The technology responsible for all the hype and drama that goes into Web3 is nonother than the famous non-fungible tokens. NFTs have had a great year back in 2021 as they witnessed a major bull run, only to come falling down in 2022’s market crash. However, have we ever stopped amidst the madness of minting and trading NFTs to ask ourselves, what’s the point? Is the future of NFTs nothing other than gaining profit from uninspired Ai-generated art? Or will NFTs will surpass mere tradable assets and reach their true potential that is based on the revolutionary decentralized technology that is the blockchain?
The future of these non-fungible tokens is yet left untapped, and the true prospect of them revolutionizing how we view ownership is still buried behind simple pixelated images. Let’s have a look at where might this newfound technology lead us if used wisely.
How Are We Dealing With NFTs?
Non-fungible tokens made it BIG back in 2021. The thought of authenticating digital assets such as art, music, and videos on an immutable ledger sounded promising. Although many regarded this new technology as an environmentally disastrous scam, many saw it as an opportunity to claim ownership over digital assets. And thus, the NFT space witnessed an unprecedented surge in NFT sales that reached up to $25.1 billion according to DappRadar.
We’ve seen that year the rise of Play-to-Earn (P2E) platforms that encouraged decentralized gaming by solely playing in the hopes of getting profit. The rise of Axie Infinity, a non-fungible token-based online video game, became the most-traded NFT collection ever at that time with almost $4 billion in historical trading volume.
The rise of PFP-based NFT collections was evident in 2021, as we saw the inception of major blue-chip NFTs today such as Bored Ape Yacht Club, CryptoPunks, and Doodles. The widespread of NFTs has also opened up major opportunities for digital artists to continuously make a profit from their art through royalties. For example, Beeple’s Everyday NFT was sold for a whopping $69.3 million.
However, the major boom in NFT sales has led people to believe that minting a non-fungible token on the blockchain equals instant profit. This resulted in the millions of worthless and useless NFT collections that emerged throughout 2022. No wonder the market crashed so drastically. People saw that there is no worth in dealing with these digital assets beyond having collectibles or gaining some instant cash.
But, are NFTs Becoming Securities?
In some ways, yes, NFTs became securities. NFTs are being used as a tool for trade controlled by major whales in the industry. What makes NFTs nowadays different than the usual stocks?
What defines security? Securities are an investment of money in the hopes of bringing more profit as a result. This might create a problem in the future of NFTs. The US government is already looking for ways to regulate cryptocurrencies and NFTs. Thus, the sale of NFT might need to be registered with the Securities and Exchange Commission (SEC).
Not following the guidelines, in this case, will generate major legal issues. Then, instead of maximizing our use of this advanced decentralized technology, people might leave it altogether in order not to face legal issues.
The Real Potential of NFTs
Let’s stop to reflect on what are NFTs in the first place. Other than their technical definition, which goes as “unique cryptographic assets hosted on a blockchain”, NFTs are certificates of ownership. However, we can go a step further beyond just ownership of digital art or gaming assets.
The applications of NFTs are quite limitless. The core of this technology is authentication, which can be used in many fields and industries. The future of NFTs lies in business and economic applications.
NFT Value Is in Authentication
If we think about it, everything we do in life is transaction-based. The transfer of any ownership from one entity to another always requires authentication. For example, you cannot sell your house to another person before proving that you actually own it. Authenticating any real estate is a costly process that requires tons of paperwork, attorneys, and other related intermediaries. In short, it’s very time-consuming.
NFTs, however, allow transactions and transfer of assets to be efficient and at low costs thanks to their underlying smart contract mechanism. NFTs can literally prove ownership of anything without the need for a third party. If we pass beyond the derivative PFP jpegs, NFTs can act as a certificate of ownership/authentication for things like legal or government documents, marriage licenses, and university degrees, and can be tied to physical objects.
In addition, NFTs are trackable and traceable on the immutable blockchain. This would be useful in sectors where ownership needs to be tracked and proven. Basically, it’s bye-bye to all the paperwork because NFTs can provide a long-listed record of the entire ownership history.
Non-fungible tokens can be thus regarded as much more than an investment to be traded. This decentralized technology can revolutionize many sectors and become part of our daily lives.
The blockchain is a decentralized peer-to-peer ledger that is very hard (and nearly impossible) to hack. Thus, NFTs written into the blockchain cannot be altered or deleted. That elevates the security of almost all documentation.
Paper-based transactions and documentation are very inefficient, time-consuming, and on top of that, prone to human error. Not to mention regular cloud-based documentation that many governments and associations chose to opt for. Digital certifications are very prone to get hacked, altered, or tampered with. Which of course, is very inconvenient since it costs companies millions of dollars.
The future of NFTs lies in becoming a solution for these issues. Since NFT transactions are public and transparent, anyone can see the full history of each token. Thus, creating an unhackable and tradable system that could create a major shift in how we store data.
The Future of NFTs: Beyond Limits
After seeing many projects that encourage the mass adoption of Web3 technologies, this might be the ideal time to change our view and witness how the future of NFTs might benefit us. Let’s go over some examples of where NFTs might become of real value and utility.
Managing Media Licensing
Although the NFT market is focusing on derivative art replicated through collections, it doesn’t take away the spotlight of actual art being tokenized. Digital art, music, and photography can benefit from this decentralized technology by tokenizing media licenses.
For example, photography has had a rough existence as an art form. Why? Well, there’s no way of telling which copy of a digital image is stolen and which follows the regulations of copyright. However, when a photographer mints a photo as an NFT, he indisputably becomes the sole license owner of the original images linked to the NFT. He can then sell and trade the license on any NFT marketplace he chooses, and earn ongoing royalties.
This way, if someone stole or “downloaded” the image, the stolen picture will be easily detectable as unlicensed, and therefore fall into copyright infringement. The same way goes for music, video, and digital art licensing.
Real Estate Ownership
Transferring property ownership can be really complicated and such a pain. NFTs can come to replace land deeds, titles, and all related documents verifying the ownership of a real estate. Instead of having the deed to regenerate each time a property is sold, it will become a traceable NFT that will log all changes, making closing on a real-estate an easy task.
Property owners can issue a token that represent their property. And thus, then they can trade it and transfer it to potential buyers. In addition, you can actually own a fraction of a property since NFTs could be fractional. This way, you can own part of a property and gain from it according to your share.
Physical Items Authentication
One of the most plausible cases of NFTs is to link them to physical items. Consider you buy a D&C bag secondhand. There is no way for the seller to prove to you that the bag is actually original.
- The receipt could be faked.
- Any QR code leading to the official website could be hacked or staged.
However, if D&C tokenized the bag, the NFT ID will be traced on the immutable blockchain, proving that indeed the bag is the real deal.
Many brands have already chosen to opt for NFTs that are linked to physical products, coining them as “Phygital NFTs”. Since Physical NFTs can provide proof of the authenticity of a certain product, that means that physical assets cannot be counterfeited. The blockchain makes sure that information attached to asset cannot be faked or altered.
The Future is NFTs
While most associate NFTs with Ape jpegs and low-resolution pixel art, the blockchain has the potential of revolutionizing how we store and document data. Now, we have the opportunity to trust our data without reverting to central authorities. However, we are kinda exploiting that for profit. If the NFT space is gonna keep focusing on blind trading instead of following Web3’s ethos, the future of NFTs will not be as bright as we hope for.
The future of NFTs goes way beyond art turned profile pictures or meme cultures, it’s about users taking the power back to their own hands, disrupting the exploitation of central authorities.