The development of NFTs has brought us crypto art and digital collectibles, but it doesn’t stop there. From real estate to logistics, you can use NFTs to prove the authenticity of many unique and collectible goods.
While the NFT ecosystem is still young, there are many interesting projects to explore, and some are already generating great value for creators and consumers.
Non-fungible tokens have helped solve long-standing problems with scarcity in digital art. How do you keep virtual artwork rare when you can digitally copy it? While there’s fake art in the real world too, we’re usually able to authenticate them.
When it comes to NFTs, the value isn’t necessarily about the attached artwork. Sometimes, what is more important is proving ownership of that particular asset. This aspect is what makes crypto art one of the most popular NFT use cases out there.
Jack Dorsey's first tweet is an excellent example of an NFT collectible. While a CryptoPunk is collectible and visually artistic, Dorsey's NFT has value purely for its collectibility.
Dorsey sold the NFT using Valuables, a platform that tokenizes tweets. You can place an offer on any tweet. Anyone can swoop in with a counter-offer and outbid you. Then, it's up to the tweet author to accept or reject an offer. If they accept, the tweet will be minted on the blockchain, creating a 1-of-1 NFT with their autograph.
Another example is BakerySwap’s NFT food combos that provide increased staking rewards for holders. By contributing BAKE, you will receive an NFT combo that provides a variable amount of staking power. Users speculate on these combos, sell them on the secondary market, or use them for staking. This combination of NFTs with gamification and DeFi creates another interesting use case for non-fungible tokens.
Gaming has a huge demand for unique items that are tradable and purchasable. Their rarity directly affects their price, and gamers are already familiar with the idea of valuable, digital items. Micro-transactions and in-game purchases have created a multi-billion dollar gaming industry that could tap into NFTs and blockchain technology.
It's also an exciting area in terms of what an NFT represents. Tokens for video games combine aspects of art, collectibility, and utility for players. However, when it comes to big-budget video games, NFT implementation is a long way off.
Gaming NFTs can be cosmetic, but many have utility too. Each Axie pet has a set of abilities for battling. These abilities also affect the pet's value when traded. A CryptoKitty can be extremely valuable just for its desirable breeding attributes. Determining the value of each pet depends on a combination of rare looks, features, and utility. In the example below, we don’t see just one desired, rare aspect but multiple.
Like an image file or video, you can also attach audio to an NFT to create a collectible piece of music. Think of it as a digital “first edition” of a record. Attaching a song to an NFT is similar to our art example, but there are other use cases.
A big issue for musicians is getting a fair share of royalties. But there are at least two possible ways to achieve a balanced outcome: blockchain-based streaming platforms and blockchain royalty tracking. Competing with Amazon Music or Youtube for streaming services is difficult for small blockchain projects. Even when a giant like Spotify purchased a blockchain royalties solution called MediaChain in 2017, there were no real benefits for artists.
In the meantime, smaller projects have ended up working mainly with independent artists. Rocki on Binance Smart Chain gives independents a platform to sell royalties and stream their music. Their first royalty NFT sale on the platform raised 40 ETH for 50% royalties using the ERC721 token standard.
Whether this model will become more popular or not will depend on its adoption by larger streaming services. Combining music with NFTs is an excellent idea for a use case, but it might struggle to reach success without the support of music labels.
Real-world asset NFTs
Linking real-world assets with NFTs can digitize the way we prove ownership. For example, in real estate, we typically deal with physical property deeds. Creating tokenized digital assets of these deeds can move highly illiquid items (like a house or land) onto the blockchain. When it comes to this application, we haven't seen regulators provide much support so far. It's still very much in development but is one to look out for in the future.
In April 2021, Shane Dulgeroff created an NFT representing a property for sale in California. It also has a piece of crypto art attached to the token. Anyone who wins the auction will receive the NFT and ownership of the house. However, the exact legal situation of the sale and the rights of the buyer or seller are uncertain.
When it comes to smaller items, like jewelry, an NFT can help prove legitimate ownership when reselling. For example, a genuine, ethical diamond usually comes with a certificate of authenticity. This certificate is also a way of proving you have ownership rights. Anyone trying to resell the item without the certificate cannot confirm its authenticity and may have problems convincing buyers they are the rightful owner.
Blockchain technology can be useful in the logistics industry as well, particularly because of its immutability and transparency. These aspects ensure that supply chain data remains authentic and reliable. With food, commodities, and other perishable goods, it’s important to know where they have been and for how long.
An NFT also has the added benefit of representing unique items. We can use an NFT to track a product that contains meta-data on its origins, journey, and warehouse location. For example:
A high-end pair of luxury shoes are created at a factory in Italy. It's assigned an NFT you can quickly scan on its packaging.
Timestamped metadata is included of when and where the shoes were created.
As the product goes through the supply chain, the NFT is scanned, and new timestamped metadata is added. The data could include its warehouse location and time of arrival or departure.
Once the shoes arrive at their final destination, a store can scan them and mark them as received. An exact detailed history is available to view and confirm the shoes' authenticity and logistic journey.
There are a lot of hypothetical ways to implement NFTs into the supply chain. All of them, however, require each stage of the chain to use the same infrastructure. With so many different players and stakeholders involved globally, it can be challenging to implement these systems in real life. This factor has led to only a minimal number of real-life use cases.
Currently, MAERSK's TradeLens system and IBM's Foot Trust are two examples of large blockchain logistics solutions. Both use Hyperledger Fabric, an IBM blockchain that supports the use of NFTs. However, it's unclear if NFTs play a role in their operations.
With the popularity of NFTs growing, there's a good chance we'll see even more ideas and use cases in the future. Currently, not every application for NFTs has had enough time to go beyond an idea or a small project. Some may turn out to not be practical or popular. However, for more fundamental and straightforward issues, like the scarcity of art and collectibles, NFTs are certainly here to stay.