Non-fungible tokens, or NFTs, have been a major tech buzzword in recent years. Is their omnipresence a symptom of our post-pandemic, hyper-digitalised lives, or the dawn of something really big?
With the growing hype surrounding them, many people are starting to question what NFTs actually are and what their purpose is.
Below, we will explain a bit more about what NFTs are and how they can be applied in the real world.
What even are NFTs?!
In relatively simple terms, NFTs are tokens that live on a blockchain – a system that tracks crypto transactions via peer-to-peer networks – and represent the ownership of unique items. Think of an NFT almost like a secure box containing information that only the owner with a key can access. With an NFT, data is stored on a blockchain, and only those with a password can access the data.
All NFTs have ‘smart contracts’ attached to them and can be purchased in exchange for cryptocurrency such as Bitcoin. These smart contracts are blockchain programmes that only execute specific tasks when certain conditions are met.
The term ‘non-fungible’ means that something cannot be exchanged for another item because it is unique. Fungible items, however, can be exchanged for one another, for example one pound is equal to another pound. Complicated, right?!
Tracking who owns digital files can be extremely difficult because they can be copied and distributed so easily. However, NFTs provide a solution to this problem as each token has its own unique metadata that distinguishes it from other tokens, thus ensuring verifiable proof of ownership.
For example, if you were to create a piece of digital artwork on your computer, you can create, or ‘mint’, an NFT out of this. The NFT representing your artwork contains some information such as a fingerprint of the file, a token name and a symbol. This information is then stored onto a blockchain, and you become the owner.
You can choose to sell this token by creating a transaction on the blockchain, which ensures that this information can never be tampered with. You can then track who the current owner of a token is and for how much it gets sold for in the future.
Because they are non-fungible, NFTs cannot be copied or turned into multiple files, making them unique and therefore often very valuable. They can be used to transfer ownership of just about anything from digital artwork to physical assets.
Which industries can benefit from NFTs?
As with many new technologies, NFT tech has the potential to be both exploited and extremely beneficial across multiple sectors. While its use has been mostly noticeable to date on money-making and digitisation within the art market, there are many more useful and altruistic applications of this fascinating technology. Read on to find out more!
NFTs have a unique potential in the digital age, allowing patients rather than companies the rights to their own healthcare data. This offers patients several advantages, including the ability to monetise their data as opposed to having companies profit off it.
With the rise of the digital health era, personal health apps and sensors equip us with the means to access personalised health data easily. However, unbeknownst to most patients, this sensitive data is governed by the companies providing these services, who often profit off it. For example, pregnancy tracking app Ovia was discovered to be selling data of its users to employers, whilst 23andMe has plans to develop drugs based on the genetic database collected from customers who have used its genetic testing kits.
By selling your health and genetic data, these companies are making huge profits that you cannot benefit from. Likewise, as sensitive data gets passed along a chain, the risk of mishandling increases. However, if your genetic data were to be minted as NFTs, this information can be tracked, and you would be able to see where your data ends up. You could even enable a feature to earn money whenever a transaction occurs using your data!
Other third parties hoping to utilise your health data for research or product development could reach out directly to patients on a digital marketplace, giving patients much more choice to share their personal data in a more informed manner.
Therefore, NFTs can provide patients with much more control over their health records and transparency over how their data is being used.
You may ask: how is NFT ticketing different from a regular barcoded or QR code-based ticket? Well, the blockchain factor helps set them apart and both NFT ticket issuers and recipients can benefit in many ways.
Ticket holders can receive tickets to an event that are then stored safely on the blockchain. Those who in times gone by liked to collect their paper tickets as memorabilia can use the blockchain to keep memories alive. Many of these NFT tickets also feature interactive digital assets, making them look like cool pieces of art. NFT tickets can also be used to grant ticket holders exclusive access to experiences such as clubs and events only to be attended by those also holding similar NFT tickets.
Ticket issuers can use the NFT system to keep a more in-depth record of attendance numbers by using the blockchain as a recording system. They can also use innovative ways to interact with ticket holders via NFTs, for example, by creating art-like tickets for people to collect or offering incentives to those who purchase the NFT tickets.
Additionally, with NFT ticketing, the authenticity of the ticket is irrefutable, and the organiser can earn a profit every time the ticket is resold, thus bringing transparency and assurance to the events ticketing system.
Another useful application for NFTs is with respect to document management for both businesses and personal documents.
It is estimated that poor contract management costs businesses nearly 10% in lost revenue every year. These issues arise due to documents and contracts often being hard to locate, or a lack of certainty over whether a version of an invoice or document is final or verified.
These problems can be resolved by creating an NFT from a PDF document and then storing it on a blockchain. This means that no single company or service is being used to store the data and thus information does not need to be transferred onto new systems or to new organisations in the future as it’s perfectly secure on the blockchain.
Unique token IDs easily confirm whether a document is approved or verified whilst also serving as certificates of authenticity. As a result, confusion about documents and contracts, as well as the risk of deletion or loss, is eliminated.
NFTs can also be used to tokenise personal documentation such as degrees, academic certificates and licenses as well as medical records, birth and death certificates, and so on. This provides users with better control of their data and can help to identify theft. An example of this is in The Republic of San Marino, where they adopted the use of NFT COVID-19 vaccination passports. Here, the tokens help to authenticate the documents and reduce the possibility of counterfeits.
Art and collectibles
An NFT artwork’s worth is mostly determined by market demand which is often hype-driven, and thus how much people are willing to pay for that unique piece can be surprising: the most expensive NFT artwork ever sold was The Merge by Pak which sold for a huge $91.8 million.
With the rise of NFTs, more artists than ever can now make profit off their own work by minting their art (whether that be physical or digital art) and selling it via online auction houses. These artists are now being rightfully paid for their labour and have guaranteed intellectual property rights. Plus, they can receive a percentage of proceeds every time their NFT gets resold.
It’s not just digital items that can be sold as NFTs though; they can also be used to digitise the ownership of physical goods too.
For rare or collectible items that need their value to be preserved, NFTs are becoming an increasingly desirable option for investors. The use of NFTs eliminates the need for the physical transfer of objects which in turn reduces the risk of potential damage or fraud. Likewise, using NFTs means that an item can be traced back to the original seller so that authenticity and provenance is irrefutable and fraudulent reproduction avoided.
A fast-growing application for NFTs is within the gaming industry. In-game items, character, land or other items can be represented as NFTs and then purchased within a game’s store or on a marketplace where they can be traded for real-world money.
This has led to a rise in ‘play-to-earn’ games which give users the opportunity to earn more virtual assets when they keep coming back and spending time in the game. This has helped create a new economy within the gaming world and has given rise to professional gamers earning a living by playing games and trading virtual assets.
Real estate industry
Another industry in which NFTs can be hugely beneficial for is real estate.
Traditional paper deeds can be easily lost, damaged or forged, however, if you purchase a property documented with an NFT, you can easily see the previous buyer, any legal disputes, payments and more.
With the real estate industry having some notoriously slow processes, the buying and selling process is majorly streamlined if sold using NFTs as the transfer of assets is almost immediate. Likewise, the use of smart contracts cuts out the need for a middleman like an estate agent. A real estate NFT also has potential to store information about a property’s condition and any works previously carried out, reducing the need for repeatedly paying for surveys on the same property, thus further speeding up processes and reducing costs.
Additionally, using ‘fractionalised NFTs’ allow you to share the cost and ownership of a high-value item effectively and easily, such as property, thus helping to lower the barriers for people hoping to get their foot in the door of real estate. Therefore, the use of NFTs can make the entire process of buying or selling a property more accessible, efficient and secure.
Are NFTs here to stay?
Some may say that NFTs just give people digital bragging rights by spending an eyewatering amount of money on digital assets, and others may say they are a scam. Whilst you of course need to be careful and do your research when purchasing NFTs, generally speaking, they are ‘legit’.
But, beyond the hype and the controversy, are NFTs here to stay? I believe the answer is yes, NFTs do have some genuine long-term potential as the unique feature of an NFT lies with its highly secure and undisputable transactional record rather than being directly linked to a fiscal value.
NFTs have redefined the rules of ownership by allowing access to an entirely accurate, secure but portable history of data, record, transfer and evidence– a potentially ground-breaking innovation in the real estate, medical, and criminal justice worlds.
Additionally, NFTs have opened certain markets to a wider range of people, they provide a potential new economy for those in the gaming industry and allow those in the creative industries to be rightfully paid for their labour.
Although we are yet to see the full extent of NFTs potential, I think that for as long as the world of the blockchain and cryptocurrency is around, we can expect to see NFTs being here to stay too.