The real use cases of NFTs are certainly limited right now, but there's a lot of untapped potential.
It's not uncommon for new technologies to go through hype cycles before their true use cases materialize.
Have you heard of the Gartner Hype Cycle? It suggests that disruptive technologies go through 5 key phases.
1. Technology Trigger: emergence of a potentially disruptive technology.
2. Peak of Inflated Expectations: Early publicity creates hype for tech with an unproven market fit.
3. Trough of Disillusionment: Early projects fail to deliver on promises and the public loses interest.
It is wise to suspect that NFTs are somewhere around this trough of disillusionment now.
4. Slope of enlightenment: The tech slowly starts to show successful use cases, and gain real adoption.
5. Plateau of Productivity: Broader market applications are succesful & the market fit is very clear. Here, we'll see mainstream adoption & the tech may become omnipresent.
Here's a more detailed visual of the Gartner Hype Cycle from Wikipedia.
In the speculative NFT bubble of 2021, we saw artists selling collages of their artwork for tens of millions of dollars. This was probably the peak of inflated expectations.
Most people think that's all NFTs are - a speculative bubble with degens and rich people buying "worthless" JPEGs
NFT PROFILE PICTURE
You might also have seen NFT profile pictures on Twitter.
But this is just the beginning. NFTs are a way to represent proof-of-ownership.
It's easy (though perhaps not as useful) to prove ownership of digital assets than physical assets. This is why artwork and pfps are the most obvious first use cases.
But they can be useful for a lot more.
NFTs can be used to represent anything that is:
• Has an owner
• Requires or benefits from a digital proof of ownership.
Example: Domains & Usernames.
One of the big benefits of NFT domains is that they are transferrable and tradeable.
Domains on Godaddy and other web2 providers are not easy to transfer or sell. In many cases, you're just leasing the domain instead of buying them.
Similarly, concert tickets and other event passes are also well suited to be represented by NFTs.
There's a finite number of them, and access to the event requires proof.
NFTs can eliminate the problem of forgery and make it easy to verify authenticity and ownership.
NFT tickets are also tradeable on secondary markets, which unlocks a few things:
1. Standardized marketplaces with buyer & seller protection. Currently, tickets are traded on inefficient markets like FB & craigslist, where buyers don't get any guarantees.
2. Free market pricing
3. Royalties for the original creator
4. Historical ownership data of tickets means performers can airdrop future passes, discounts, giveaways, etc to fans.
5. NFT passes can also serve as a badge to showcase your fandom.
In-game assets benefit from NFTs for many of the same reasons.
Imagine that someone spent 2 years of their life accumulating a rare in-game collectible sword. That collectible clearly has value for gamers. That means it can be traded for $ or swapped for other game assets.
The gaming industry is expected to make $200 BILLION in revenue this year, a significant portion of which comes from in-game purchases.
Royalties on secondary market trading of these gaming assets provide an incentive for gaming companies to create NFT-based ecosystems.
But digital assets only capture a fraction of the potential... Real-world assets can get much of the same value from on-chain NFT representation.
For example: Real Estate is unique, has an owner, and requires proof of ownership.
Tokenizing real estate has multiple benefits:
1. Can be fractionalized to increase access and liquidity
2. Can be collateralized to increase capital efficiency (ex: easy access to loans backed by a property)
3. Proof of ownership is particularly important in countries with weak legal systems.
4. Investors globally can invest in specific properties, neighborhoods, towns, etc
The global Real Estate market is worth hundreds of TRILLIONS of dollars, and NFTs are the most effective way to prove ownership, resolve disputes and increase access for investors and homeowners worldwide.
Still very early days, but it’s already in motion.
DEGREES AND DIPLOMAS
NFTs are essentially digital certificates that anyone can verify. That lends well to use cases like Degrees & Diplomas - though of course, you wouldn't want these to be tradable. So they would best be represented by non-transferrable NFTs (SBTs).
Having a standardized, public proof of diplomas, degrees, skills and achievements on-chain means that anyone can verify their legitimacy.
The same is true for all other kinds of certificates.
• LinkedIn could give you a verified checkmark for your degree.
• You could earn NFTs for freelancing to showcase proof-of-work done, skills used, time spent, and samples. This can then be used as your portfolio on Upwork, Fiverr, etc.
NFTs can also be useful for Counterfeit Protection.
Counterfeiting is the largest criminal enterprise in the world, estimated to be $2 TRILLION a year and growing. So there's a lot of value to anti-counterfeit tech.
Speaking of counterfeiting, identity theft/verification is another massive real-world problem that can be solved using NFTs.
In the US, 15 million+ citizens face identity theft every year, suffering damages of over $50 billion a year. This is not surprising at all since all you need for US identity theft is a 9-digit number (social security number) that is regularly passed around in emails, documents, on the phone, etc.
How can Identity NFTs solve this problem?
• NFTs are unique and can't be forged.
• NFTs provide a global standard.
• NFTs can be easily verified.
• Non-transferrable NFTs (SBTs) are locked to a specific wallet.
• NFTs can be revoked in case of wallet loss or theft.
Digital and physical memberships can also use NFTs to verify access requirements.
NFT identities can also solve problems like verification of votes.
If you remember the 2020 US election, there's no need to explain why this is a problem worth solving. The simplicity of online voting can also increase voter turnout.
NFTs can also be used by creators to crowdfund.
Investors can receive NFTs that represent rights to future earnings, for example.
This is particularly useful for fields where people who are not in the top 1% can't make money. (aspiring artists, athletes, actors, etc)
This leads to a broader concept of Financial NFTs (fNFTs).
There are lots of financial contracts that are unique.
• An individual's basket of assets (unique portfolio)
• A debt agreement with a lender that has been partially repayed
• Time-locked tokens (ex: veCRV)
Generally, any document can benefit from NFT representation. Existing systems of proof by paper / PDF have photoshop-risk.
When it come to Medical records, NFTs can be used for:
• Vaccination certificates
• Covid test results
To end up, we are just barely scratching the surface of NFTs, and the future will belong to those who take this technological opportunity and utilize it.
At Metabloq.io, our prime duty is to help individuals transform their ideas into reality. Contact us to discuss your ideas.