The explosion in interest in non-fungible tokens has sparked a boom in crypto-collectibles and NFT art. These are just two of many uses for DeFi tokens, but there are many more. Non-fungible tokens are a great match for real-world assets and logistics. We can expect more NFTs to be adopted as they mature.
It was extremely difficult to create digital scarcity for assets before the advent of non-fungible tokens. Although copyright protections are in place, consumers can copy and pirate digital artwork.
NFTs have made crypto art and digital collectibles possible, but the development doesn’t end there. You can use NFTs for everything from logistics to real estate, to verify the authenticity of unique and collectible goods.
Although the NFT ecosystem may still be young, there are many exciting projects that can be explored. Some are already creating great value for consumers and creators.
Digital art has long suffered from scarcity. Non-fungible tokens can help solve this problem. Digitally cloning virtual artwork is a great way to keep it rare. Although there is fake art out there, it’s usually possible to authenticate them.
The most valuable part of crypto art is the digital verification of authenticity and ownership. Although anyone can view a CryptoPunk on Ethereum and save or download the image, it is impossible to prove ownership.
Pak, an anonymous digital artist, created a series of NFTs that were identical to each other except for the name. Pak named each piece The Cheap, The Expensive, and The Unsold and gave it a unique value depending on its title. This collection forces us to think about what makes an artwork valuable.
The attached artwork is not the only thing that can be considered valuable in NFTs. Sometimes it is about proving ownership of the asset. This is why crypto art is one of the most common NFT uses cases.
Digital collectibles are in high demand, regardless of whether it’s a PancakeSwap Bunny or a Binance Anniversary NFT. This use case is even mainstreamed with the NBA NFT collectible trading card NBA Top Shot.
These non-fungible tokens, along with digital NFT artwork, make up a large portion of NFT marketplace sales like Opensea and BakerySwap. There is a lot of overlap with crypto art. Sometimes an NFT can also be a collectible or an art piece. These are the two most advanced use cases we have at present.
Jack Dorsey’s very first tweet is a great example of an NFT collectible. Although CryptoPunks are collectible and visually beautiful, Dorsey’s NFT is valuable solely for its collectibility.
Dorsey purchased the NFT via Valuables, which tokenizes tweets. Any tweet can be used to make an offer. Anybody can make a counter-offer to you. It’s up to each tweet author to decide whether they accept or decline an offer. If they accept, the tweet is minted on blockchain and a 1-of-1 NFT will be created with their autograph.
Each NFT is signed and verified by the creator’s Twitter handle. This means that only the creator can mint NFTs from their tweets. This creates a rare digital collectible that you can trade or keep. Although it can be difficult to understand the concept of selling tweets, it is a great example of NFTs creating collectibility. It is basically a digital autograph.
It is easy to forget that every NFT does not derive value from a song or a picture. NFTs can also offer unique financial benefits in decentralized finance (DeFi). While most people will also have artwork, their true value is in their utility.
JustLiquidity, for example, offers an NFT staking option. One user can stake tokens in a pool and get an NFT. This allows them to access the next pool. Once you have participated in the next pool, your NFT will be destroyed. These NFTs are sold in secondary markets based on their access.
BakerySwap’s NFT food combinations that offer increased stake rewards are another example. Contributing BAKE will get you an NFT combo with a variable amount of staking power. These combos can be used for speculation, secondary trading, or stakes. Combining NFTs with DeFi and gamification creates a new use case for nonfungible tokens.
Gaming is a big market for unique items that can be traded and bought. The rarity of these items directly impacts their prices, and gamers are familiar with the concept of digital, valuable items. In-game purchases and micro-transactions have helped to create a multi-billion-dollar gaming industry. This could be tapped into NFTs or blockchain technology.
This is also a fascinating area because of the NFT. Tokens for videogames combine elements of art, collectibility, utility, and utility. NFT implementation is still a long way away for big-budget games.
Other projects have also integrated blockchain technology into their games. Axie Infinity, Battle Pets, and Pokemon Go are both Pokemon-style games that offer tradable pets or items. These tokens can be purchased and sold on other marketplaces (peer-to-peer sales).
Gaming NFTs are not only cosmetic but also has utility. Every Axie pet comes with a variety of fighting abilities. These abilities can also impact the value of the pet when it is traded. A CryptoKitty is a valuable pet because of its unique breeding characteristics. The combination of unique looks, features, utility, and value will determine the pet’s worth. The example below shows that we don’t just see one desirable, rare aspect, but many.
You can attach audio to an NFT, just like an image or video file. This will allow you to make a unique piece of music. It is a digital “first edition”, or a digital version of a record. Although attaching a song is similar to the art example, there are other uses.
Musicians face a major problem: getting their fair share of royalties. There are two options to get a balance: blockchain-based streaming platforms or blockchain royalty tracking. Small blockchain projects find it difficult to compete with Youtube and Amazon Music for streaming services. Artists did not see any real benefits even when Spotify bought MediaChain, a blockchain royalty solution.
In the meantime, smaller projects are now working mostly with independent artists. Independent artists can sell royalties on Rocki on Binance Smart Chain and stream their music. The platform’s first royalty NFT sale raised 40 Ethereum for 50% royalties. They used the ERC721 token to make the transaction.
This model’s popularity will be determined by its acceptance by larger streaming services. Although mixing music and NFTs is a great use case, it may struggle to gain popularity without support from music labels.
Real-world asset NFTs
The digitization of ownership can be made easier by linking real-world assets and NFTs. In real estate, for example, we deal with physical property deeds. Tokenized digital assets can be created from these deeds to move highly liquid items (such as a house or land), onto the blockchain. We have not seen regulators offer much support for this application. This is still in development, but it’s something to keep an eye on in the future.
Shane Dulgeroff, in April 2021, created an NFT that represented a property up for sale in California. The token also includes a piece of crypto art. The NFT and the ownership of the house will be given to the winner of the auction. The legal status of the sale and rights of the buyer/seller is not clear.
An NFT is a way to prove ownership of smaller items such as jewelry when it comes time to resell them. A certificate of authenticity is usually included with genuine and ethical diamonds. The certificate also proves that you are the rightful owner. Without the certificate, anyone trying to sell the item can’t confirm its authenticity. Buyers may not be convinced that they are the rightful owners.
This is also possible for NFTs. Owning an NFT that is associated with an asset can make it just as important to own the NFT. The NFT can be embedded into an item using a physical cold storage wallet. We will see more NFTs used to represent real-world assets as the Internet of Things grows.
The logistics industry can also benefit from blockchain technology, due to its transparency and immutability. These features ensure that supply chain data is reliable and authentic. It is important to know the exact location and duration of food, commodities, or other perishable goods.
NFTs also have the advantage of uniquely identifying items. An NFT can be used to track a product with meta-data about its origins, journey, and warehouse location. This is an example:
- An Italian factory produces luxury shoes that are high-end. You can scan the NFT on the packaging to quickly identify it.
- Timestamp metadata includes information about when and where the shoes were made.
- The NFT is scannable as the product moves through the supply chain. New timestamped metadata is then added. This data could include the product’s warehouse location, arrival/departure times, and other information.
- A store can scan the shoes and mark them as delivered once they reach their destination. A detailed history of the shoes can be viewed and verified to confirm their authenticity.
There are many possible ways that NFTs could be integrated into the supply chain. Each stage of the supply chain must use the same infrastructure for all of these options. It can be difficult to implement these systems in reality because of the many stakeholders and players involved worldwide. This has resulted in very few real-life applications.
Two examples of large-scale blockchain logistics solutions are currently MAERSK’s TradeLens and IBM’s Foot Trust. Both utilize Hyperledger Fabric, an IBM Blockchain that supports NFTs. It’s not clear if NFTs are involved in their operations.
NFTs are becoming more popular, so there is a good chance that we will see even more use cases and ideas in the future. Not every NFT application has the time or resources to develop beyond a simple idea or project. Some might not prove to be popular or practical. NFTs will be around for the long-term, however, because they address more fundamental issues like scarcity of art or collectibles.