NFTs (Non-Fungible Tokens) are gaining increasing traction in the world of cryptocurrencies, and it’s important to be prepared to deal with them on a daily basis in the near future. Much like in the 2000s when the internet was in its infancy and destined to change the lives of each of us, NFTs are evolving, and more and more people are realizing the potential of this technology. Yes, you read that correctly, technology. The images of monkeys (i.e. Bored Apes or BAYC) that you have probably already heard about are just the tip of an iceberg whose roots are much more important and substantial than a ‘simple’ profile picture.
An NFT is simply a digital asset that people can own in the digital world. However, while common traditional assets and cryptocurrencies like Bitcoin or Ethereum are fungible, NFTs, as the name implies, are non-fungible. This means that each NFT is one-of-a-kind, and you won’t find another NFT on the market with the same properties. To make the concept more concrete, if we both have a dog, we could exchange them, but they wouldn’t be the same because each dog is unique, thus non-fungible. The same goes for artworks, tickets, real estate, passports, etc.
You might be wondering about the advantages of an NFT. Their major potential lies in traceability and immutability. Thanks to the blockchain they reside on (the most common one being Ethereum), the history of an NFT is always accessible, and there is no way to alter it. This means that at any time, you can verify who was the first owner of a used car you want to buy or how many owners there have been over time, without the risk of accessing incorrect information. By combining the immutability of NFTs with their uniqueness, you get a combination that is destined to revolutionize the tracking of every material and non-material good.
Take the art world, for example, where counterfeiting is a significant issue. Just think that, in 2019, the global trade in counterfeit products amounted to 412 million euros [1]. Thanks to the traceability and immutability of NFTs, artists could guarantee the authenticity of their works by associating each one of them with an NFT. This process is called tokenization. Imagine a collector wanting to buy an artwork on the secondary market. If the artwork is associated with an NFT that guarantees its authenticity, the collector will no longer be exposed to the risk of purchasing a fake, thus avoiding counterfeiting and plagiarism. NFTs also offer a new ethics for artists and creators who can finally monetize their work more fairly and directly. Thanks to NFTs, artists can sell their works directly to their fans, without having to go through intermediaries or art galleries, and can introduce royalties that will be paid to themselves whenever a piece is sold on the secondary market. This ensures that the artist receives a percentage of the price of each sale, guaranteeing a continuous income from their artwork even after the initial sale.
But the advantages don’t stop there. Just as artworks, many other material goods could be tokenized, introducing a way to guarantee their origin, status, and authenticity. The provenance and history of luxury items could be traced, certification of organic or fair-trade products, management of copyright, transfer of ownership of movable and immovable property, and much more. Within large companies, NFTs will allow tracking every component of the production chain without room for errors or ongoing counterfeiting. In these applications, we can see NFTs as elements of a tracking database that cannot be modified in any way, is always accessible, and is managed in a decentralized manner without the need for input from operators or a central entity.
Another significant application of NFTs, if not the one with the most potential in the short term, lies in the world of ticketing. NFTs eliminate the problem of scalping, which is the practice of buying tickets for events in large quantities and then reselling them at much higher prices near the event date. According to Imperva [2], 40% of all tickets purchased online are bought by bots with the goal of reselling the tickets at inflated prices. By selling tickets in the form of NFTs, event organizers can guarantee the authenticity of the ticket itself and allow fans to purchase tickets only from the official event website, eliminating the possibility of reselling tickets at higher prices. Reselling could also be allowed, but high royalties could be imposed, strongly discouraging scalping. Additionally, tickets can be used as membership tokens: only if you attended a singer’s concert, you could access their community, receive discounts for future events, participate in lotteries… the limit of possible utilities is only in the organizer’s or singer’s imagination, all verifiable thanks to blockchain technology.
NFTs also have the potential to revolutionize the real estate world, especially the rental sector. Rental properties or even individual rooms within a property can be associated with an NFT, automating the rental process from start to finish and eliminating intermediaries. Owners can create smart contracts that automatically verify rent payments and occupancy conditions. Imagine making a reservation on Airbnb and receiving the corresponding NFT for the rented room only when the check-in becomes available. Once you possess the NFT, you can verify it at the entrance autonomously and gain access to the room without needing to pick up a key or receive codes. The use of NFTs for rentals has the potential to make the process faster, cheaper, and safer for all parties involved.
The utilities we have seen so far might seem revolutionary, but they are only the most obvious ones that will soon be in everyone’s sight. There will be many other applications for NFTs, and many sectors that will be revolutionized by this technology. We just have to wait a few years to see the groundbreaking technologies that early adopters are already working on!
[1] https://euipo.europa.eu/ohimportal/it/web/observatory/report-on-trade-in-fakes
[2] https://www.imperva.com/learn/application-security/ticket-scalping-bots/
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