem of digital ownership. For example, sending an MP3 file traditionally means sending a copy of the file, not the original. NFTs assign a unique ID to the file, ensuring both its authenticity and ownership. When you transfer a tokenized asset, you transfer the ownership itself.
What makes Tokenized assets unique?
Unlike crypto or tradition money (fiat), each tokenized asset is unique, and cannot be exchange one-to-one with another. Because, the uniqueness is tied to these characteristics:
1. Metadata: Information that describes the tokenized asset, such as its title, creator, and attributes.
2. Smart Contracts: Rules embedded in the asset, enabling functionalities like royalties for artists or proof of ownership.
An artist can create a tokenized asset from artwork and embed a smart contract that makes the artist receive 10% royalties each time the tokenized artwork is sold on the market, this can be built into the system without having a broker or a middle-man. The same applies to real estate.
Tokenized assets have opened new possibilities, such as proving ownership of digital or physical assets, earning royalties on secondary sales, and enabling interoperable assets across platforms.
Common use cases
Digital art and collectibles
Tokenized assets are revolutionizing how artists monetize their work. Platforms like OpenSea and Rarible allow creators to sell digital art with built-in royalties, ensuring they earn a percentage every time the piece is resold. This combats the historical challenge of piracy and unauthorized duplication .
In 2021, Pak’s “Merge” was sold for 91,8 miljoner dollar, where the artist used many tokenized assets to create a dynamic artwork with multiple buyers (28,000 collectors).
Gaming assets
In gaming, tokenized assets enable players to truly own skins, weapons, or even virtual land. Unlike traditional in-game purchases locked to a single platform (e.g., Fortnite), Those assets are transferable and can be sold to other players. Some gaming ecosystems, like Sandbox, have integrated assets extensively.
Axie Infinity made it possible for gamers to earn money by selling tokenized characters and in-game objects. One Axie-character was sold for 300ETH, about 1,2 million dollars at today’s valuation.
Virtual real estate
Platforms like Decentraland and Sandbox allow users to buy and own land as tokenized assets. These digital plots are mapped with specific coordinates, much like Google Maps, enabling owners to build, trade, or display other tokenized assets on their property .
Phygital products
“Phygital” products combine physical with tokenized assets to ensure authenticity. Luxury brands use this technology for watches, sneakers, and more. For instance, artist Damien Hirst created 10,000 paintings tied to tokenized assets. Buyers had to choose between keeping the physical artwork or the tokenized asset, with the other version being destroyed. Hirst embedded links to NFTs in the physical artwork itself, ensuring that either the digital or physical version would be burned, making each tokenized item entirely unique.
Example: Nike launched CryptoKicks, the first native Web3 sneaker. This is a sneaker that includes a tokenized proof of authenticity, and to make it possible to trade it in both digital and physical worlds.
Why do Tokenized assets matter?
Tokenized assets redefine ownership and monetization in the digital age:
• Direct income for creators: Artists and creators can earn royalties on every resale, creating long-term revenue streams.
• Interoperability: Tokenized assets can function across platforms. For example, an item bought in one game might be usable in another, creating a seamless experience.
• Physical-digital linkage: Tokenized assets can act as digital contracts, streamlining real-world processes like property sales or inventory management.
Challenges and criticisms
Loss of trust
After the NFT market peaked on April 28, 2022, at $372 billion, it fell to around $36 billion by the end of 2024. The rapid decline has led to skepticism. The decline was caused by a combination of a saturated market of speculative projects, media hype+the concept of the metaverse, and scams that made both buyers and creators move away from the scene. As highlighted in “NFTs: The Good, the Bad, and the Ugly,” scams and bubbles took away all trust, showing the need for tokenized assets to focus on real-world utility to be credible again.
Environmental issues
Certain blockchains, like Ethereum (before its move to Ethereum 2.0), had high energy consumption early on (also noted in NFTs: The Good, the Bad, and the Ugly), and concerns about NFTs environmental impact. This reputation is still alive among the public- Even if Layer-2 solutions like Polygon and eco-friendly blockchains like Solana are addressing this issue more than ever.
Accessibility
The steep learning curve for setting up a digital wallet, buying cryptocurrency, and navigating tokenized asset marketplaces has made tokenized asset less accessible to the average person.
Conclusion
While NFTs may no longer dominate headlines, their evolutioncontinues. From simplifying real estate transactions to preserving environmental assets, and supply chain transparency, tokenized assets are unlocking the bridge between the physical and digital world.
While the term “NFT” may have faded, the technology remains transformative. By focusing on tokenized assets, we can unlock innovations across art, real estate, gaming, and supply chains — seamlessly blending the physical and digital worlds.
Sources
1. Polygon: Ethereum’s Layer 2 Scaling Solution
2. Use Google Chrome and get a wallet at MetaMask and buy POL (Polygon coins)
3. Find NFTs to buy or sell one yourself at OpenSea use POL to buy and sell.
4. Build your own NFTs at OpenSea (gas fee appr. )
4. Most expensive NFT: Beeple’s $69 Million NFT Sale
5. Metaverse: The Sandbox
6. Metaverse: Decentraland
