The world is still exploring NFTs. But there are a couple of really strong “real world” use cases for NFTs in the future. Let’s see some of them.
What is an NFT?
If you need an introduction or a refresher, “NFT” stands for “Non-fungible Token.” NFTs are created using the same blockchain technology that enables cryptocurrencies, but NFTs cannot be “spent” in the same way as cryptocurrency tokens. That is what makes them “non-expendable”.
Basically, NFTs act like a receipt or a certificate of authenticity that proves ownership of a digital item. The most common use of NFTs now is to show that a person owns a digital artwork, although that does not usually make a practical difference in terms of how that digital artwork is viewed or shared.
Real-world use cases for NFT
There are many ways that NFTs could be used in the future. Most of them boil down to proof and transfer of ownership of digital assets.
1. Buying and selling art
Our short introduction to NFTs has already presented its first use case. It’s the same prominent use case as this one: digital art sale and ownership.
Ownership of physical art is generally fairly easy to demonstrate. The art is usually in the physical possession of the owner. In the case of ancient or high-value art, the piece may have a physical document (called “provenance”) that shows who owned the art at what time and how it changed hands.
However, owning digital art is much more complicated. Intellectual property rights can protect it, but this does not suit ownership and property transfers in the same way that art traditionally requires.
By associating a digital good with a specific point on a blockchain development, NFTs essentially create a digital provenance that is immutable linked to the art itself. This allows collectors to own digital art in ways that were not possible before, but it also allows artists to sell digital art in ways that were not possible before.
2. Demonstration of the authenticity of prizes and rare goods
A related use has to do with goods that are even less transferable, such as prizes.
In 2020, the first WebXR Awards were “delivered” to recipients in the form of NFTs. While physically impossible to create, the awards have a design that can be reproduced as a three-dimensional digital artifact. While anyone can file and fax an XR award, only genuine recipients can prove, through NFT, that they received the honor.
This is a use case, but it takes little imagination to find similar opportunities like diplomas or even physical assets and properties. These ideas also have promise tied to the development of “smart contracts,” blockchain-enabled agreements that could facilitate transactions between individuals that used to require third parties.
3. Preserve scarcity in the age of digital reproduction
Part of the difficulty people have in understanding the value of NFTs comes from the fact that after an NFT is sold, the image or digital artifact represented by NFTs remains publicly available. However, this is not always the case.
Byte Agency and Dept Apparel sold NFT of a virtual coat. When buyers received the NFT, they also received developer files that allowed them to “wear” the coat on Snapchat. Even if someone decided to replicate and sell those files, they would not be able to replicate the NFT, keeping the scarcity and value of the original purchase for everyone else.
4. Provable property of virtual elements for virtual characters
Perhaps the most interesting thing about the virtual jacket use case is that it speaks to the value that people associate with the way they represent themselves online.
If you are a gamer, think about your avatar or character from your favorite video game and all the time and effort it has invested, perhaps even the material value behind its accessories. Some items seem to cost more if they are rare, but there is no way to guarantee their scarcity.
As people begin to spend more time in virtual environments, virtual appearance naturally becomes more important, making virtual items more valuable. In May 2021, a Gucci bag was sold on Roblox’s virtual world for more than the market value of the physical bag.
Right now, expensive items like this are the only use case for NFTs. The process of creating an NFT costs so much money that the digital item must be of high enough value to justify the cost. However, as technology becomes more common and more available, NFTs can support more elements of personalization for our virtual likenesses.
5. Adding value to micro-transactions
That’s not the only reason online gaming and social experiences are such a promising field for NFTs. These areas are also promising for virtual currencies through cryptos like Bitcoin, but we may be talking about any virtual currency here.
At this time, in-game purchases generally have to be for at least a dollar because the transaction between the app and the bank or credit card company costs money. Because users can eliminate the middleman in virtual currency peer-to-peer transactions, virtual currencies can be used for “micro-transactions.”
Most games avoid this by having an in-game currency that players buy for real money. You could spend $ 5 to buy 500 units of an in-game currency to purchase a customization item for 300 units. That’s an indirect way to buy an item that costs $ 3. Using real-world virtual currencies would streamline this process.
Now, combine this with the previous conversation about NFTs that empower artists (and later sellers). The ability of players or members of the platform to sell their own virtual goods regardless of the commercial value of those goods could allow rich player-to-player economies to develop within the games and social experiences we love.
How will you use NFTs in the future?
Of course, we don’t know for sure if these potential uses of NFTs will actually materialize. Some of them seem to make sense given the convergence of other technologies and trends. However, many of these potential uses are based on technological developments or the maintenance of social trends that may not last.