Most of the NFTs that grab headlines for their exorbitant winning bids are pieces of art. A pixelated image or looped video are the characteristic formats. One of the first ever NFTs depicts spinning dollar signs within a golden picture frame. The most expensive is a collage.
As one creative project after another is tokenized and sold for huge sums, an observer would be forgiven for equating NFTs with art, thinking they’re one and the same. But just as artwork isn’t the only example of a non-fungible asset in the real world (a racehorse, for example, is non-fungible) nor is it the digital world (believe it or not, there are digital racehorse NFTs).
Besides being non-fungible (“NF”), if a digital asset can meet the only other criterion—that it’s tokenized (“T”) on the blockchain (most NFTs are on the Ethereum network)—then technically it’s an NFT.
That’s exciting, because while we’re all waiting with bated breath for the next celebrity to release a tokenised video of themselves, it’s nice to know that NFTs have promise beyond what we’ve seen so far.
Here are three use cases that are not art, showcasing the potential for NFTs to disrupt the status quo.
1. Authenticate wine
The global wine market is worth an estimated $364.25 billion and is projected to reach $444.93 billion by 2027. One way that NFTs could penetrate this lucrative trade is to be a form of digital provenance—a means to authenticate a bottle's ownership and avoid fraud, which is rampant in the industry.
The traditional way to authenticate wine is hard work. According to Wine Science, numerous considerations must be taken into account:
Is the label of a historic bottle glued on with synthetic glue? Is the weight and shape of the bottle correct? Is the label printed with a modern printer? Is the label’s paper actually as old as the bottle should be? and the cork?
This is where NFTs come in. By storing all the relevant information on the blockchain and ascribing a token with a unique identifier that’s tied to a bottle, these manual processes are no longer needed and the risk of fraud is significantly reduced. A wine’s provenance, transaction history, and current ownership are all fully traceable, rendering its value clear to those wanting to buy, sell, or invest.
There are other use cases, too: Màquina y Tabla, a winery in Spain, is already selling wines en primeur (wine futures) as NFTs. A French vineyard is even capitalising on its prestige by selling non-fungible “digital bottles”. But given the prevalence of fraud in the industry—some sources estimate that as much as a fifth of the wine on the secondary market is counterfeit—the primary function of NFTs will likely be to bring more transparency to the market.
The Romans had a saying: in vino veritas (in wine there is truth). NFTs have the potential to bring more truth to the industry.
2. Improve event ticketing
It’s difficult to think of a more fitting application for NFTs than tickets. As blockchain developer Kasper Keunenw writes, “tickets are digitally native assets that can only be truly owned by one person,” making them “exceptionally well suited to be represented as an NFT.”
But what problem would tokenized tickets be solving? Just like in the wine example above, the secondary market for tickets is far from efficient. Ticket resale, or scalping, imposes costs on buyers, an estimated 12% of whom get scammed.
It’s not just individuals shouting outside concert venues who scalp tickets. High-margin ticket resale companies are making a killing in the trade, often at grossly inflated rates and at the expense of fans and artists. Performers and consumers alike have voiced their frustration. Comedian and musician Tim Minchin called resale sites “petty grifters” and “cheating scumbags.” The world’s largest ticket marketplace has an average Trustpilot rating of 1.7.
What better way to challenge this bloated resale market than by utilising the technology known to cut out the middleman? By putting tickets on the blockchain, the secondary market can be completely controlled by the ticket issuer. All T&Cs can be set in advance and revenue can be efficiently allocated to those who deserve it most.
Besides getting around scalpers, an NFT ticket can also be personalised in ways a regular ticket can’t. For example, if someone has an NFT ticket to a baseball game where the pitcher throws a no-hitter, then their NFT ticket could trigger some sort of reward, such as a QR code for a free meal. Or if a soccer player scores a hat-trick, then the NFT could mint a digital hat-trick playing card.
Tickets, straightforward and mundane as they seem, are ripe for disruption. The next big NFT may just be a non-fungible ticket.
3. Transform real estate
One of the fastest growing digital assets is virtual real estate. Decentraland, a virtual world where land is bought and sold as NFTs, boasts roughly 10,000 daily users. When it launched in 2017, a typical plot sold for about $20. Now in this single corner of the Metaverse, prices are in the thousands.
In February, nine plots of virtual land on the blockchain gaming platform Axie Infinity were sold for a whopping $1.5 million, the sixth most expensive NFT sale to date. According to Coindesk’s Janine Yorio, “Digital real estate has become a legitimate asset class, one worthy of investor consideration and one I believe is likely to appreciate exponentially over the near term.”
But what about real real estate? It turns out NFTs are making an appearance here, too. TechCrunch Founder Michael Arrington bought his Kiev apartment in 2017 as part of the first blockchain-based real estate deal, and recently decided to sell it as an NFT.
“Once we do this proof of concept, and it’s successful, it means that we are ready with a legal framework for any US-based property,” said Natalia Karayaneva, CEO of real estate transaction software company Propy, to Yahoo! Finance (even though the apartment is in Kiev, the property is owned by a US entity). According to Karayaneva, 30 properties in the US have already applied to be sold as NFTs.
How does it work? The mechanics are slightly complicated, but the principle is much the same as it is for wine: compress as much of the traditional way of doing things into a single token. In an article for Forbes, Karayaneva writes that “the current transfer of property ownership is extremely labor-intensive and expensive….By ‘tokenizing’ the property rights, it becomes much easier to trade and manage them.”
NFTs have the potential to shake-up the way real estate is transacted, but it will take time. Details need to be ironed out, and the industry is typically slow to adopt new technologies. Until NFTs get a foothold in real real estate, however, there’s still plenty of virtual land up for grabs.
The future of NFTs
Wine, tickets, and real estate are just a few examples of where NFTs could have a big impact. Other areas include fashion, collectibles, luxury items, and university degrees, to name a few more.
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