According to a Reuters report in early January 2022, global NFT sales in 2021 topped $25 billion. If anything, the sales volume indicates the massive potential that blockchain technology, mainly the non-fungible token (NFT) ecosystem, offers. But the report further details that digital art comprised a disproportionate share of the sales.
Many will ready their wallets to plunge into the NFT ecosystem on seeing the figures in the report. However, others might wonder whether NFTs have such a narrow scope of practical applications.
But non-fungible tokens are an up-and-coming aspect of blockchain technology, whose practical applications are still expanding. Besides digital art, enthusiasts can acquire a variety of NFTs spread over many industries. This article offers a granular overview of the top 10 practical applications of NFTs.
1. Tracking artwork
Most of the notable NFTs sales so far are in the art segment. For example, Beeple’s Everydays: The First 5000 Days fetched over $69 million in March 2021, marking a turning point in the NFT ecosystem.
In fact, an Art Basel & UBS Global Art Market Report released in March 2022 stated that international art sales recovered strongly in 2021. Sales grew 29% to $65.1 billion compared to 2020 – but the report’s highlight is the sizable contribution of NFTs to the revenue jump.
However, the smart contracts built on blockchain technology have more practical applications in the global artwork sector. For starters, a non-fungible token is a unit of data stored on a blockchain network capable of representing a physical or virtual asset. The data is unalterable once recorded on the blockchain.
The traditional artwork industry can leverage the NFTs to tag pieces of art for tracking and, of course, to combat counterfeits. Artists and other players can track the originality of a particular piece to ensure nobody buys an inauthentic property.
2. Gaming
Art is essential to the NFT ecosystem, but it is not the sector where the NFT technology has found relevance. Gaming is one of the sectors that could evolve to a higher dimension if stakeholders adopt the full potential of blockchain and smart contracts.
Take, for instance, Axie Infinity. The online gaming company has built a virtual universe where players can collect, breed, and battle virtual pets – also called Axies. What sets Axie Infinity apart is how it built synergy between regular online gaming and blockchain technology. Also, players can own their virtual assets.
The best part is that Axie Infinity is built on a blockchain and that an NFT represents each in-game asset. As mentioned earlier, NFTs are cryptographically unique, which enables the players to exchange the game characters for fiat currency like US dollars (USD).
Thanks to the ingenious business model, Axie Infinity boasts $4.17 billion in sales volume since its launch in late 2017. Furthermore, DappRadar data indicates Axie Infinity has sold more NFTs worldwide, just under a million less than NBA TopShot, the leading NFT collection in the market.
The point here is that online gaming is the natural home of NFTs. Unlike other industries, gamers are nearest to the virtual world, where NFTs thrive, and, already, the value addition of the technology is apparent.
3. Metaverse
There was a rush of explanations and ‘ultimate guides’ to the metaverse in global media after Facebook unveiled its new name on October 28, 2021. Although knowledgeable observers argued that the name change was a necessary face-saving PR stunt for a beleaguered tech giant, CEO Mark Zuckerberg explained that the new company name, Meta, indicated the shift in priority.
The new priority was the virtual world, where today’s online social experiences are expanded into three dimensions or projected into the physical world. In other words, Zuckerberg was referring to the metaverse.
According to Wired, the metaverse is a lot of things. Still, to put it simply, it is a computer-generated virtual-reality space where users can have real-world interactions and even run a thriving digital economy.
Seeing that NFTs are already transforming online gaming, there is little doubt that the technology is a game-changer for the metaverse. For instance, users can store and appreciate digital art in ways not possible before.
4. Real estate
Zuckerberg might have steered his company towards the metaverse because he believes the future of social media is headed in that direction. However, he could have missed another critical aspect of the virtual-reality environment – it is attracting virtual land prospectors.
On March 23, 2022, Forbes ran an article describing the typical process for buying virtual land in the metaverse. Less than two weeks later, it emerged that virtual land was one of the hottest NFTs on Decentraland, an NFT marketplace. The report came in the wake of Decentraland’s hugely successful virtual-reality Fashion Week.
It could be that the rising interest in virtual land is driven by buyers’ trust in the cryptographic power of NFTs. However, it could also be due to the fact that most virtual worlds have a hard cap on their real estate. Therefore, the resulting finite supply implies the asset’s price will soar if demand increases.
If people in the real world can profit from land in a virtual space, the possibilities of virtual real estate are immense.
Furthermore, NFTs can extend their usefulness to the real world of real estate. The traditional real estate market involves lots of paperwork, including proof of ownership paperwork and transfer deeds. Indeed, stakeholders could vastly benefit from the ability of NFTs to keep track of property via the blockchain.
For example, software developers could link each property to a smart contract that tracks its value over time and simplify and expedite transactions. The technology could also enable the creation of decentralized home rental services – significantly reducing expenses for buyers and sellers.
5. Documentation and digital identity
There has never been a period when technology reined supreme as today. But its ubiquity has made technology complicit in many of the crimes taking place in many places worldwide. For example, identity thieves are wrecking families by destroying their financial lives.
Fortunately, it turns out NFTs could unlock the door to secure digital identities. One aspect of NFTs is self-sovereign identity, an integral technology in the blockchain architecture.
Self-sovereign identity or SSI is a technology that leverages the blockchain to enable people to manage their identities without the need for centrally managed databases. This technology allows users to self-manage their digital identities without depending on third-party providers to store and centrally manage the data.
The technology is akin to a digital passport that proves your identity easily and securely. Plus, one instance of your information is acceptable everywhere on the internet. What’s more, users have complete ownership of their data.
Based on SSI, developers can create utility NFTs – not exchangeable for money – that help owners prove ownership of an item or information.
Besides digital identity, such utility NFTs can help authenticate documents like college diplomas. Accordingly, employers and academic institutions can verify critical documents speedily and with zero chance of giving frauds a free pass.
To demonstrate the promise of NFTs in this sector, San Marino partnered with VeChain, a blockchain company, in 2021 to digitize coronavirus vaccine passports. According to one of the officials involved in the project, the technology created a proof of vaccination status that was “immutable, secure, and seamless.”
6. Combating counterfeit products
If NFTs can weed out fake diplomas, the technology should indeed ensure the authenticity of products in the supply chain. According to William Quigley, co-executive of the Tether crypto project, NFTs could operate as digital certificates of authenticity for nearly every physical product within a decade.
Interestingly, some industries are already busy at work creating digital twins for their products. For example, fashion brands Prada, Cartier, and LVMH are working on a blockchain solution, Aura Blockchain, “for customers seeking greater authenticity.”
Aura Blockchain will provide encrypted certificates of guarantee for every product the brands produce. Additionally, the certificate enables better traceability and makes it easy for luxury goods consumers to sell their items on the secondary market.
Other sectors that could vastly benefit from the technology are food and medicine. They could prevent counterfeit medicines and food products from circulating in the global supply chain by leveraging the immutability and traceability aspects of NFTs.
Imagine if a manufacturer places a QR code on a product on the factory floor, and scanning the code provides you with all the details of the product’s journey since leaving the floor.
In this case, manufacturers will be better protected against erroneous claims by unscrupulous consumers or others who might have been conned. Also, customers will have previously inaccessible insight into the products/services they are spending their hard-earned funds on. In the end, an efficient and transparent supply chain will benefit everyone.
Conclusion
There is already a lot of hype about NFTs, but many might only have heard of the part where the technology is revolutionizing the art sector. However, the technology has immense potential to smoothen operations in many other sectors. It could be too bold a statement, but there isn’t denying that all forms of value will have an NFT twin soon.