“NFTs are a scam.” You’ve probably heard this common refrain before, often accompanied by an incredulous snort as yet another cartoon monkey sells for thousands of dollars.
With the market for NFTs still mostly limited to the speculative trading of digital art, this kind of mainstream skepticism is perfectly normal. Where’s the value in a JPEG that I can just right-click and copy anyway?
Luckily, there’s much more to these divisive digital assets than meets the eye. With blockchain technology still exploring the early stages of its development, new and exciting use cases of NFTs are beginning to emerge. Let’s look at a few ways that NFTs can become an integral part of the internet of the future.
NFTs are an ideal solution to the slow, overly bureaucratic methods that real estate agents use today. What if we could streamline the process of transferring ownership and cut out the excess paperwork and associated intermediaries?
Real estate NFTs are imbued with all the necessary documentation, giving them the legal authority to represent proof of ownership. These NFTs are tradeable in the marketplace, allowing buyers to get the legal rights to the associated property in minutes rather than days or weeks.
This concept is already being mapped out in some places. For example, the crypto haven Satoshi Island, an island of Vanuatu, promises “a true crypto-economy where everything will be paid for in crypto, and all ownership on the island is represented with NFTs.” According to the founders of the concept, every home will be an NFT that can be traded on a digital marketplace. This will give NFT holders the ability to turn their digital rights into physical documentation on the official land registry of Vanuatu. Sounds like another disastrous “utopia” in the making? Only time will tell.
The opportunity for fractional ownership is another compelling use case. Properties are split into smaller sections and auctioned off as individual NFTs, sometimes for as little as $100 apiece. This is an excellent way for more people to gain exposure to a market that might be otherwise out of their reach. With this model, buyers not only gain access to regular rental income, but their NFT also appreciates in value as real-world prices rise. Spanish real estate company OMNI is already offering this possibility, allowing investors to buy, sell, and trade fractional real estate NFTs directly on the blockchain.
The gaming market was valued at an astonishing $198.4 billion in 2021, bigger than Hollywood and the music industry combined. Videogames are increasingly finding their way onto the blockchain, where in-game purchases (characters, accessories, clothing, etc.) are available as NFTs that players can own. These can also be transferable to other games and platforms, allowing users to create unique digital personas that can travel across the metaverse.
Illuvium, one of the most anticipated games of 2022, is a great example of NFTs in gaming. Built entirely on the Ethereum blockchain, this vast open-world exploration offers players the chance to collect NFT “creatures,” which they can use to battle other players in a graphically-rich sci-fi adventure. If successful, Illuvium looks set to pave the way for the future of gaming and the crypto-based “play to earn” model.
NFTs work so well in games because they bring real-life rewards to users. For example, you can increase the value and utility of your NFT through gameplay, and then easily trade or sell it for cryptocurrency. Game developers also benefit, with the sale of NFTs bringing increased exposure and an additional source of revenue.
While the advent of QR codes has streamlined event ticketing, there are many ways that NFTs can further improve the process. For example, ticket fraud and scams become virtually impossible by issuing tickets as NFTs. Organizers create only the correct number of ticket NFTs, which cannot be forged or copied. It’s also possible to make non-transferable NFTs, preventing scalping and promoting a fairer distribution.
Adding digital artworks to NFT tickets can also turn special occasions into collectibles. Rather than a plain old QR code or paper ticket, users can have a unique memento of a concert or event that they can trade or sell later on. Perks like drinks, merchandise, or backstage passes can also be included in the price of the NFT, enhancing the experience and simplifying the process for organizers.
Coachella, one of the world’s biggest music festivals, is already offering NFT tickets that enrich the experience of attendees. Users can go to the festival’s marketplace and buy NFTs that offer things like lifetime festival passes, unique on-site experiences, physical items, digital collectibles, and more. With the initiative already proving to be hugely popular, it’s only a matter of time before other big events follow suit.
Content such as streaming services, music, podcasts, articles, and more can be tied to ownership of their associated NFTs, ensuring that only those in possession can gain access. This is called ownership-based access management and promises to be a game-changer for content creators. They can create different categories of NFT to offer tiered access, with unique variations like higher streaming quality, bonus content, personalized services, and much more.
NFT ownership-based access can add tremendous value and flexibility to creators’ work. Imagine, for example, that you’re one of only a handful of people who can listen to a particular song by a famous musician. What a privilege! NFTs' ability to create digital scarcity can provide new revenue streams and alternative forms of value for creators and consumers alike.
Creators also find an alternative way to connect with their audiences while sticking to their values as independent artists. This was the case for Daramola, a popular musician who also runs the NFT art project The Supply Chain. “The main motivation behind me starting an NFT project was to explore the possibilities of creating and sharing my music and art to people outside of the framework of a record label,” Daramola told Blockmate.io.
“I also wanted to ascribe the right amount of value to my music. The tech isn’t quite there yet, in terms of a redefinition of copyright and royalties as securities, so I told my story through art. The main utility here, however, is access. Access to me, to my work, my sound, etc. I definitely see more artists creating different ways to build a community and get their music out there to people in this space.”
Global supply chains are highly complex and are prone to massive disruption by unforeseen events. Blockchain technology offers the possibility of transparent, immutable smart contracts that execute each time an item changes hands. NFTs can keep a record of the history of each transaction, making data easily accessible without the need for third-party governance.
Freely-available information and tracking of goods in a decentralized supply chain will significantly increase efficiency compared to the current system of private, siloed databases. Businesses save money and time on procurement, production, transportation, and warehousing, with agreements automatically executed through legally-binding smart contracts, removing the need for manual processing.
The luxury goods market is currently leading the way on supply chain NFTs, with brands like Prada, Louis Vuitton, and Cartier launching Aura, a blockchain solution aimed at banishing counterfeit goods. Customers who have purchased a high-end product from one of these companies are also provided with an NFT that details its origins. They receive information about the materials used in the manufacturing process and how they were sourced. Only products that are accompanied by this NFT can be called fully authentic.
With this model set to become the norm, customers will come to expect full information about the supply chain, the origin of their products, and whether they’re ethically sourced. This will become a powerful tool against not only counterfeit goods, but things like environmental violations, animal abuse, and labor exploitation in certain industries.
Decentralized Finance, or DeFi, is another population application of blockchain technology. Users can access financial services such as loans, yield farming, and other asset management tools without third-party intervention. DeFi has seen an explosion in growth in the last couple of years, with the total value locked in the sector at over $200 billion. So how do NFTs fit into the burgeoning world of Decentralized Finance?
The most obvious use case for NFTs in DeFi is collateralization for loans. NFTs are currently illiquid assets, requiring an active market and willing buyers in order to realize their value. However, platforms such as Honey Finance will enable borrowers to get liquidity for their NFTs, while lenders obtain high yields. The NFT is automatically returned to the borrower when the debt is paid. If the debt defaults, the NFT is made available to the lender.
Loans are just one way that NFTs are currently plugged into DeFi protocols. With both NFTs and DeFi still in their infancy, the potential for growth and integration between these Web3 powerhouses is limitless.
With blockchain technology forming the backbone of the upcoming Web3 revolution, you can expect NFTs to become part of your everyday life. They allow us to create secure, transparent, and transferable digital representations of physical and intellectual property—vital components of a decentralized and user-controlled internet.
Sure, some of these use cases might seem like a big jump from playing around with cartoon monkeys. But remember, the current art-based value of NFTs was nothing but a pipe dream just a few short months ago. Web3 tech is moving quickly, and early adopters see the biggest rewards in terms of investment.
So, keep your eye out for utility-driven NFT projects that solve real-world needs like those outlined in this article. Because you never know, you might just find yourself invested in some of the brightest Web3 companies of the future!