If you are an avid follower of technology and the software industry, you must be used to freqeuntly being introduced to new concepts and ideas, some of them outrageous. The last few years have been particularly fertile in that regard, giving us blockchain, Ethereum, Metaverse, and the like. However, one recent invention, Non-Fungible Token (NFT), sounds crazy even by the standards of the tech industry.
An NFT is a blockchain-based cryptographic asset containing a piece of metadata and, therefore, is unique. Unlike other blockchain-based tokens like Bitcoin and Ethereum cryptocurrencies, which are interchangeable, NFTs derive their value from an underlying asset, making them non-fungible. An NFT is a token that is considered unique because of the data attached, which turns the token into a medium of creative expression. All digital artwork consists of 1s and 0s. It is when you tokenize that artwork as an NFT that it becomes recorded on a blockchain ledger and one of a kind.
People are coming up with creative use cases for NFTs recently. Some of these use cases can be confusing, prompting you to ask yourself, "who needs something like that?" For example, a marketing agency has minted NFTs of the sounds of 10 automobile engines from BMW for its "Museum of Sound" project. Who knows, maybe they are banking on the assumption that those NFTs will probably be worth something in an EV-only future, where the sound from an internal combustion engine will be a distant memory.
Without any sensible use cases, the ongoing NFT mania would be another Tulip mania, that surge, and the subsequent collapse, in the prices of tulip bulbs in the seventeenth-century Netherlands. However, people experimenting with different uses of new technology, pushing the envelope at times for results with questionable value, is nothing unusual. As the new technology matures and becomes more mainstream, those extreme proposals fall by the wayside. Here are a few use cases for NFTs that are not too far-fetched and might fill a void today:
Artworks minted as NFTs have been fueling all this talk about NFTs and grabbing the headlines. Digital artist Beeple selling an NFT of his work for $69 million was what opened people's eyes to the NFT market. This deal was not an isolated case but rather part of a larger trend, reflected in the spike in the trading volume NFT marketplace OpenSea has enjoyed recently. The platform recorded a trading volume of more than $5 billion in January 2022, about 50 percent higher than its previous record of nearly $3.5 billion in August 2021.
The boom of the NFT market follows from the fact that NFTs serve a purpose for both buyers and producers of artwork. Customers seek authenticity and uniqueness in art, two attributes NFTs can verify for them. On the producer side, NFTs can be a game-changing technology for artists who feel they haven't been compensated enough for their work. NFTs facilitate the monetization of work like murals or graffiti, which were previously difficult to monetize, and create new revenue streams for the artists. NFTs also make it easier for the artists to track and collect royalties on their work. A simple smart contract can give an artist a portion of the revenue every time her work is sold.
Art has become a legitimate investment option in the last quarter-century, consistently delivering an annual return of 7.6 percent and outpacing the S&P 500 by around 180 percent from 2000 to 2018. However, most artwork is considerably more expensive than regular people can afford. NFTs fractionalize the ownership of the artwork and make it more accessible to regular people who want to invest. Once a work of art is minted into an NFT, it can be divided into shares and jointly owned by a group of people who would otherwise not be able to invest.
Collectible is an item that does not have an intrinsic artistic value but is worth more than its initial sale value due to its rarity and/or popularity. So, the value of a collectible does not reflect its functional utility or aesthetic quality but what people are willing to pay for it for the privilege of ownership. The fact that Jack Dorsey, the co-founder and former CEO of Twitter, sold the first-ever tweet for $2.9 million provides a good case in point.
NBA Top Shot, a partnership between NBA and the Canada-based Dapper Labs, has proved that NFT collectibles can be the basis for a viable business model. The app sells digital assets based on NBA highlights minted as NFTs, or "moments," and started the year strong with a 72 percent increase in trade volume in the first month of 2022. Considering the worldwide following the NBA and its stars enjoy, it is safe to say that the sky's the limit for the NBA Top Shot NFT
Buying and selling in-game items have been familiar concepts for us. Fans of online video games like World of Warcraft have been purchasing weapons, armor, accessories, or potions and upgrading their characters for close to two decades now. However, the marketplaces for these items were previously fenced-off within the gaming platforms. Today, NFTs are taking in-game item trading out into the real world, letting gamers buy and sell items regardless of time and place.
NFTs are powering the play-to-earn model of gaming, in which gamers earn real-world rewards for their success. Some gamers in the Philippines can even make a living by doing that. Axie Infinity, the most popular play-to-earn game where you get to collect and battle Pokemon-like monsters, is the gold standard in such games nowadays. Boasting 2.8 million fans currently, the game awards its players Smooth Love Potion crypto tokens and has generated more than $3.5 billion in revenue so far.
For decades, tickets have done a fine job of letting people partake in concerts, rave parties, and other events. But there are issues like secondary ticketing or counterfeit tickets that still stand. NFTs can fix these problems by making tickets completely traceable and introducing transparency into the process. Thanks to NFTs and smart contracts, not only will the organizers be able to see every time a ticket changes hands, but artists, crew, and other workers working backstage will be able to receive a percentage of the resale value in every transaction. Letting artists tap into the secondary ticketing market and access an ongoing revenue stream is one of the most important features of NFTs.
What about the fans? NFT tickets can be used to change the way fans interact with artists. These tickets can be minted with exclusive rewards and perks such as backstage access, meet-and-greets with the performers, limited audio and video copies from the event, and free tickets for future events. These rewards and perks can be used to create one-off offers that can be sold for a premium or personalize the experience for fans.
You may be thinking, "What do these three have to do with one another?" They may sound unrelated, but they have one concern in their focus: Verifying the authenticity of a claim.
- You want to know whether the person you are dealing with is who he says he is.
- You want to make sure that the candidate you are interviewing graduated from the school she claims to have graduated from.
- If you are paying thousands of euros for a single bottle of Bordeaux wine, you want to be certain that it is made from the grapes harvested from that particular vineyard you have been hearing about.
The immutable character of NFTs makes them perfect for verifiable documents of identification like ID cards or passports, or professional qualification documents like diplomas. Being based on blockchain technology, NFTs can serve as immutable proof of provenance, which is what you want to see if you are shelling out big bucks for artwork or luxury goods. By making materials and processes traceable, NFTs give end-customers visibility into the supply chain. This kind of traceability means a lot to customers who are keen on buying "organic" or "ethically sourced" products.
We have covered blockchain technology extensively on our blog. To complement that coverage, we recently launched an NiftyExpo template, letting our users create pixel-perfect landing pages for their OpenSea collections. Instead of watching your collection get lost in a sea of collections, you can now bring your NFTs under the limelight and feature them on a customized landing page. If you want to give your digital artworks the stylish stage they can shine on, Peaka's NiftyExpo template is the tool for you!