A Complete Guide to NFT Categories

What is NFT?

NFTs, or Non-Fungible Tokens, signify exclusive and unparalleled digital assets that establish ownership or verify the authenticity of specific items or virtual goods. In stark contrast to cryptocurrencies like Bitcoin or Ethereum, NFTs are distinguished by their inherent uniqueness, with each token embodying a truly one-of-a-kind nature.

These tokens are crafted through blockchain technology, predominantly leveraging the Ethereum platform, and are accessible for purchase, sale, or trade on various online marketplaces.

NFTs have surged in popularity across diverse sectors, offering creators and collectors a pioneering avenue for exchanging and owning exceptionally unique virtual content. They span a diverse array of categories, encompassing digital art, virtual real estate, in-game assets, and collectibles.

Common Classification Methods for NFT

Various criteria are applied to classify NFTs. Here are several common methods:

1. Application Area:

NFTs are often grouped based on their purpose, covering digital art, music, collectibles, games, and virtual real estate.

2. Token Standards:

NFTs can be classified based on the token standards they adhere to, such as ERC-721 or ERC-1155.

3. Platform or Blockchain:

NFTs vary depending on the blockchain networks they are built on or the marketplaces where they are created and traded.

4. Interactivity Level:

The degree of interactivity is also a crucial aspect, ranging from static images to dynamic and interactive digital collectibles.

Additionally, other classification criteria include rarity, compatibility, and the role of the creator's team. Let's delve into each of these aspects in more detail.

NFT categories based on use cases

1. Profile Pictures (PFP):

NFTs gained popularity as profile pictures with the launch of CryptoPunks by Larva Labs in 2017. The Bored Ape Yacht Club (BAYC) collection significantly contributed, expanding the application of NFTs to represent physical goods and club memberships.

2. Digital Art:

This category includes digital paintings, illustrations, animations, and other forms of digital art. Artists can tokenize their creations, establishing ownership rights and unlocking new earning opportunities through their creativity.

3. Music:

Musicians can tokenize their compositions, albums, and even exclusive content. NFTs enable them to direct their creations among fans, provide exclusive content, and earn royalties from secondary sales.

4. In-Game Items:

This category encompasses virtual assets in games, such as weapons, armor, and other items. An example is the Decentraland Wearables project, offering virtual clothing for in-game use.

5. Virtual Real Estate:

This includes virtual lands, objects, and spaces in metaverses. Users can buy, sell, and trade virtual real estate in the form of NFTs.

6. Tokenized Utilities:

NFTs can be attached to various services and goods, from physical items to special tools and online services. Creators have broad opportunities to customize these tokens according to their goals and creative vision.

7. Identification:

NFTs used for identification provide unique digital identifiers, ensuring verification without the involvement of centralized authorities. This enhances privacy levels and gives users control over their data.

There are also numerous other categories of NFTs, including video, cinema, domains, fashion, photography, literature, and sports. New use cases regularly emerge in this rapidly evolving space.

Categories of NFTs based on interactivity:

1. Static NFTs:

These digital assets, like CryptoPunks, have immutable characteristics and maintain their original appearance throughout their existence.

2. Dynamic NFTs:

Dynamic NFTs, such as VRF NFTs from Chainlink in the World of Ether project, possess variable properties that undergo transformation over time due to external factors or data. These assets incorporate procedural attributes and collectible features that depend on interactions with users.

3. Interactive NFTs:

Interactive NFTs, like the creatures in Axie Infinity or virtual lands in Decentraland, are designed for direct interaction with the assets or their properties within gaming ecosystems or virtual spaces. For example, Axie Infinity creatures can battle and reproduce, while owners of virtual lands can develop and customize them as they see fit.

Each of these categories provides a unique experience for NFT owners, ranging from static collectibles to dynamic and interactive virtual worlds.

Categories of NFTs based on token standards:

1. ERC-721:

ERC-721 is a widely used Ethereum token standard specifically designed for NFTs. This standard enables unique digital assets with scarcity, providing a secure means to manage, transfer, and own various digital and real-world items on the Ethereum blockchain. An example of an NFT created under ERC-721 is Cryptokitties, where users can breed unique virtual cats.

2. ERC-1155:

ERC-1155 is an Ethereum token standard that supports both NFTs and fungible tokens. It facilitates efficient management of diverse digital assets by allowing multiple types of tokens within a single smart contract. Tokens like The Sandbox (SAND), following the ERC-1155 standard, are used in a virtual world for creating, owning, and monetizing digital assets and gaming experiences.

3. Other Blockchains:

Beyond Ethereum, numerous blockchains have their own NFT standards, offering alternatives and solutions for scalability and cost issues. Blockchains such as Flow, Binance Smart Chain, and Polkadot provide diverse applications and standards for creating NFTs.

These token standards form the foundation for a variety of NFTs, unlocking possibilities for unique digital assets across different blockchains.

Categories of NFTs based on rights and licensing:

1. Open License:

NFTs with an open license provide owners with extensive rights, including display, copying, modification, and redistribution of assets. They enable the creation of derivative works, exchange among users, and reuse of content without significant restrictions. Examples include CryptoPunks and Bored Ape Yacht Club, where an open license fosters collaboration and creativity within the NFT ecosystem.

2. Closed License:

NFTs with a closed license impose strict restrictions on usage, distribution, and modification. These licenses protect intellectual property and grant complete control to the rights holder. NBA Top Shot from Dapper Labs is an example where owners can trade the collection only within the platform, with no ability to use tokens for commercial purposes.

3. Partial License:

Partial licenses for NFTs offer a balanced approach by providing specific rights to owners while preserving exclusive rights for the creator or rights holder. They may include limited usage, permission for distribution, and selective authorization for commercial use and modifications. This category of licenses caters to the needs and desires of creators and collectors, promoting collaboration without infringing on original rights.

Conclusion

Currently, NFTs are actively permeating various industries, reshaping the concepts of digital ownership and value in the era of digital technologies. The classification of NFTs based on different parameters, such as application areas, interactivity, token standards, and licensing types, reflects the diversity of their possibilities.

Various types of NFTs open up innovative ways of owning creativity and redefine the notion of possessing digital technologies. Their dynamic nature highlights the potential for transformations and changes in the digital world.

However, it is essential to remember the potential risks, considering that this technology is still in its early stages of development. While exploring the realm of NFTs and the potential of non-fungible tokens, it's crucial to maintain vigilance and minimize the risks of losses or harm. Staying informed and cautious is always the best approach in this dynamic digital landscape.