So if you are bored with the Bored Ape Yacht Club and all these other digital art things you may be wondering what use are NFTs?
Can they be used for anything more than a status symbol sold at inflated prices? The quick answer is yet.
When digital artist Beeple sold an NFT of his work for $69 million USD, he quickly became one of the top three “most valuable living artists” in the world. The fact that he was given this title in lieu of selling a non-tangible image was the subject of confusion, surprise and abject scrutiny.
NFTs have since become the newest way for collectors to trade and claim ownership of unique digital assets. They’ve also simultaneously become a particularly despised advent by spectators and online users — particularly gamers, who have struggled to accept the technology. To be fair, their abjection towards NFTs and blockchain hasn’t come out of left field. Without understanding any greater context, the idea that cartoon apes could be selling for hundreds of thousands of dollars is, well… absurd.
Nevertheless, the idea that NFTs are just expensive cartoons is a myth — one that’s most likely been fuelled by the fact that blockchain technology hasn’t been widely utilised yet. The distinct construction of an NFT allows them to have several use cases outside of serving as collectable art.
In this article, we’ll review why anything — not just art — can be an NFT. We’ll also cover some use cases of the things that can — and likely will — more frequently come in the form of an NFT as we wade closer towards Web3.
The science behind NFTs
In summary, an NFT (non-fungible token) is a digital representation of an item — with authenticity, ownership and transaction records that are registered on a blockchain (specifically the Ethereum blockchain). Thanks to this technology, it’s virtually impossible for any NFT-based digital assets to be hacked or copied.
Since NFTs are non-fungible, there’s always only one of them per digital item. They’re equipped with powerful encryption, ensuring that they’re ultra-protected against any duplication and tampering. This makes them a particularly useful tool for industries where it can be difficult to establish ownership or determine authenticity. Users of NFTs get exclusive ownership rights, where it can be verified and where owners can store specific information inside of them.
Furthermore, much evidence suggests that NFTs are presenting a new way for brands or creators to manage the idea of revenue streams — allowing for industries to tokenise assets and wield greater control over their generated profits. For example, an artist can sell an item directly as an NFT as opposed to relying on an intermediary to help do it for them. This allows them to keep more of their profits, rather than letting a middleman take a cut.
Where will we see the formation of NFT marketplaces? Will we one day become acclimated to an equivalent of our current Web2 marketplace for goods and services?
What else can be an NFT?
As we’ve mentioned previously, the most popular NFTs right now include digital artwork and images sold through collectable markets, such as OpenSea. However, as just about anything can be an NFT, here are some of the other things you’re likely to see become tokenised in the not-so-distant future.
Since the internet’s earliest days, music technology has been tied to the sharing, purchasing and ownership of music. From the days of illegal P2P file sharing to today’s popular streaming services in Web2, artists have grappled to survive in an industry that will allow them to receive the lion’s share of their profits.
Enter music NFTs, which are unique certificates of ownership. Their ability to run securely on blockchain technology has given artists a new ability to remove intermediaries (such as Spotify or Apple Music) and assume full ownership of their work. By selling their music as NFTs, artists are also given the capability to pocket their full earnings, better track their revenue streams and directly interact with their fans. In this dynamic, the control is essentially granted to artists and their fans — not their record labels.
Popular artists such as Grimes, Deadmau5 and Kings of Leon have already reaped the benefits of selling their music as NFTs, generating millions of dollars in sales from single items alone. Blockchain-based music platforms (such as Audius) are also rising to the fore, with business models that will allow artists to cooperatively own part of the streaming platforms themselves.
Like the music industry, NFTs have also taken the fashion industry by storm — shifting the market in ways never before seen. The fashion industry has formed an especially unique relationship with NFTs, given that they’ve provided a way for brands to create new design and marketing strategies while also letting go of the idea of physicality in every blueprint.
Dolce and Gabbana recently made headlines by selling a digital Glass Suit, which sold for nearly $6 million USD (the most ever generated from a piece of NFT fashion). This was an important milestone for the fashion world, as it was the first time that a diverse set of assets was sold inside a singular package (in this case, it was a digital wearable, a physical item and a user experience all rolled into one).
While the bulk of us likely aren’t going to purchase our very own Glass Suit in the metaverse, we’ve now learned that NFTs aren’t just here to let wealthy fashion collectors acquire high-end items. Rather, the idea that underlying utilities can be attached to fashion NFTs is what will really change the fashion landscape. We are likely to see a future where physical items can be tokenised via NFTs — a system that will thereby allow users to redeem physical wearables at in-person stores through their Ethereum wallets. Users may also be able to digitally “try on” items in a metaverse space before purchasing.
Long-gone are the days where physical tickets are required to enter an important event, such as a concert, a theatre production or a sports game. Inventions such as QR codes have helped make tickets digitally unique, but they’ve also taken away their special keepsake utility. Digital tickets now get lost in the shuffle of emails or PDFs, rather than functioning as special memory tokens for those who want to keep something in honour of a special day.
Authenticity is also a common issue in the traditional ticketing system. Fraudulent tickets are common, sometimes forcing fans to pay additional fees or subjecting them to security risks and a lack of customer trust.
NFTs are steadily presenting a better alternative to ticketing, where event organisers can simply mint a required number of tickets on a chosen blockchain platform. The NFT tickets can be coded to set a sale price or run as an auction where attendees can bid. The tickets can then be securely kept in users’ Ethereum wallets, where they can be accessed via mobile devices.
NFTs can be used to represent ownership of physical assets, making them a particularly handy asset for the real estate industry.
In the case of fractional ownership, for example, homeowners might be able to sell parts of their property to a number of investors by issuing tokens on the blockchain. If investors hold these tokens, they could receive a rental income and even split profits on capital appreciation upon sale (or both).
Moreover, buyers may even be able to buy and sell fractional ownership in rental properties — even in liquid markets without an intermediary. This opens up a wealth of possibilities for investors, allowing better options to be created for those looking to unlock equity without having to move or borrow funds.
Borrowing may also even be affected by NFT technology. One day, it might be possible for people to take out a mortgage by issuing an NFT that’s backed by ownership of a property. Investors may one day meet the ability to purchase an NFT that represents any part of a debt, while holders might have the ability to receive repayments via blockchain technology, which would be relative to how much they lent out.
While the future of NFTs might seem uncertain, they’re likely to become more ubiquitous once they’re used for greater, more everyday purposes and once they acquire greater layers of utility.
As NFTs continue to create new forms of production and consumption, more industries are likely to invest in new business models that support new ways of ownership and monetisation. We look forward to documenting whatever comes next.