It would have been unimaginable a few years ago to consider a GIF or JPEG file as an art collectible, but today the market for these crypto investment assets called NFT’s, are worth tens of billions of dollars. Many tech investors have seen huge profits as a result of investing in these unique digital tokens that can be bought and sold online.
There are many experts who believe the next big breakthrough in the metaverse will be when it comes to the assignment of ownership to virtual goods, in the metaverse. Wouldn’t it be great if NFTs could also be used for securing property rights and unlocking the value of tangible assets?
Physical objects, such as artworks and luxury goods, are already represented and “tokenised” by NFTs, expanding their attributes of ownership into the digital world and making transactions more efficient and secure. Real estate NFT projects are now experimenting new ways to provide liquidity to a system historically beholden to transaction costs.
Identity is becoming increasingly difficult to safeguard even in familiar physical and online environments. In today’s world, all kinds of apps exist to manage identity and prevent identity theft, demonstrating how digital ambiguity can affect our personal integrity.
NFT’s unique characteristics
Essentially, NFTs are digital objects that convey ownership of something using computer code and data. You could own the property online, for instance in a virtual world or through a video game outfit. Something real might be involved, such as a piece of property, art, or a seat at a sporting event. It might also be some sort of hybrid, like deciding who will lease a piece of land in a Metaverse game.
Virtual identities can also be programmed with unique ownership rights and stored in blockchain, just as digital sporting event tickets can. Identity cannot be completely protected by any technology (NFT encryption keys can be stolen for instance), but through blockchain technology, established identities can move freely between immersive virtual worlds transforming the metaverse experience.
Are NFT’s dead?
At the beginning of May, The Wall Street Journal published an article: “NFT Sales Are Flatlining: Is this the beginning of the end of NFTs?”
There was some concern raised by this, and people are wondering: Where is the market headed, and are NFTs still a good investment?
According to Dune Analytics’ dashboards, on-chain data highlights NFT’s continued resilience, thanks to continuing technological advancements. Additionally, it shows NFT users and transactions are much higher than what’s reported by Nonfungible, the resource referenced in the WSJ article.
Community, Utility and Culture
Three pillars support the value of NFT collections: community, utility, and culture. In NFT collections, value can be found in multiple aspects or only in one. The most well-known examples are some of the best. A great example of an active NFT community is the Bored Ape Yacht Club. In the cultural sphere, NFTs have been pushed forward by the Cryptopunk movement, with Tiffany & Co. recently selling out its Cryptopunk ‘NFTiffs’.
While NFT prices can be volatile, there is potential in that. By developing strategies during volatility, investors are able to earn substantial returns. In addition, volatile markets offer a perfect opportunity to identify the strongest projects and determine the diamond hands from paper ones.
It is a fast paced world when it comes to things like cryptocurrencies and blockchain technology, and NFTs have become a part of that busy world. According to tracking firm DappRadar, around 85,000 NFTs were bought and sold each day in May – worth $5.8 million daily.
NFT ERC Standards
As new NFT ERC token standards are introduced into the Ethereum ecosystem, we gain new capabilities in what these NFT’s can do.
In recent years, the ERC-721 NFT standard has been the backbone behind the increasing hype around NFTs. ERC-721 tokens provide a perfect foundation for creating non-interchangeable, customised tokens. With the ERC-721 token, you can create a unique character set or a completely unique avatar.
Dapper Labs, the developers of CryptoKitties, first introduced the ERC-721 standard in 2017 through an Ethereum Improvement Proposal (EIP).
In the Enjin project, they focused on addressing the challenges associated with ERC-721, especially the lack of batch transfer flexibility. While transferring multiple NFTs, you would need individual transactions for each ERC-721 token. Trading each NFT individually can result in high transaction costs.
So Enjin created a standard called ERC-1155, in which smart contracts can encompass multiple assets, enabling their transfer with less network congestion and lower transaction costs. Another significant feature of ERC-1155 is its support for fungible and non fungible tokens, as the standard allows for multiple states on the same contract.
Semi-fungible tokens can also be created with ERC-1155. Semi-fungible tokens would essentially serve as fungible tokens during trading, and become NFTs upon redemption.
By implementing the innovative ‘expires’ function, the ERC-4907 token standard implements the time-limited role of a ‘user’. By incorporating the ‘expires’ feature, the process of renting NFT assets has been simplified, resulting in reduced gas costs by eliminating the requirement for NFT owners to withdraw user rights manually.
Due to its easy implementation, security, and a high degree of composability, the Dual-Role NFT Standard (ERC-4907) promises to become a pioneer in separating the owner’s and user’s rights. As a ‘user’, you may access addresses and use them within a period of time, but you will not be permitted to transfer them. By adopting this model as the standard for NFT building, the NFT ecosystem could see faster innovation and growth.
For GameFi projects wanting to integrate Double Protocol, long codes are required in order to implement it without this standard. There are no coding requirements with ERC-4907, and its timer feature eliminates the need for another on-chain transaction.
As a result of their ability to adapt and change to external events and data, Chainlink Labs‘ Dynamic NFTs (dNFTs) are expanding the design space that NFTs can address.
As part of tokenising real-world assets and building innovative video games updating data is often necessary. With dNFTs, you can maintain your NFT’s unique identifiers while updating aspects of your metadata at the same time. Dynamic NFTs change in response to external factors. Smart contracts often trigger changes in an NFT’s metadata and in turn, change the NFT’s characteristics. They can also house “hidden traits” manifested through user interactions instead of within the metadata, essentially evolving the NFT.
9 practical NFT use cases that go beyond JPEG’s:
1. Verification of identity and medical records
Since NFT transactions are validated on multiple nodes before being added to the blockchain, NFT ledgers can store individual medical records without compromising confidentiality or risking tampering from external sources.
In virtual worlds, enabling secure and stable digital identities has enormous implications. People would be able to build a real social, economic, and even political system in the metaverse, based on the norms we enjoy in the real world.
NFT-secured identities may in many ways be more secure than everyday identities. Biometrics can be hacked, passwords can be stolen, passports can be forged. Faking and stealing identities on the blockchain is more difficult.
Additionally, NFT ledgers provide a safer means of storing sensitive medical data while still granting access to authorised healthcare providers. In recent years, hospitals, health insurers, and other organizations have been exploring NFT use cases to improve hospital operations by verifying patient identities and recording medical procedures without compromising patient confidentiality.
2. Patents and intellectual property
Using NFTs can be a very effective way of protecting intellectual property and patents. Aside from proving ownership, NFT tokens enable users to prove their rights to content, something that cannot be accomplished using traditional IP rights.
With timestamps, the IP history can be traced back to the owner. As the NFT chain is immutable, an NFT owner would be able to prove they created a piece at any point in time.
In a similar way, NFTs can protect and certify ownership of innovations or inventions and create a public ledger of all patent transactions.
3. Assuring the authenticity of products
You can use NFTs to verify the authenticity of a product. Due to the blockchain’s ability to permanently store information about a product, checking its rarity and authenticity will soon be available for physical products as well. The manufacturing process can also be recorded in NFTs, guaranteeing fairtrade for example.
There are already well-known fashion houses using NFT to promote their new products and engage with their customers, including Gucci, DOLCE&GABBANA, Nike, Ralph Lauren, and BALENCIAGA. NFTs, however, do go beyond marketing. NFTs can guarantee the identity, origin, and other specifications of a product, giving the buyer added peace of mind.
In order to reduce or eradicate counterfeit artwork in circulation, NFT’s can be used to track the originality of a particular piece of art too, assuring NFT owners that their piece is indeed authentic.
4. Real Estate
Real estate and NFTs go hand in hand. NFTs can be used for transferring land deeds, proving ownership, and even tracking property value changes over time, if they are timestamped.
Among the sectors most ready for NFT is real estate. Using NFTs in real estate can simplify transactions, speed up payments, and even allow decentralised rental services (with automatic payments). Payment details, among other sensitive data, are protected at the same time.
Just a few taps on your phone will provide you with all the information you need about the property you may be considering to buy. You will be able to find out when the property was constructed, who owned it before you, and what changes were made to it up until this point.
5. Gaming and in-game assets
The gaming industry and NFTs are a perfect match. By making NFTs cross-platform, users will be able to use assets across multiple metaverse’s. By owning characters or items within a game, developers will be able to expand their brand and generate more revenue, while gamers will be more likely to continue playing.
Since NFT items in games have varying levels of rarity, NFTs can also increase the value of items in games. Transactions between NFT owners happen instantly via the blockchain, limiting the possibility of scams.
Smart Contracts allow users to retain ownership of their user-crea content, such as n Sandbox’s VOX Editor, providing a comprehensive user experience.
In March of 2022, The Sandbox sold more than $24 million in digital real estate represented by NFTs, including top brands and celebrities across industries like Atari and Snoop Dogg.
6. Education and Credentials
Academic credentials can also be represented with NFTs. In addition to offering proof of attendance, NFTs can also store important information, such as degrees earned and achievements attained, safely and securely.
There will no longer be a need to issue paper certificates in the future. NFTs will serve as a record of academic achievement and can be used by other individuals to prove that the person who holds it has earned that NFT.
America’s biggest ticketing company, Ticketmaster, posted a job for a product manager of NFT ticketing last week. It indicates that the company intends to offer NFT-based ticket offerings “across all content categories, including music and sports.”
Binance recently entered the NFT ticketing business in partnership with football club Lazio for the 2022-2023 season.
A NFT ticket could prevent fake tickets from being sold and scalping problems from occurring. Binance plans to utilise NFT-based tickets for a variety of purposes, including providing discounts at store and match events and enhancing personalised experiences.
When voting at polling booths, many countries require voters to bring a photo ID and proof of residence. The problem is, many are disenfranchised because they lack copies of their IDs, as well as any other documentation that will prove their location or registration.
Digital identities would provide people with no physical documents proving their identity and place of residence.
Furthermore, NFTs will serve as official record, eliminating cheating and voter fraud.
From Netflix to Prime Video and Spotify, putting up a paywall and charging people seems to be the model that prevails.
When it comes to unsubscribing from something however, it can be less appealing.
Tokenising subscriptions transforms them into bearer assets, which flips the relationship between publisher and reader. Rather than a publisher holding a reader’s account details, readers hold the keys to the content gates, and they are free to do what they want with them.
With more paywalls being built, readers may find themselves trapped by paperwork tsunamis if things don’t change. Imagine if readers had a single key to unlock multiple content gates? It would be even better if that key were a token they kept in their wallet.
From pet insurance to collateralising NFTs, I have come across a many more use cases and interesting applications. New ones are being invented all the time and innovation is everywhere.
While the current Web3 ecosystem mostly consists of static, ERC-721 NFTs, a few standout projects have already kickstarted dynamic NFT and new ERC standard innovation.
In the end, we have to admit that we are at the beginning of the NFT journey, and the market is maturing. We expect a journey in which many things will eventually evolve into NFTs in the future.