What Is an NFT?: The Forgotten Use Cases for Non-fungible Tokens (NFTs)
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Over the past two years, NFTs, or non-fungible tokens, have taken over the conversations in the crypto market. These digital assets are welcoming the general population into the crypto space, with celebrities, athletes, and billionaires getting an opportunity to connect with their fans.
While the “NFT” buzzword has been overused across mainstream media and social media platforms, many investors and holders of NFTs do not understand what NFTs are and why they were created. I could go as far as assuming that even the experts in the crypto space today don’t necessarily fully understand what NFTs are used for (minus digital art and collectible items) and what the future holds for this budding industry.
In this article, we remove any fog surrounding the space and explain the widespread use cases for NFTs, the projects working in the NFT space and what the future holds for the space.
Understanding Non-fungible Tokens (NFTS)
Non-fungible tokens, or NFTs, are digital tokens that are built on the blockchain and used to represent ownership of unique assets. Via NFTs users can show immutable ownership of assets such as art, music, videos, collectibles, and even title deeds. The differentiating factor between NFTs and traditional data records is that NFTs can only have one owner at a time, secured by the blockchain, meaning no one can modify the record of ownership, or create a copy of the NFT.
As the name suggests, NFTs are non-fungible, an economic term that describes uniqueness. Generally, NFTs are built using the same technology as cryptocurrencies and are based on the blockchain, but that’s where the similarities end. Fiat currencies and cryptocurrencies are “fungible” meaning they can be traded for one another without any implications. Simply, you trade one US dollar for another US dollar, or one Bitcoin for another Bitcoin, given they are always equal.
However, NFTs are drastically different from cryptocurrencies due to their non-fungible properties. Each NFT includes a unique digital signature that differentiates one NFT from another. As such, one Bored Ape Yacht Club (BAYC) NFT is not equal to a CryptoPunk or Azuki NFT, actually, no two BATC NFTs are the same too.
These properties have seen the value for NFTs sore since coming to light in 2014 as the industry becomes an increasingly popular avenue for artists to sell and collectors to buy the artwork. One of the most popular NFT artworks, Everyday’s: The First 5000 Days by Beeple, sold for a record $69 million at Christie’s, the 255-year old auction house, last year in March. Until October, the most Mike Winkelmann — the digital artist known as Beeple — had ever sold a print for was $100.
Beeple’s $69 million NFT: Everyday’s: The First 5,000 Days by Beeple (Image: Beeple)
Since then, hundreds of NFT pieces have sold for millions, opening up the market for these digital artworks. Snoop Dogg, Steph Curry, Lil Wayne, Lionel Messi, Neymar Jr, Justin Bieber, Paris Hilton, and several other celebrities have all bought into the NFT space, owning at least one NFT. As such, the NFT market value has exponentially grown into a $50 billion market, according to DappRadar, showing potential for future growth as even more investors buy these digital assets.
Despite digital art and files dominating the NFT space, it only represents only one way to use these digital assets. NFTs, as explained above, can be used to represent unique ownership of any asset and file, from land title deeds, academic certificates, or any item in the digital and physical realm. Below we look at some of the forgotten use cases of NFTs that could open up the world to a new digital revolution.
The Wider Use Cases for NFTs
It is hard to imagine NFTs as anything else rather than the wonderful digital pieces of art displayed across OpenSea and Looksrare marketplaces. Far from it, NFTs have widespread use cases that can be used to represent any kind of asset whether it’s your table, title deed, or even intangible assets such as royalties and intellectual property rights.
Apart from the wide use of NFTs in the gaming world, these digital assets have more to offer the global financial and economic ecosystems. Here, we discuss some of the ways that NFTs can be used and the benefits they offer to the global economic systems.
1. Intellectual Property and Royalties
One of the major reasons Bitcoin (and with respect to the crypto and blockchain industries) have been so successful till now is to give users autonomy and control over their own data and creations. NFTs have more potential in this role, especially for artists, musicians, and digital creators.
NFTs give creators control over their creations and build a platform to better track music royalties and intellectual property (IP). Some of the platforms dealing with music-NFTs include Catalog, the primary marketplace for single-edition music NFTs; Sound.xyz, which runs almost daily drops where collectors or traders can mint editions of music NFTs; and Beats Foundry.
NFTs can provide information on ownership of an IP, especially with blockchain timestamps, and the entire history of the IP. Simply, the artist mints the IP as an NFT, and with the information recorded on an immutable network, the NFT owner could prove they were the original creator of a piece of work at any point in time. Additionally, NFTs can also be used to track royalties paid to the creators. For instance, every NFT sold on Opensea, an NFT marketplace, remits around 2% of the sale (and every resale) of the NFT to the original creator.
Several artists and musicians have taken the NFT route to monetize their craft. Kings of Leon, last year March, became the first band to release their album titled When You See Yourself, as NFT and raised $2 million in the process. Other popular artists that have also released NFT projects include Grimes, DJ 3LAU, Steve Aoki, and Bajan rapper Haleek Maul.
2. Identity Verification
As the world becomes more digital and connected, there is a growing need for trustless digital ownership, and NFTs (given their unique features) provide the perfect solution for this problem. A stable and secure digital identity across the real world, virtual worlds and the metaverse offers massive advantages to the digital future. It promises to give people the freedom to build genuine societies in the metaverse – with social, economic, even political interaction.
The value of NFTs resides in the ability to capture human’s uniqueness, in a similar way that each human is unique. This could be beneficial for governments as individuals’ data (such as the driving license, passport and ID numbers) can simply be coded into an NFT and this NFT can then be used to verify the individual’s information digitally.
One such project is Photochromic, which enables people to securely own and verify their identity and personal information through an NFT. PhotoChromic aggregates biometric proof of life, with government-backed identity verification and unique personal attributes, into an on-chain asset that is utilised for blockchain based identity verification and Web3 applications.
3. Academic Credentials
NFTs are moving from the art world into academia and theoretically into every other industry as seen in the examples above. However, none of the industries have quite embraced NFTs (except entertainment and art) than the academic world. NFTs are a good way to represent academic credentials. As units of data are saved onto a blockchain, the provenance of every NFT is trackable, substantiating ownership and authenticity, which could translate to tracking academic credentials.
The world of academia is already welcoming blockchain in the space and NFTs could further impact the record-keeping at schools, universities and other learning institutions. For instance, Blockademia, a Cardano-based DApp, is at the forefront of minimizing document and identity fraud, especially government documents, education certificates and IDs. Simply, Blockademia is a decentralized information system that checks the authenticity of certificates and government documents ensuring they are legal, legitimate, and authorized by the relevant authorities.
By integrating NFTs, verifying academic credentials will be far much easier. Today, these credentials are issued manually and often on physical paper, which makes them easy to fake. Academic institutions should integrate solutions such as Blockademia, creating NFTs linked to diplomas or certificates, which are immutable. NFTs also reduce the cumbersome process of graduates sending physical (or digital) certificates to employers.
4. Asset Protection/ Crypto Inheritance
Over the past decade or so, digital assets have slowly crept into investors’ portfolios affording them immense opportunities. Nonetheless, the complexity of these assets poses risks for most investors as management and storage of crypto remains a key issue for investors, especially the newcomers. To ensure total security of assets, self-custody wallets are preferred to having a third party holding the assets.
Additionally, crypto-asset inheritance has always presented a pain point for self-custody, as security-minded users often fail to make provisions in the event of sudden death. The grieving family members often have no way to access their relative’s inheritance, permanently locking the assets away. The consequence of not resolving this issue could leave billions of dollars worth of crypto locked in cold wallet storage, removing them permanently from circulation.
Serenity Shield, a crypto inheritance firm, is preparing its users for such an event by preserving access to the tokens in case the owner passes away. The company incorporates NFTs allowing the end user to set, store, and save their unique credentials to the Serenity Shield application.
The system divides a user’s wallet, called the StrongBox, into three non-transferable NFTs. The NFTs each contain a third of a secret (based on Shamir’s Secret Sharing) needed to access the wallet. One NFT is held by the user, another is held by the nominated heir, and the third is held by Serenity Wallet, a smart contract that delivers its key to either the heir or the original user depending on specific Activation Conditions defined when setting up the StrongBox. The conditions can be based on lack of activity, or active “pings” requiring action to ensure the original user still has access to the wallet.
5. Ticketing for Events
Finally, NFTs are also taking over the ticketing system for events. The current ticketing systems have shown loopholes such as counterfeiting, faking, and slow entry into events. The introduction of NFTs enhances the functionalities, speed, and cost of the ticketing system. Paper tickets present difficulties in that they may be misplaced, become damp or even damaged.
To this end, most event organizers have turned to the QR codes, which also presents its challenge such as failure of systems at the entry of the event, leading to slow verification of the tickets. Additionally, QR codes are ineffective in terms of attendees purchasing them.
Event organizers can turn to NFTs to minimize the cases of forging and faking tickets given the immutability properties that they hold. Simply, organizers can mint the appropriate amount of NFT tickets using their preferred blockchain platform. They can customize the NFTs to establish the sale price, or alternatively conduct the sale as an auction. Customers can then purchase these tickets and save them on their blockchain wallets, which will then be scanned and verified upon their arrival at the event.
Apart from verifying the authenticity of the tickets, NFTs also allow primary buyers to sell/transfer their tickets to secondary buyers, who can verify that they are purchasing a genuine ticket to an event.
Conclusion
The rise of NFTs in the past half-decade opens up the world to representing any unique asset on the blockchain. While the industry has flourished in the art and entertainment sector, there’s still so much potential that NFT users can tap into to enhance systems across the global economy. The use cases mentioned above are only the tip of the iceberg for this massively growing industry!
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