The Future of NFTs: Beyond Profile Pictures
The potential of NFTs goes far beyond that of profile pictures and digital art collection. They have the potential to impact every corner of society.
The potential of NFTs goes far beyond that of profile pictures and digital art collection. They have the potential to impact every corner of society.
The NFT mania of 2021 was driven primarily by status-seekers and art collectors that desired expensive profile pictures or digital art to display to their peers.
Instead of driving a Ferrari around the neighborhood to parade one’s wealth, reaching only the hundreds around you geographically, owning an expensive NFT became a way for individuals to communicate their wealth to a much larger audience.
The use of NFTs as profile pictures introduced an exciting and creative new approach to identity, community-building, brand-recognition, and speculation. Not to mention it is an innately fun experience for users.
This served as a coming-out party for NFTs to the masses, but the less obvious use cases of NFTs are what will significantly impact society for the better.
To fully understand the potential use cases of NFTs, it is important to understand what exactly an NFT is.
Fungible??
At this point almost everyone with internet access has heard the term NFT but many have no idea what exactly it is.
NFT stands for “Non-fungible Token”. When something is non-fungible, it means that that item is uniquely identifiable and there is nothing else exactly like it. There are numerous examples of everyday items that are non-fungible, such as real-estate, concert tickets, and even your first fingerpainting. Although there are items that may be similar, they are not exactly the same and cannot be exchanged equally like-for-like.
Fungible tokens are items that can be exchanged for equal value and are virtually indistinguishable from one another. Examples of this include fiat currencies or cryptocurrencies. Cryptocurrencies are fungible because one bitcoin can be traded for another bitcoin for identical value.
A non-fungible token is a file that’s data has been publicly verified on the blockchain. Any type of file can be verified in this manner but is mostly seen via .jpeg and .gif files. When a file is “minted”, or verified, on a blockchain, its data becomes immutable. This means that no one can change the data or recreate it.
The immutability of data within an NFT is exactly what makes them so valuable. What you have is undoubtedly provable and cannot be replicated.
Even 1000 copies of the same NFT are non-fungible, because each one is uniquely identifiable. This is because they all have different metadata (data that describes other data), such as unique identifiers, ownership history and mint information.
At its essence, an NFT is a publicly verifiable digital asset.
The introduction of these digital assets opens entirely new avenues for consumers to explore and benefit from in the digital world. Digital economies will be created in a way never seen before.
Now that we understand the basics, let's dive into exactly what implications this will have on society.
The Superpowers of NFTs
As previously mentioned, the most prevalent uses of NFTs are currently centered around digital art. While this has certainly impacted many industries already, it is only one of NFTs’ superpowers.
Strides have been made in industries such as gaming and music already, but many use cases are just being discovered.
Together we will explore some of the more useful and interesting use cases that NFTs provide.
Crypto-gaming
The introduction of ownable digital assets within the gaming industry will change the way that games are experienced.
Think of the countless dollars and hours that many have invested into video games. All the skins, experience, and rare items that are collected along the way are essentially worthless once you stop playing.
NFTs allow gamers to own these assets and earn a return on their investment.
Instead of losing your investment when you move to a different game, you can take the assets with you, or even sell them on an open marketplace.
This will create expansive in-game economies, incentivize players, and even provide a legitimate form of income for those that capitalize on the opportunity.
This is already evident in games such as Axie Infinity, DeFi Kingdoms, and Splinterlands.
For example, the majority of Axie Infinity gamers are located in the Philippines where they can make more money gaming than they can in most other available jobs.
According to DappRadar, Crypto-gaming NFTs generated $4.8 billion of revenue in 2021. This is a 1395% increase from the $321m of revenue generated in 2020.
As more game developers build blockchain infrastructure and incentives into their games, the adoption of crypto-gaming will continue to rise exponentially.
Music NFTs
The utilization of NFTs in the music industry introduces something that artists have historically struggled with – a way to effectively monetize their music.
This is something covered in-depth in my previous newsletter – The Disruption of the Music Industry via Web3 and NFTs.
Artists will be able to distribute their work directly to the consumer, eliminating the need for parasitic middlemen such as Spotify or Apple Music. On these platforms, if an artist manages to reach a million streams, they are only awarded a few thousand dollars.
This is because the record labels and streaming platforms take the lion's share of the profits. With NFTs, artists are able to sell their music directly to their fans, thus receiving all of the profits.
Music NFTs will also benefit the fans. Fans can now support their favorite artists directly, financially benefit from their success, and connect with music on a deeper level.
Platforms such as Royal.io and Sound.xyz have built unique platforms for artists to create and sell their music NFTs for fans to experience the music in a completely new way.
NFT Ticketing
The implementation of QR codes and platforms such as Ticketmaster have made substantial progress in the efficiency of the ticketing market, but the use of NFTs will introduce a new dimension to the experience.
Tickets to sporting events or concerts will now become collectibles. By owning an NFT Ticket, you can prove that you experienced a legendary moment. Paper-tickets are easily lost or destroyed, and current digital tickets just don’t quite hold the same sentimental value. Ticketers can also implement exclusive artwork to increase the value to a collector.
This will also introduce a more efficient secondary sales market. There will no longer be a question of whether a ticket you purchased is legitimate, as the history of that ticket can always be traced back to the original source.
From a ticketers perspective, they can potentially increase revenues by introducing ticketing auctions. Instead of selling every ticket at a fixed price, where bots can quickly buy up and resell at a higher value, they can benefit from the market deciding the price of these events. Ticketers can also include provisions to benefit from a percentage of secondary sales.
Community Involvement
NFTs can be used as an access pass to exclusive communities and allows those communities to provide more benefit to the participants.
An excellent example of this can be seen in the web3 education DAO -Invisible College. By minting a “Decentralien” NFT, users are granted access to Invisible College courses, events, networks, and resources.
This can also be seen in valuable projects such as Cryptopunks or Bored Ape Yacht Club. At surface-level, these projects are just overpriced profile pictures, but they actually function as an all-access pass to a large group of wealthy individuals that you now have direct access to.
Marketing
Iconic brands and other corporations can utilize NFTs to unlock a new marketing channel.
By creating and distributing a company branded NFT, businesses can introduce a marketing strategy that makes money instead of burning it.
In the summer of 2021, Coca-Cola released a number of Coke branded NFTs inspired by their history and products to be used in the metaverse, or simply just as collectibles.
This story went viral and generated free press for Coca-Cola. Not only were they able to avoid paying for TV spots or social media advertising, but they made money directly from the NFT proceeds.
Healthcare NFTs
For years medical service corporations have packaged and sold your personal medical data to third parties in what has become a multi-million-dollar industry. All of which you have seen no monetary benefit from.
By taking control of that data via NFTs, you can reap the financial rewards of how your data is used. It will also help curve sketchy actors in the space, as your data will be completely trackable regarding who and how it is used.
An example of this can be seen with Aimedis. They aim to create the first medical and scientific NFT Marketplace by creating a platform where you can tokenize your NFT data and sell it to companies.
Virtual Land NFTs
Metaverse projects such as Decentraland and Sandbox have made national news as plots of their virtual land were selling for millions, reaching over $4 million for a single digital property.
Digital real-estate works much like traditional real-estate. The price of certain lots increase as value is built on the land, and as surrounding plots see higher traffic. There will still be “rich neighborhoods” or “art districts” in the metaverse, just as there are in real life. There will even be virtual landlords that lease their properties to others and collect rent.
Real-estate NFTs are not restricted to the digital world either. MetaBlox has created a metaverse project that is working to merge the physical and virtual world. By tokenizing actual properties in cities such as San Francisco and Miami, they provide users a way to immortalize memories made in specific locations, or “Blox”, within those cities. Users can also display artwork NFTs within these Blox to enhance the aesthetic of their property, eventually introducing AR/VR technology to experience both the physical and digital world simultaneously.
As the metaverse continues to be developed, so will the adoption of virtual land NFTs.
Dynamic NFTs
A Dynamic NFT is something that changes or evolves the more (or less) you interact with it. Think of it like a Tamagotchi that gets hungry when you are away from it for too long, or a Pokémon that evolves after leveling it up.
For example, imagine a music NFT that changes the more you listen to it. After 10,000 plays, it could evolve into a higher tier, introducing additional benefit and utility from the artist.
An example of this can also be seen with the evolvable health and wellness NFT project - Health Heroes. By collecting data from health tracking devices such Apple Health or FitBit, Health Hero NFTs evolve and develop unique traits as you exercise and achieve health goals.
Consumable NFTs
Although more related to art, consumable NFTs can be used to change the appearance and data of an NFT you already have, thereby creating something brand new.
A great example of this can be seen with Sol Stone. By using a Sol stone in addition to another NFT, you can alter the appearance of your NFT by providing the Sol Stone with a set of instructions, which then guide the AI to “reimagine” the art in an entirely new perspective.
Below is an example of this using the Solana NFT project - Soul of Hidama.
There are currently very few of these NFT projects, but I expect this idea to continue to be explored in the crypto-gaming industry and in metaverse projects.
Many of these use cases have made some noise in the Web3 community, and many are just beginning to be explored. Given how new this technology is, I would gamble that there are plenty more applications that have yet to be discovered. As brilliant technological minds and unique creatives unite to explore what is possible, truly anything can happen.
Hurdles of the Current Landscape
Together we have explored how NFT superpowers will change industries, but this technology is certainly not without its faults.
Of course, with the countless NFT projects launching, there are bound to be those that take advantage of the un-prepared. There are plenty of examples of fraudulent projects that take advantage of the wide-eyed newcomers through scams, rug-pulls, and pump and dumps.
To avoid being the target of this, make sure to conduct thorough due diligence on any project before you participate. It is important to ask yourself – Does this project have a real and vibrant community? Are the founders doxxed or are they hiding behind aliases? Does the NFT have real utility?
Peter Yang’s article, How to Find and Evaluate NFT Projects, offers a comprehensive guide to staying safe in this space and identifying value.
Another problem that is frequently encountered is the lack of scalability and high transaction fees on many blockchains of which NFT projects are built on. For someone new to the space, it can be difficult and costly to get your feet wet when you have to pay $100 for one transaction.
Look for NFT projects built on low-gas fee chains like Solana or Polygon to get educated before diving into the more expensive blockchains.
It is also extremely important to understand blockchain security and how to protect yourself against attack. Even reputable projects can be stolen from you if you are not careful.
In February of 2022, there was a mass phishing attack on Opensea that led to $1.7 million worth of NFTs being stolen from users’ wallets. The affected users mistakenly clicked on a phishing email which signed a fraudulent transaction allowing the attacker to take their NFTs.
This may sound scary, but once you learn how to identify scams and keep your assets secure, these events are easily avoidable.
Looking Toward the Future
The mass adoption of NFT technology may turn out to be more impactful than Cryptocurrency itself.
Although Crypto can be an excellent financial tool for many reasons and is what drives the use of many projects, NFTs ultimately have stronger use cases that are directly applicable to a multitude of industries.
As this technology continues to be developed, new use cases discovered, and barriers to entry lowered, NFTs will undoubtedly have a profound impact on all of us in the years to come.
Never Stop Innovating,
Jake
Follow me on Twitter (@chefsteff_) for more insights into the Web3 world.
Additional Insights:
Blockchain Game Alliance - NFT games generated $2.32B in Q3
Lyle McKeany - What are NFTs? And why are they important?
James Davis - The Problem with NFTs (And Why They’re Not Really Problems)
LeewayHertz - Token Standards: ERC20 vs ERC721 vs ERC1155
A very enlightening article
The gaming space is going to get crazy!! My kids can pay for there own shit