You may wonder why there has been so much hype about NFTs since 2021, more than any other blockchain-related technology. If you have no idea what NFTs are, glance through this detailed breakdown that explains NFTs for five-year-olds.
NFTs have become very popular for people to tokenize digital arts. Currently, on NFT marketplaces, digital arts and collectibles are the most common forms of NFTs; however, many people erroneously limit the functionality of NFTs as just a way to digitize art.
With the gradual shift of the internet protocol from Web 2.0 to Web 3.0, blockchain technology will become widespread, cutting across several sectors of life. At the moment, Blockchain technology is majorly used in finance (via cryptocurrency), but with Web 3.0, every aspect of life will be decentralized, enabling all transactions (whether financial or not) to be verifiable on a public ledger.
Since many of these other aspects do not involve fungible spending, NFTs can be applied to many real-life sectors in the future of the internet.
Some of these sectors are listed below:
· Music: In the 80s, 90s, and earlier 21st century, consumers bought cassettes or discs to listen to their favorite artists. There was a direct link between the artiste and the fan; when a fan purchases an album, they own it and can replay it several times without making a separate subscription. With a one-time payment, fans own the purchased albums for life. However, with the development of social platforms in Web 2.0, streaming services were created; thus, artists upload their songs on the platform while fans subscribe to listen. This creates a centralized third party that shares the creator’s revenue and has access to the users’ data, which can be sold to advertisers.
However, with the NFTs, decentralization can be returned to music collections; artists can mint 100,000 copies of an album and sell to interested fans via the blockchain; this NFT will contain images, lyrics, and sounds, tokenized as one. This can provide revenue to both fans and artists. For example, if an artist sells out a collection of 100,000 items at $10 each, and more fans are willing to buy, they have to buy from the current owners of the items; the less reluctant the owners are eager to sell, the higher the value, and the item initially sold for $10 could be worth thousands in a short while.
Also, the artiste can earn royalties (as commissions) when each item is resold. It could be preprogrammed in the smart contract that 20% of the revenue made from each sale of items in the collection is remitted to the creator. This effectively undercuts the middleman and ensures data security since centralized bodies do not hold user data again.
· Real Estate: Real estate is another heavily centralized industry. Real estate agents, lawyers, banks, and other individuals are often involved in facilitating a rental agreement between two parties, making the entire process cumbersome and more expensive. However, with NFTs, assets can be quickly sold and transferred from one party to another without fearing fraud since all information is publicly verifiable with the blockchain.
· Gaming: With our traditional games, many items are unique to each player. Sometimes, a gamer will spend a lot of money to build a character with faces, clothes, weapons, and many other items. All this spending is done into the developer’s account, and the player gets nothing but bragging rights.
However, with the development of blockchain games, the paradigm has shifted towards Play-to-Earn (P2E). Hence, players who participate in a game can earn tokenize these items and easily trade them in NFT marketplaces.
Also, it is common with traditional games that coins earned are only useable within the game; however, all tokens earned can be used in and out of the game with blockchain games. In addition, it can be used to purchase other gaming items, regarded as NFTs.
This decentralization helps to ensure that gamers don’t lose money; if a game no longer interests you, you can transfer your in-game items (NFT) to another game, unlike traditional games, where the end of the game signifies the end of all the players’ in-game items.
· Patents and Intellectual Property: NFTs also help protect inventions with timestamps. Often, many inventors engage in fierce legal battles on patents in the traditional world, each claiming that they created a product first. However, with NFTs and blockchain technology, timestamps are available to verify the exact time an item was created; hence, legal battles become unnecessary, as the original creator can be proven on the blockchain.
· Voting: The voting processes of many countries and organizations are often accused of impartiality and unfairness; several appeals happen, and election results are constantly challenged. This is one of the solutions the blockchain aims to achieve; with blockchain technology, all voters can access the voting platform with their tokenized Identity cards minted by the authorities. The number of minted cards is publicly available, and the moment each person has voted, their wallet signs a transaction, making it impossible to vote twice. In the end, it becomes possible to see who everyone who had voted for.
· Authenticity of Identity, Items, and Documents: With blockchain technology, several records can be securely documented on NFT ledgers. Since NFTs authenticity are publicly verifiable on the blockchain, all documents and records can be verified, and forgery/manipulation can be stopped.
We have seen several criminals traveling with fake passports, using fake birth certificates, and several other documentation crimes. NFTs can help to avoid this by ensuring that everyone has a digital copy that can be scanned and verified on the blockchain.
This can also be applied in manufacturing companies, particularly in supply chains and logistics, to properly track items from manufacturer to the end consumer, ensuring that all items received are authentic.
Other NFT applications for authenticity verification include ticketing, fashion, licenses, certificates, etc.
· Metaverse: The metaverse is a virtual world that merges real-life events into a computing environment. You can eat, sleep, build houses, buy items, and get married in the metaverse, just as you do in real life. This is one of the many applications of Web 3.0 that seeks to revolutionize the social experience from what we have in Web 2.0. For example, in the present day, it is possible to have a video conference with people from different locations on Zoom or google meet; however, everyone in attendance knows that they are miles apart.
It is different from Web 3.0; the metaverse makes it possible to bring virtuality close to reality. Everyone present in the meeting will feel like they are sitting next to the other person, whereas they are miles apart. We can already see applications of these in VR and AR games.
NFTs are useful in the metaverse because they provide digital identities; everyone can be identified with their unique avatars. In the end, highly reputable people can make money from their identities by selling them to others with not-so-much popularity.
· Community Membership: NFTs are commonly used to signify membership in a community or club. Today, several virtual communities exist in which membership access is only available by owning an NFT. This represents a high repute, as we have in physical communities like Scotland’s Carnegie Club, London’s Arts Club, Milan’s 1930 club, New York’s CORE, and many more. These clubs are exclusive, and to get access, you need to be of a particular social or financial status; as a result, the desperation of people who are willing to make it into the high-repute community causes bribery and corruption by some members of these clubs.
With the popularity of virtual worlds and the metaverse, getting membership access isn’t gatekept by anybody for corrupt reasons; as long as you have the NFT, you get membership benefits. If you wish, you can leave the community at any time by selling your NFT to other people who are interested in joining.
Some common examples of these high-profile NFT communities are Crypto punks and Bored Apes Yacht Club; early community members got in for a few hundred or thousand dollars, but to get into these communities now, you would need to part with millions of dollars.
To Wrap It Up:
NFTs have many use cases for the present and the future. In all honesty, NFT technology is still taking baby steps because we are yet to access the full strength of decentralization and the blockchain. Most people are currently flipping NFTs to make money, so people who have no idea how they work believe it is all an elaborate scam.
However, contrary to what many people think, NFTs aren’t money-laundering schemes or a scam. Instead, NFTs are essential for the decentralized internet (Web 3.0), where security and authenticity will be made possible via blockchain technology.
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